My name is Micah McDonald and I am The Deep Value ETF Accumulator. I’m a retired USAF Crew Chief, which is a fancy title for general aircraft mechanic. I am now an electronics technician working in remote locations throughout Alaska.
I am married and have seven children and a multitude of grandchildren. I’m a Christian man who is not perfect, but forgiven. We live in Palmer, Alaska which is about 45 miles north of Anchorage. I enjoy mountain hiking, fishing, driving in the mud, shooting guns, skiing, researching investments, listening to podcasts, reading, spending time with my church family and spending time with my wife, kids and grandkids.
We have our investments spread over a traditional IRA, two Roth IRA’s, a 401k, a standard brokerage account and an M1 Finance account. We save about 20% of our income into these accounts.
My investment philosophy is relatively simple. I buy ETFs as if they were mutual funds and I hold them for a very long time. I employ a similar strategy as dollar cost averaging, but with a twist. I buy ETFs that have good long term track records, but are currently out-of-favor and relatively cheap. I trim the fat, or sell just the profits on my holdings when when profits are greater than $1100. That’s my idea of tactical re-balancing.
I have tried my hand at buying and selling individual stocks with some success. I’ve bought and sold stocks based on the IBD, Investor’s Business Daily CANSLIM method with very limited success. I have invested in leveraged ETFs with a great deal of success, until, that fateful time when I invested in UWTI, a triple leveraged oil futures ETN.
Although I was making good money using TQQQ, a triple leveraged ETF that tracks the NASDAQ 100 and BIB, a double leveraged ETF that tracks biotech stocks; I sold off my leveraged ETF’s, because I was losing my shirt in UWTI. The loss I took on UWTI had the most transformational effect on my investment philosophy. It was during that 2-year process of losing money that I finally realized that I am investing for our future and not gambling. I’m not prepared to debate the difference between gambling and investing in this forum, but I learned the difference for me.
Since I finally discovered the difference between gambling and investing, I endeavored to learn all that I could about actual long term investing and wealth building. As I researched and learned from numerous financial titans, I realized that I liked and agreed with several of them, but I also disagreed with some of their advice. Dave Ramsey helped me get out of debt and have more to invest, but I disagree with the use of mutual funds. I learned most of what I think I need to know about investing in equities from Paul Merriman, but I don’t agree with the need to keep a balanced portfolio. I went on to learn even more about long term wealth building from Joshua Sheats, Rob Berger, Todd Tresidder, Roger Whitney, Scott Allen Turner, J. David Stein, Ric Edelman and others. What I learned specifically, is that there isn’t just one way to build wealth over time, and there definitely isn’t just one way to build a long-term portfolio of equities. It was through these mentors that I developed a system of investing in equities that works for people like me. People like me enjoy buying and selling stocks, but we also see the need to keep our heads on straight and build wealth over time. Although each of these mentors teach different methods to invest, each one has contributed in some way to the eventual building of The Deep Value ETF Accumulator.
In future installments of this ‘about me’ series, I will spend some time describing my investment journey. Additionally, I will share some of my personal and financial goals. And of course, I will describe in detail how the Deep Value ETF Accumulator was developed and how I use it as my primary means of investment due diligence.
Thanks for reading and please feel free to drop me a comment or question.
The Deep Value ETF Accumulator; AKA Micah McDonald
Hi,
I just came accross your blog and I think you´re doing a great work, I appreciate it.
Is it possible to be notified automatically of new posts by mail?
Greetings from sunny Spain!
I will endeavor to learn how to do that. I’m kind of a new blogger. Thank you.
A nice and stable program for running some long term results. Your premise is an excellent idea. I was able to drop that into Google Finance and have their API run the whole thing automatically so I now I just sit back and watch it every now and then.
Excellent!
Hi Robert
Thank you for the kind words. Would you be able to share a link to what you’ve built on Goggle? It sounds very interesting to me.
