Portfolio Review – February 2019 – Stock Market Gains Return

[This February portfolio review may contain affiliate links for which I receive a commission at no cost to you. I only recommend products I use and trust.]

The last month was a perfect example as to why it’s so hard to time the market. You never know when the stock market gains will return and missing them is a huge hit to your returns.

It was easy to feel negative about the market after the shellacking it took in December. After all, look at the performance of my own portfolio and the S&P in the first 24 days of December. As always, the graphics below are from Personal Capital.

That’s not the type of Christmas gift I was hoping for. It’s very easy to get spooked if you look at your portfolio one day and see it down nearly 15% in a few weeks. I imagine many people sold right at that moment fearing the worst and thinking the market would tank ever further.

What happened afterwards?

The stock market reversed and recovered those losses. It all happened within the span of weeks. In fact, the biggest drops and gains happened in a few days. You blink and you miss it. Good luck timing that correctly.

That quickness is also why selling in panic almost never works out well. Imagine the panicked investor who sold on 12/24 and still hasn’t bought back. Not only was the investor down 14.8% from the start of December, he or she missed a 15.2% run up since then. That’s a 30.0% swing in portfolio value.

Yikes, not good. Of course, it’s a worst case scenario type situation and likely didn’t play out like that. However, it can show you how quickly fortunes can change and why timing the market is a foolish endeavor. The problem with selling is that even if you happen to sell at the right time, you still have to buy back in at the right time.

While selling at the right time and missing the biggest drops is a recipe for success. The reality is that it’s also very easy to miss the big stock market gains if you’re out of the market for even a short period of time.

To put it another way, between 1998 and 2017, the S&P 500 had a return of 7.2%. Missing JUST the best 5 days with the biggest stock market gains brings that down to a 5%. That’s a big swing. Of course the opposite applies as well as missing the worst 5 days takes it up to a 9.5% but the reality is that since the returns are so concentrated, the odds of you guessing the right day out of the 5036 trading days in that period are astronomical.

What did I do? Well since I’m not Nostradamus, I stayed the course. As you can see by my Personal Capital graphic below, it worked out OK in the latest month. I have a plan and stuck with it. I bought more on the way down and bought more on the way up. I’m still buying today. That’s the beauty of long term investing, there aren’t a ton of decisions to make once you set up your investment plan!

In the time period since my last update, my portfolio returned 4.44%, slightly better than the 4.3% garnered by the S&P 500.

That’s not bad and combined with additional contributions likely means good things for my portfolio totals. I’m coming off 4 straight months of negative growth and it’s likely that ends this month.

My portfolio ended at $533,914.37 last month so let’s see where I am today.

The Portfolio

My portfolio now sits at $562,258.57, a new record!

That’s a 5.31% increase over last month or a bump of $28,344! There’s the power of contributions and stock market gains.

The $28,344 is the second biggest dollar growth in a month. It follows March 2018 where I gained over 30k in a single month. It’s interesting how similar those situations were as both months saw a quick drop followed by a relatively fast recovery. Blink and you miss it guys.

It does follow four months of portfolio losses. However, those losses totaled $24,364 so we’re back in the green. However, contributions are a good part of how this month’s total eclipses those losses. The overall return on the portfolio since then is still negative but it’s certainly not a disaster at this point. It certainly hasn’t been a banner last 6 months for stocks but this month does make it a bit more palatable.

My taxable accounts were up 6.3% since the last update. The top 5 holdings there continue to be UNH, AAPL, MKL, BAM and MSG in that order.

My tax-advantaged accounts were up 5.4% since last month. My top 5 holdings there are all mutual funds and included VIIIX, VSCPX, RERGX, VGSLX and VBTLX. I’m a guy who likes his Vanguard.

Cash was down a bit as I used the downturn to buy more of what I already owned. Cash still makes up 7.2% of my portfolio and I’m always looking to buy something if I find any values.

Lately, I’ve also been putting money into my M1 Finance account and plan to do more fun stuff there too. I’m really liking the platform as it allows me to test out some strategies without a large capital infusion.

This was a good month on the portfolio front and I’m hoping the rise in stock prices and additional contributions also helped get my asset allocation back on track.

Asset Allocation

My focus last month was U.S. large cap and small cap stocks and those are more on track this month.

I was able to sell my ESPP shares and re-deploy the money into areas that needed the infusion. Let’s see where things sit against target versus last month.

Large caps and small caps are still trailing target but not as badly as last month. REITs had a great month and soared upwards despite no additional contributions.

As always, I’ll use the shortfalls as a guide to drive my buying decisions. The exciting part about restarting the year is that my 401k and HSA contributions soar again as I front load those areas. I’m also expecting a bonus in February that will help push money into the market. That’s always nice.

The plan for next month is as follows;

• Purchase U.S. large caps followed by U.S. small caps
• Cash is at 7.2%, look for individual values or purchase large cap or small cap ETFs

Overall, this was a pretty good start to the year and while there’s a lot of uncertainty out there; one thing is certain for me. I’m a long ways away from needing this money so all I’ll be doing is buying whether it goes up or goes down.