Investing,  Portfolio Updates

Portfolio Review – August 2018 – Lagging the Market

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It’s official. August is here and I’m lagging the market for the first time this year. The S&P 500 kicked butt since the last update and my portfolio didn’t keep up due to my exposure to bonds and international stocks.

Here are the results since then according to Personal Capital.

personal capital

It’s natural that my portfolio which has some bonds and foreign stocks fell behind. My individual holdings, especially UNH and AAPL did well but my international stocks continued to suffer.

One thing to remember is that lagging the market doesn’t mean anything in a vacuum. For example, those with a high bond allocation will almost always lag the market during a bull market but they have downside protection that can help them sleep at night and not sell at the wrong time when stocks are falling. That’s the trade-off you make when adjusting for risk preference.

This portfolio is designed to have a high return but provide lower volatility than full market exposure. That means periods of lagging the market are to be expected. This month wasn’t great but one has to remember this is a long term game and one month doesn’t matter.

YTD, the returns are comparable.

lagging the market

That’s good to see considering my exposure to bonds and lower volatility. It’s clear that foreign stocks have weighed heavily on my performance and I’d be doing much better without them. However, it’s easy to say that in hindsight but future performance is tough to gauge. Today may be a great opportunity to buy those under performing assets.

The goal here is to have my asset allocation whether that’s the case and it very well may be again given the continued domestic strength.

I’ve got a long term outlook and timeline so I don’t worry about monthly movements much. It’s nice to see them and hopefully they’re not terrible but I know they can vary widely month to month. Things can zig while others zag and hopefully I’m buying at opportune times for good long term returns.

My portfolio last month was at $536,864.78 so let’s see where I am now. It’s possible we’re at a new milestone given the positive returns for the month!

The Portfolio

My portfolio now sits at $550,092.88!

That’s a 2.46% bump over last month and a new record. It’s also a new milestone sending me above $550k for the first time!

That 2.46% bump is actually lower than the S&P 500 return for the month and includes contributions. You can see the impact a lagging month can have on portfolio growth.

Taxable accounts were up 5.7% due to strong individual stock performance.

I also opened an M1 Finance account and created two portfolios there. If you’re not familiar with M1 Finance, it’s a free to use platform that allows you to create portfolio slices of as many stocks as you’d like and buy partial shares. It’s a nice idea and I wanted to give some stock ideas a try in a cost efficient way. The great thing is that it’s completely free which means no annual portfolio fees and no trading fees. This way I can buy 50 stocks I like without a trading fee and without a huge cash infusion which is hard to do at a place like Fidelity with it’s 4.95 per trade fee and you can’t buy partial shares.

Tax-advantaged accounts were up 1.3%.

Cash was down 1.7% as I made some purchases. It is now at 6.23% of my portfolio so well below my 10% max.

My portfolio may be lagging the market now but overall results are still good. Like I said before, one has to remember portfolio goals when looking at monthly updates. It’s clear I’ll lag when the S&P 500 kills it against other asset classes because of my exposure to international and bonds.

When the domestic market does have some rough times in the future, it’ll be nice for me to have some exposure to bonds and potentially even international stocks.

Until then, I’ll keep buying the asset class that falls below target as that tells me it’s affordable that particular month in relation to others.

I’m still very happy with things given that I was below 450k this time last year. The growth in this time period has eclipsed my gross salary which is pretty awesome.

Let’s take a look at the asset allocation.

Asset Allocation

The international struggles continue as U.S. large caps seize the day and run away from their target.

UNH and AAPL had strong months and my ESPP hit my account which sent that asset class up quite a bit. I haven’t had a chance to sell my ESPP purchase yet but will do so soon and move that money into lagging areas.

Here’s a comparison of where I am today versus last month.

Bonds fall a bit behind as large caps surge and international stays in the dust despite money flowing into both international areas.

I picked up a few more shares of Tencent stock and also initiated a position in Brookfield Asset Management to help in that regard but didn’t see a lot of change due to the poor returns in that class.

That means the plan for next month is as follows;

  • Buy international stocks/funds/etfs targeting both emerging and developed markets. Tencent and more BAM are on my list as potential buys.
  • Cash is at 6.3%. Look for individual values in the market.

International may be struggling but it’s possible that now is a great time to buy those stocks in terms of potential future returns. There’s no denying that domestic stock performance has been awesome but that also leads to high valuations. My asset allocation is clearly telling me that I should put my money elsewhere right now and I’ll do that.

The targets are obvious and I’m fairly certain buying international or bonds is a good move right now. It may take a while for the market to realize that and the trade wars may continue to put pressure on international stocks for a while so I don’t expect a turn around to happen tomorrow. It’s no big deal as I’m a good long way away from needing this money and don’t have to worry about depending on it for a while.

That means I can wait out lagging performance and hopefully benefit in the future when that changes.

I’m glad I do these updates so I can see where I’m directing my money. The long term results have been good and I can’t wait to see what the market brings in the future. Whatever, it is, I’ll make sure to put money in there guided by my trusty friend, my asset allocation.

That’s it for the August update. It’s good to see another milestone and I now have my sights set on 600k. At this pace and if the market doesn’t tank, it might come early next year which is crazy! The pace of growth in the past few years has been insane.

Thanks for reading and let me know how your portfolio did this month or if you have any suggestions for international stocks to check out.

#portfolio #money #investing #stocks #bonds #millennial #cash


  • The Beta Post

    I’m glad you’re not stressed about beating the index. No one can do that month after month.

    I got caught up in this sentence: “the growth in this time period has eclipsed my gross salary which is pretty awesome.” – wow, that’s so cool. I envy you that feeling of seing your capital gains surpass your income. Congratulations! 🙂

  • JoeHx

    You may be lagging the market, but you still have positive returns. That’s the most important, although it’s also important not to stress on those times when you do have negative returns.

  • wealthfromthirty

    Lagging the market or not Time, your portfolio is really growing. The bonds and cash should be helpful at the next down turn. Pays not to be too greedy while markets are hot.

    Keep up the great work mate!

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