Posted on by Micah McDonald

2018 Annual Performance Report – The Deep Value ETF Accumulator

“What gets measured, gets managed”

The Deep Value ETF Accumulator 2018 Annual Performance Report

 

 

 

I’ll be the first to admit, 2018 was a tough year to make money in the stock market. But, if you are in the accumulation phase of your investing journey, take heart, most of your purchases of equities last year were probably at great prices. This may not make you feel any better about your year-end account balances, but if your account simply returns to par in 2019, you’ll probably be up substantially in the new year.

If you do anything more elaborate than just dollar-cost-average into your investment accounts, I highly recommend looking at the performance of your accounts. The reason being is that if what you’re doing isn’t keeping pace with a broad market index, it may be worth considering tweaking your strategy, or simply throw in the towel and dollar-cost-average into a few good index funds or ETFs. A couple of years ago, my better half (aka HH7) asked me how my investment strategy was performing. In other words, was my strategy worth all the trouble? I didn’t have an answer. So, I went through the effort to discover what our actual returns were in our accounts after subtracting out the contributions. Ever since then, I have published our returns for HH7 and on my website semi-annually. This will be my 4th report since starting the Deep Value ETF Accumulator blog.

LINKS TO MY PAST PERFORMANCE REPORTS:

SO, HOW DID WE DO IN 2018? 

Not great; but not horrible either.

NOW FOR MY SEMI-ANNUAL RATIONALIZATIONS (aka excuses):

  • Roth IRA 1: Our largest position in this account is XLE. 2018 was a really bad year for energy stocks. That’s my story, and I’m sticking to it. I’m hoping for a recovery in energy equities in 2019.
  • Roth IRA 2: HH7’s account. Very satisfied!
  • Traditional IRA: This account pretty much did what the market did. No complaints.
  • Brokerage: I made a significant change in this account. I opened an account with M1 Finance in July 2018 and have been slowly migrating money from our TDA brokerage over to the M1 account. Our last holding in this account is FNI. When FNI (China/India) recovers, I will put a trailing stop on this holding, then migrate the money over to M1. That’s the plan.
  • M1 Finance – DVETF 31 ETF portfolio: This account is pretty much on autopilot. I started the account in July 2018. I’ve been adding to this account about once a week during these last few months of market volatility.
  • 401k: This account is on 100% autopilot. My 401k has lousy choices, so I put it all in my favorite equity asset class, Mid-Cap-Blend. NTIAX. I don’t like 401k’s and I don’t like mutual funds. But hey, if your company is giving you a 401k match, you DON’T turn that down! The -14.5% return includes my employer’s contributions. So, I’m actually up considerably. Always look on the bright side, right?
  • StockPile: This account is on 100% autopilot. This is just a place to stash our credit card reward points.

Now, on to our EOY (end-of-year) asset allocation. I publish this every weekend, but I published a special EOY HOLDINGS CHART after the market closed on December 31, 2018. Here’s what we currently own:

THE STORY BEHIND OUR LARGEST HOLDINGS:

  • EWW – Mexico: This is one of our two largest holdings. This ETF is currently 25% below its’ 52-week high and 46% below it’s all-time-high. The 2.68% dividend is satisfactory while awaiting capital appreciation.
  • REZ – Real Estate Investment Trusts: This was a much larger holding at the beginning of 2018. In fact, at one point this ETF was over 20% of our portfolio. We were able to trim some profits in this holding from August through December 2018. We are very satisfied with this asset.
  • XLE – Energy: The energy sector has been in a real slump for the latter half of 2018 and is still down significantly. We were able trim some profits in this holding during late 2017 and early 2018. Energy is very volatile, but very profitable for the patient investor. Enjoy your 2.96% dividend while you’re waiting for capital appreciation.
  • EWZ – Brazil: This is a relatively new holding for us. This ETF dropped dramatically in late spring, early summer 2018 and we scooped up a lot of shares. It recovered fairly well, and we were able to sell 1 lot with a quick profit.
  • RYU – Utilities: This has been a great defensive position during the recent market volatility. It increased in value enough to sell 1 lot with a decent profit. I like the 3.08% dividend too.
  • EZA – South Africa: Our most volatile holding. It’s an emerging market single country fund. Holding this  is like riding a wicked-fast rollercoaster. Try to enjoy the ride with the 2.81% dividend.
  • FNI – China/India: This is a great ETF in my opinion. But, everything China related has been beaten down with the recent trade war talks and worldwide market declines. A 2.72% dividend for the patient investor.
  • CASH – Cash: I deploy our cash on a weekly basis; usually on Mondays. We bought some XLE this week; we might buy some more small cap blend (EES) equities next Monday. I like having enough cash on hand to make weekly purchases. But, if our cash goes above 9%, I go into rapid deployment mode and buy every day until the cash level gets below 9%. The reason for this is that too much cash in a portfolio WILL drag down performance (aka cash drag).
  • EWD – Sweden: Our only non-emerging-market single country fund. It’s difficult to find a single-country developed-market fund that performs as well as an S&P 500 index fund. EWD has a great history, but over the last year that performance has diminished. I’m sticking with EWD for now; but we’ll reconsider this investment when the market recovers.

Changes made to the Deep Value ETF Accumulator buy-list in 2018:

  • SPY was added only as benchmark. I prefer FTCS for our U.S. Large Cap Blend holdings
  • RWJ replaced VBR in the Small Cap Value category. VBR is a great fund, but we now prefer RWJ.
  • EES replaced SLY. SLY is still the top performing Small Cap Blend ETF, but EES trades commission-free at my broker (TDA).
  • FIW was added. FIW is a Water ETF and is in the Morningstar category called “Miscellaneous Sector“
  • FTCS replaced PKW in the Large Cap Blend category. PKW is still a great fund, but we now prefer FTCS.

Here’s how the daily Deep Value ETF Accumulator chart looked on December 31, 2017:

Now, here is the current Deep Value ETF Accumulator chart dated December 31, 2018:

In conclusion, I want to reiterate, if you’re doing something other than dollar-cost-averaging into a few good funds, do you know how your investments are performing? It’s worth the effort. If you are significantly trailing your benchmark, maybe some changes are in order. I wish you all a Happy New Year. Stay diversified friends.

Thank you for reading my blog.

Respectfully yours, Micah McDonald, aka the Deep Value ETF Accumulator

Disclosure: I own many of the funds discussed in this article. I am not a professional investment advisor. Please performed your own due diligence or consult a Registered Investment Advisor prior to investing in any fund mentioned in this article.