Thank you
Micah
wow.. just came across your homepage.. its really interesting.. i have been in the trading industry for almost 30 years.. 25 years as a FX trader in banks – and last 5-7 years as a stock trader by myself.. i simply needed to get away from the currencies after so many years.. Mostly trading scandinavian stocks – as im from denmark. i have 2 retirement acc i trade from. 1 is for short term single stock trading – the other for medium- long term – and im really looking for some inputs to trading the ETFs in my med-long term portfolio – where i dont need to trade them dayli – but perhaps with longer perirods.. then i came across you.. can i ask – are u looking at any technical stuff when u enter or exit positions ? when you enter a position – do you have a predefined exit plan – stop loss – stop profit ? looking at your etfs – “hold” is that what your currently longs ? i guess corrections is a no go – and dips are etf s looking good to buy ? i just mentioned on twitter for you – look at EDEN – denmark. thanks man im a follower from now on . gert – denmark
Hello Gert and welcome to my blog.
I appreciate your compliments and the short description of your trading background.
I might be of little help on your short-term trading goals, but on your medium to long-term goals I’d like to answer your questions by telling you how I am investing in these ETFs.
I do look at my investments daily to create my daily chart, but there is no need for me to watch them since I only buy once or twice a month.
One of the main drivers in my investment strategy is to put up self-imposed barriers to keep me from over-trading.
I do not look at any technicals except how far the listed ETFs have fallen from their 52 week high.
I use to incorporate the 200 day moving average (DMA), but I lost that capability with Yahoo and was forced to use Morningstar for my data, which doesn’t give me the option to use the 200DMA.
I am in the accumulation phase of my investing journey and will be for at least 13 more years, so at this point I would say my holding period is 13 or more years.
I do not use any stop losses; in fact, the further one of these ETFs drop in value, the more likely I am to buy more to bring my cost basis down.
I do not have a stop profit either, but I do sell some profits off the top if that profit is greater than $1k and/or greater than 1% of my entire portfolio.
I never sell my entire position in an ETF, I just trim profits occasionally.
These profits that I trim do 3 things for me: 1. frees up cash flow to buy a different ETF that is out of favor, 2. reduce risk by trimming a position I may be too heavily weighted in, 3. adds diversity to my portfolio.
This method of re-balancing a portfolio is what I call tactical re-balancing as opposed to what most advisers recommend which is more strategic in that they re-balance by a calendar date or they use re-balancing bands, such as ±5%.
By using the term “hold” in my chart, this is what I do. I either “hold” that ETF, or I refrain from buying it, or I take the opportunity to trim some profits. (This all depends on how much I profit I’m carrying.)
I do prefer to buy when an ETF is in ‘correction’ mode (-10%) or in worse condition, but this current bull market has given me few opportunities to do that, so I will buy when an ETF is only suffering a ‘dip’ (-5%).
I saw your comments on EDEN in Twitter. Thank you for the lead. I am always on the lookout for new investments.
I have my own personal bias for older funds, so I try to stick with funds that are 10 years old or older.
EDEN is only 5 years old, but I am definitely keeping it on my radar screen.
I maintain a few other self imposed trading rules on myself that I use to control my desire to trade frequently.
I do not buy more than once a week.
I buy or sell at least 1% of our entire portfolio during any trade.
I do not place orders while the market is open.
I only use limit orders.
I hope I’ve answered your questions sufficiently, if not, please write again.
Thank you
Micah
Good principles to Know. Just to know more details on this “I do not place orders while the market is open.”. Since ETFs may available less than it’s NAV during trading, whether it can be used as buying opportunity?.
Hi Vijay
You are correct in saying that the NAV difference can be taken advantage of.
But, I am not willing or able to do that.
I use to trade individual company stocks and I learned that I am not a very good trader.
I, like most investors, am an emotional investor.
Because of the lessons I learned in trading, I have developed a few self imposed rules.
The self imposed rule of placing limit orders while the market is closed has helped me more than it has hurt me.
I have occasionally broken some of my own self imposed rules and it usually wasn’t to my advantage.
