Portfolio Review – June 2018 – Buying Bonds and International Stocks

bonds
[This portfolio review about buying bonds may contain affiliate links at no cost to you]

The U.S. stock market has had a good year so far. Sure, there have been some dips like the ones in February and April but the results YTD are positive. On the flip side, bonds and international stocks haven’t been so lucky. That means investors with a tilt towards those asset classes have been buying bonds and international stocks.

Both asset classes were underweight in my portfolio last month. It’s easy to see why if you look at the YTD results.

personal capital

The above breakdown is from Personal Capital which I recently started using to track my portfolio results and net worth. It allows you to connect your accounts then track your net worth on a daily basis and best of all, it’s free! It also provides some cool graphics like the one above. They do offer some paid services if you’re interested in that but there’s plenty of useful things you get for free. I’m happy just being a free subscriber forever!

These results show the problem for investors like me with foreign equity and bond exposure. Foreign stocks have been slightly negative since the beginning of the year. U.S. bonds have been negative due to rising interest rates. It’s been tough sledding as U.S. stocks have eclipsed everything. Luckily my portfolio(the You Index) has done well this year despite the bond and international exposure. That’s mostly due to my individual holdings which have outperformed the index.

That solid performance in domestic stocks has ushered in some asset allocation issues. That’s not necessarily a bad thing. My asset allocation and any shortfalls allow me to target my purchases. That means I’ve been buying bonds and international stocks quite a bit lately. Perhaps that’s a good thing from a long term return perspective. That’s one of the goals with an asset allocation plan. Purchases are targeted towards things that fall behind and are in theory priced well in relation to the other classes.

I actually utilized some of my excess cash this month trying to fix those holes. I found some decent values in China this month and put some capital to work.

The Tecent ADR(TCEHY) dropped into the low 50s. That’s near the price where I initially bought it a while ago. I still think it’s a good value at that level and doubled my position in the company. It’s still a small holding but I’ll likely pick up more if the price drops again.

Baidu(BIDU) dropped below $250 for a brief period in May. I opened a small position there as well. Baidu is the dominant search engine in China. It has a good growth path ahead and retains majority ownership in recently IPO’d iQIYI, the potentially over hyped “Netflix of China”. This wasn’t a big position one I’m happy to hold for a while. I like these Chinese tech companies for the long term. Baidu may just be one of the more attractive ones right now. They have a solid balance sheet and produce a ton of cash that they can hopefully use to grow their business.

Neither of these were large buys. However, I did want to lend some support to my lagging international position. Tencent is already a 500B market cap company but their potential is still quite large.

Beyond that, I was also buying bonds with my regular 401k contributions. I also used some excess cash in my brokerage link account to buy more bonds.

This was the first month in a while where I had some individual buys. I’m definitely interested to see how these do in the long run. China is always a risky bet and volatility is sure to come but my holding period here is very long. Hopefully these stocks are a good long term part of my portfolio.

My portfolio last month was $523,117.61 so let’s see where I’m at today.

The Portfolio

portfolio

My portfolio now sits at $535,565.60!

There were some dips in February and April but I’m back with another all time high.

The portfolio was up 12.5k this month or a 2.38% return including contributions.

Here’s a look at my overall performance this month excluding contributions versus the rest of the stock market from Personal Capital.

As you can see, I lagged the U.S. stock market very slightly. That’s due to poor international performance this month. My exposure to international has been a drag in recent years but hopefully that turns around.

YTD, my portfolio is still doing well. I’m happy with my asset allocation. I’ll keep buying securities as my asset allocation dictates. My recent asset allocation review talked about why I do what I do. There are currently no plans to change it and I won’t revisit that area until next year. However, continued international under-performance without any volatility reduction certainly makes a person think.

One of the things I decided to do was to broaden by international stock research. That’s where purchases like BIDU and TCEHY come in to hopefully improve my overall international performance.

Related : Revisiting my Asset Allocation

My taxable accounts were up 5.5%. That was driven by strong UNH performance and purchases of BIDU and TCEHY.

My tax-advantaged accounts were up 3%. That was due to strong U.S. stock market performance and additional bond purchases.

Cash was down 15% due to the individual stock purchases. Cash still makes up 6.5% of my overall portfolio which is below my limit of 10%.

The hope is that the recent buys help my lagging assets. However, the monthly performance of international assets and strong U.S. stock market performance may reduce that impact.

Let’s take a look at my asset allocation.

Asset Allocation

buying bonds

The goal was to get international and bonds close to target. However, the U.S. stock market game me a Mutombo finger wag and said “no, no, no.”

The international purchases helped but my international allocation is still below target. The same applies to bonds.

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

asset classes

Most of my contributions last month went to international and bonds. However, despite that, both are still below target. That’s due to the strong performance in the U.S. stock market and my individual holdings most of which are domestic.

Still, I’m in a pretty good spot right now with all of the asset classes within 30 basis points of target. That means I have some easy fixes ahead of me and will just continue doing what I’ve been doing.

Next month’s strategy is as follows;

  • Buy international stocks/funds targeting developed markets.
  • Continue buying bonds.
  • Cash is at 6.5%. Look for individual values in the market and fill out gaps using ETFs.

Cash is still high but it’s lower than it’s been in a while. I really wanted to put a little bit of it to use and will continue to keep an eye out for good long term holds. The good thing about having an asset allocation that I visit monthly is that I’m always buying the things that are on sale; at least in relation to other securities. Right now, that means buying bonds and international stocks but that may change soon.

This is the 2nd month in a row of growth after some volatility. We’ll see if that continues or if things will go south again. I’m a long term investor so I won’t complain either way. However, it’s certainly harder to find individual values in an ever growing market. That’s why I had to look to China to find something I liked this time around.

Time in the market beats timing the market so either way I’ll have regular money flowing into index funds every month.

That’s it for this update. It’s another good one with 10k+ in growth. I’m well on my way to 600k and beyond and am eager to have you along for the ride. I’m at a spot now where market growth dictates performance much more than my contributions. Those still matter but much less than they did a few years ago. I’m interested to see where the market takes us the rest of the year and will be contributing every month along the way.

Time in the market beats timing the market. Whether we are up or down, I’ll have money flowing into index funds every month.

Thanks for reading and let me know how your portfolio did this month!

Follow my portfolio growth! #Portfolio #Dividends #Investing #Money #FIRE #Retirement #Cash

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3 thoughts on “Portfolio Review – June 2018 – Buying Bonds and International Stocks

  1. Nice summary TIME. Being mainly focused on DGI, so far this year I feel like I’m having a very good year with dividend increases. Many of the companies I own have broken to the upside versus past dividend increase trends. This is great and you may be seeing it too? Tom

  2. Hi Time –
    Thanks for the post. Also glad to see you’re using Personal Capital – it’s a very helpful tool.

    On your comments re: trailing the US market, I still think you had a very solid month and, long-term, a well-balanced portfolio. We also just recently started taking a look at our small and medium cap allocations; we’re also a little lower on the international (ex-US) side than I’d like to be at right now.

    Thanks again for sharing. – Mike

  3. I just found your page, nice solid diversified portfolio. I’ll be bookmarking your site to come back and read more. I’ve only traded stocks /options, never bonds but I’m always looking to learn.

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