It is my opinion, that to be a successful investor or trader, you must know yourself well and employ disciplined buy and sell rules.
Thank you Vijay
Micah
awesome man.. really like your way to look at it.. im very much basing my trading on technical analyses… always using weekly charts – and zooming into dayli as well – using the 50 and 200 ma on dayli… that said – we all like to buy whats cheap and at the moment not much has falling that much to put it into the box cheap.. thats why i recommended EDEN for you as that has dropped 10-12 pct lately – but of course understand u need to have a 10 year frame at least before u enter a certain ETF.. thanks indeed man. i totally follow your ideas – and will be on the page often to see.. at the moment im planning to enter more ETF -i just need to find some thats hedged in euros – cause i dont want the pain beeing too much exposed to USD – im from scandinavia.. thanks for your time man. and keep in touch.
Hi Gert
Thank you again for the lead on EDEN.
This is a very tempting opportunity, so I will be re-thinking an investment in EDEN.
I know that WisdomTree has quite a few currency hedged ETFs.
I don’t know how they would work in Euros, but I do recommend WisdomTree funds.
I do not buy currency hedged ETFs because the benefit of the hedge goes away when held for a very long time (in my opinion).
But, if your time horizon is shorter, I can see the potential benefit of a currency hedged ETF.
Thanks
Micah
I poked around your site a bit, read this page obviously. I don’t really get it. What are your valuation methods? How often do you trade? Do you have a target number of etfs? What do the terms mean in your spreadsheets (“correction”, “pause”, etc)?
Hello Norm
I will attempt to answer all you questions in order:
– Valuations – I’m not using any traditional valuations. The ETFs are ranked highest to lowest by distance from their 52 week highs. The further below the 52 week high, the higher they appear on the list. Ultimately my valuation is the fact that I value each of these asset classes and ETFs, and I want to be invested in each one, but I’m attempting to buy them when the are ‘on-sale’.
– Trades – I typically buy once or twice a month. I usually buy on Monday’s if I have enough cash to make a purchase. I only buy or sell 1% lots; meaning, 1% of the total value of our portfolios. So, if I don’t have 1% in cash, I wait until I can raise 1% cash. I rarely sell, but when I do, I must have at least a 1% of my total portfolio value in profit to make a sell. I never sell an entire holding; I only trim the fat (sell the profits).
– Number of ETFs – My target number of ETFs is all the ETFs you see on the list, which is currently 30 ETFs.
– Mode ‘terms’: I will reference a short article I wrote about the mode. Defining Stock Market Modes: Depression, Crash, Bear, Correction, Dip, Pause, Hold: https://deepvalueetfaccumulator.com/blog/defining-stock-market-modes-depression-crash-bear-correction-dip-pause-hold/
I hope I was able to answer your questions.
If not, please write again.
Thank you for reading the dvetf.com and thank you for your questions.
Micah
Micah,
I just discovered your blog and it’s great! I read your profile and I just say, Christian, shooting guns, investing, outdoors; we are kindred spirits!
I just retweeted your REIT accumulation as I think that NOW is a perfect time to purchase that sector.
I’ll be frequenting your blog from here on out.
God Bless,
MrFIREby2023
Hello Mr. FIREby30
I appreciate your kind comments. It’s good to meet another brother in the finance blogosphere. REITs are beginning to look like they’re bottoming out. Need to exhaust all the week holders. We’re currently at 22% REITs and will continue accumulating until they do bottom out.
Thank you again for reading and commenting on my blog. I’ll checking out your blog also.
Micah
Micah,
Thank you for your blog.
What reasons do you have for only 2 small cap etfs, as opposed to: 10 small, 10 mid, 10 large cap ETFs?
Do you not have the Vanguard etfs, VB and VO, because they are too “simplistic?”
Thank you!
Hello Peter
I see what you are saying here.
The column labeled “Morningstar Equity Style Box” is kind of misleading.
That column is populated by Morningstar data that shows the valuation & market cap of a fund.
The Morningstar Style Box can drift based on market conditions and the rebalancing schedule of the fund being rated.
To be honest, I don’t pay a lot of attention to this column.
The more important column of information to me is the “Morningstar Industry / Fund Category”; this information will rarely change.
I have only chosen one fund per Morningstar category to invest in and put on my daily chart.
I have endeavored to select funds that have the best long term track records that are 10 years old or older.
All this to say, I do have 3 U.S. Small Cap ETFs listed. They are:
1. IJT – iShares S&P Small-Cap 600 Growth ETF
2. EES – WisdomTree US SmallCap Earnings ETF
3. VBR – Vanguard Small-Cap Value ETF
I have no problems with VB & VO as both are very fine funds.
I did some backtesting on VO along with 14 other ETFs and VO ranked #10.
You can read about that backtest right here: Best Long-Term Performance U.S. Mid Cap Blend ETFs https://deepvalueetfaccumulator.com/blog/best-long-term-performance-u-s-mid-cap-blend-etfs/
I also backtested VB along with 10 other ETFs and VB ranked #5.
You can read about that backtest right here: Best Long-Term Performance U.S. Small Cap Blend ETFs https://deepvalueetfaccumulator.com/blog/best-long-term-performance-u-s-small-cap-blend-etfs/
If it interests you, I have also written about U.S. Small Cap Growth ETFs right here: Best Long-Term Performance U.S. Small Cap Growth ETFs https://deepvalueetfaccumulator.com/blog/best-long-term-performance-u-s-small-cap-growth-etfs/
Thank you very much for your questions.
Micah
Micah, you provide awesome service to the community through this site!
This is what you have stated in the piece “Defining Stock Market Modes”:
[Once I’ve begun to accumulate an ETF, that’s the one I accumulate until it bottoms out.
Once an ETF that I’m accumulating bottoms out, I quit buying it, even though I could continue buying shares “cheap”.
The reason for this is that I don’t know that it actually bottomed, so I could potentially buy shares cheaper in the future.]
I am not sure I understand what you mean by that. Do you mean to say that you stop buying a particular ETF when it starts creeping higher? Do your consecutive purchases of that ETF need to fetch more shares than the prior purchase for you to add more shares? Can you perhaps explain with an example?
If you were starting to invest from scratch all over again, which and how many ETFs would you pick?
Thanx
Vin
Hello Vin
I apologize for taking a few days to get back to you.
I work in a remote location in Alaska and just returned home this week, so I’ve been catching up on some things around the house.
I will try to answer your questions as thoroughly as possible.
I do keep buying ETFs while they are declining in price.
You have correctly stated that I stop buying when that ETF starts to creep up in price.
I keep an excel file handy that tells me the price I last paid for the ETFs I buy.
This saves me a little time from the way I use to do this.
I used to go look at my brokerage history or my webpage; the excel file is much quicker and easier.
I don’t necessarily need to get more shares than the prior purchases, but that is usually the case since I’m paying a lower price.
I think a good example of how I determine to continue to accumulate an ETF is in my recent purchases of the EWZ Brazil ETF.
We started buying EWZ towards the end of May.
From then until now, most of our purchases have been of EWZ, but we did purchase one lot of EZA and one lot of EWD during that time frame.
The reason for EWD & EZA was that on those days we had larger unrealized losses in those ETFs.
Since May we have slowly increased our position in EWZ from about 1% to about 6% of our total combined portfolio value.
This is yet another reason to limit myself from purchasing more shares of an ETF until it drops some more in price.
My method of accumulation usually makes me very overweight on some assets while very underweight on others.
If I continue to buy an asset just because it is the cheapest could conceivably make one asset a majority of my portfolio, which I don’t want to do.
So, these self-imposed limitations are risk management tools for me.
At today’s market close, I see that I could buy more shares of EWZ cheaper than my last purchase, but I have a larger unrealized loss in EZA, so on Monday, I will be buying more EZA.
If I were starting new today, I would probably do the same thing I’m doing now but if you are considering a similar methodology of accumulating assets, I would recommend just a few broad market ETFs to get started.
You could employ the same tactics I do, but just limit yourself to these broad market ETFs.
I suspect you would end up with comparable results as I do.
Here would be a great starter portfolio, in my opinion: Diversified Emerging Markets (DEM), Foreign Large Value (FGD), Foreign Small/Mid Value (PDN), Large Blend (FTCS), Mid Cap Blend (EZM), Small Blend (EES)
I don’t know how much you are investing, but if I were starting out, I’d only buy $1000 lots or greater due to the cost of commissions. If I didn’t have $1000, I’d save up until I did. Now let’s pretend I could only save $1000 every 2 months; then I’d only buy every 2 months. I would employ the same methodology that I do now. I’d buy what’s on sale just as I do now, and I’d select DEM today. Pretend I’m ready to buy more in 2 months and DEM has dropped in price from today, then I’d buy more DEM. Or let’s pretend DEM goes up in price and small cap blend drops in price, significantly more than the others, then I’d buy EES instead.
So, bottom line, I’d stick with my plan, but I’d make purchases less frequently.
I hope this helps.
If you’d like any of this explained further, please write again.
Thank you
Micah
Micah, you may be a good investor… but I am so sure that you are a much better (and helpful) human being. I sincerely thank you for taking the time and explaining so very beautifully and thoroughly. Please excuse me for the delay in my reply as well. Too many distractions caused that to happen. Take care, my friend.
Thank you for the kind comments Vin. I appreciate your readership too. Micah
Micah,
By the way, can you educate me on why you suggest DEM, FGD, PDN, FTCS, EZM and EES as opposed to the ones that are more beaten down and out of favor like EWZ, EZA, EWW, EWD, DGS, DEM, and EWY? Would they not offer a better bargain? Also, just out of curiosity, may I ask why you do not hold DEM, PDN, and FTCS?
Finally, is there a certain threshold that you have in mind for additional purchase of say EWZ, for example? Must the additional purchase price be ALWAYS lower than your previous purchase? You would not buy it even if it is say a 1% above that price?
Thanks again for your teachings Micah.
Hi Vin
I’ve never considered myself an educator, but I will certainly try to answer your questions.
QUESTION: Why do you suggest DEM, FGD, PDN, FTCS, EZM and EES as opposed to the ones that are more beaten down and out of favor like EWZ, EZA, EWW, EWD, DGS, DEM, and EWY? Would they not offer a better bargain?
I’m not really recommending one over another; because they are all good picks in my opinion.
My daily chart simply ranks them by distance below their 52-week highs.
So, for example, today, EWZ, EZA, DGS, EWY and EWD are ranked in the top 5.
Therefore, I am currently attempting to accumulate EWD tomorrow.
The reason I’m choosing EWD over the others is that I am showing my largest unrealized loss in EWD and I can currently buy shares of EWD cheaper than the last time I bought.
But, to answer the actual point of your question, I need to refer back to one of your prior questions that I attempted to answer.
“If you were starting to invest from scratch all over again, which and how many ETFs would you pick?”
In my answer to this question, I had suggested a smaller group of ETFs, just in case you didn’t want to invest in 31 different ETFs.
I think I may have misunderstood your question.
This group (DEM, FGD, PDN, FTCS, EZM and EES) would give you worldwide exposure to equities with only 6 ETFs rather than 31.
Here’s what this leaner portfolio would cover:
DEM – DIVERSIFIED EMERGING MARKETS
FGD – FOREIGN LARGE CAP VALUE
PDN – FOREIGN SMALL/MID CAP VALUE
FTCS – US LARGE CAP BLEND
EZM – US MID CAP BLEND
EES – US SMALL CAP BLEND
That is a lot of coverage with a small number of funds.
I hope this answers the question better.
QUESTION: Why you do not hold DEM, PDN, and FTCS?
ANSWER: The opportunity has not yet happened for me.
These less volatile funds are more difficult for me to capture.
I am building this portfolio one brick at a time, and I have at least 12 more years to build it.
The opportunity to buy these ETFs will come along some day; and I am very patient (in this field).
QUESTION: Is there a certain threshold that you have in mind for additional purchase of say EWZ, for example? Must the additional purchase price be ALWAYS lower than your previous purchase? You would not buy it even if it is say a 1% above that price?
We are invested in 6 different accounts. So, for me to say ‘never’ would be shortsited.
At some point in the future, I will be invested in every single one of these ETFs. And at that point, it may be impossible to always buy at lower prices than previous purchases.
I recognize this and have a plan for that also.
In the current example of EWZ, I am accumulating that ETF in 2 different accounts.
In one account, my last purchase price was $34.14; in the other account, my last purchase price was $32.43.
EWZ’s current price is $33.54.
So, in this situation I would still be willing to buy more EWZ in the account that I paid $34.14 on the last purchase.
And, yes, at this point, I would not continue to buy EWZ in the account that I last paid $32.43 even though the price is very cheap.
This method has served us well in both cash & risk management in our accounts.
But as I stated earlier, I’m showing a larger unrealize loss in EWD and I can still buy it for less than the last time I bought it, so I am attempting to buy EWD this week.
I have a self imposed limit of buying only once a week.
So, sometimes I have to choose between two or more very good opportunities.
This week I am giving up an opportunity to buy more EWZ at a very good price.
This too is part of our risk management system and I’m okay with it.
I hope I have sufficiently answered you questions Vin.
Thanks for the opportunity to explain my methodology.
Micah
For your information, I have been out of market since 2010 because, like you, I am an emotional investor as well and just couldn’t handle the loss in 2008-2009. I know I have missed almost 70% of the bull run. But that is old news and have to start fresh with what I have. If you were in my shoes and had a significant chunk to invest after being on sidelines for several years, how would you deploy those funds? Would you be buying small amounts every week/month or would you put a much larger sum to use?
Hello Vin
If I found myself where you are and I wanted this money in equities, I would employ a similar strategy that I currently do.
It is my intent to be 91 to 99% invested in equities at all times.
I currently have approximately 6% in cash, so I only buy once a week until I run out of cash to invest.
But, a couple months ago we went over 9% in cash.
Any time we find ourselves with more than 9% cash, we purchase 1% lots everyday until our cash level is below 9%.
Now, lets pretend I’m at 100% cash and I have $100,000 to invest.
I would determine what percentage I want my cash level to be and how fast I want to be at that percentage.
For this example, we’ll use 10% cash, 90% invested in equities and 1 year to get there.
I would invest the 90% in weekly increments.
So the math says $90,000 / 52 weeks = $1730/week.
If I had weekly or monthly income to invest on top of the 90%, I would simply add that income to the $1730 so I could stick with my plan.
Once that year of investing the $90,000 was over, I go back to my current methodology.
I know the fear of putting this money into the market.
If your risk tolerance is low, I would recommend a smaller % towards equities.
You may want to consider a 60% equity / 30% intermediate term treasury bond fund / 10% cash.
I am not a financial advisor and I cannot accurately guage your risk tolerance, but the bonds can smooth out some of the volatility of the equities.
If I invested in an intermediate bond fund, I’d probably use BIV.
But I haven’t thoroughly researched bond funds.
I hope this is helpful Vin.
Thanks again for your readership.
Micah
Micah, you are very thorough at what you do and very patient as well. I am immensely thankful for taking the time and answering my queries. I am one of your biggest fan now and you have earned a tremendous amount of my respect. May The Lord bless you with health, wealth and happiness.
Hello Vin
Very kind comments my brother.
I pray the very same blessings on you too.
Respectfully yours
Micah
Hello Micah,
Interesting blog.
I wish You and Your family good luck!
Thank you for the kind comments Frank.
Micah
We have a few similar mentors in Merriman, Tressider, and Stein!
Hi Bill
We live in a wonderful day and age when we have such easy access to these great minds.
Thank you for commenting on the blog Bill.
Micah