“What gets measured, gets improved.”

Welcome to my 6th installment of my semi-annual performance reports. 2019 was an amazingly profitable year to be invested in the stock market, especially coming off the heels of that horrible last quarter of 2018. Most markets are hitting new all-time-highs and so are most investor’s portfolios. Look at how 9 major asset classes performed in 2019; even emerging markets performed well.

Source: https://novelinvestor.com/asset-class-returns/

“What gets measured, gets improved.” So, why do we measure performance? Most investors want to get a good return on their investments, so there needs to be a benchmark and a measurement to know if they are getting a good return. I will take that one step further and say that most portfolio managers are looking to produce portfolios with good risk-adjusted returns. For example, a portfolio consisting of 60%/40% equities and fixed income should be compared to a similar portfolio, not a portfolio of 100% growth stocks because they contain different levels of risk. Personally, I have 3 main reasons that I track performance. 1.) I run a blog dedicated to ETF investing and I expect that some people who read it will want to know how well or poorly my strategy works. 2.) I personally want to know if my strategy is worth continuing to pursue. 3.) My wife wants to know if the time and effort I spend playing with my blog and researching investments is a good use of my time.

If you do anything more elaborate than dollar-cost-averaging into a target date fund, I highly recommend looking at the performance of your investment accounts. The reason being is that if what you’re doing isn’t keeping pace with a basic target date fund, it may be worth considering tweaking your strategy, or simply throwing in the towel and dollar-cost-average into a good target date fund or a total stock market fund.

Links to our previous semi-annual performance reports:

The Deep Value ETF Accumulator 2019 EOY Performance Table:

Our returns were good and we are pleased with them, but notably lower than a US Large Cap index. Although we are not attempting to build a US large cap portfolio, it can be disheartening to know your portfolio’s performance lagged in any way. Our portfolio is very fluid, so it’s difficult to nail down an exact portfolio allocation, but I’d say it is roughly 45% US, 37% Emerging Markets, 14% Developed Markets (ex-US), and 4% Cash. This static allocation would have produced an approximate 24.41% return in 2019. (See linked asset allocation performance here.)

My annual explanations for each of our 7 investment accounts:

Roth IRA 1: We actively manage this account. The largest positions are XLE (energy), FGD (international large value), EWY (South Korea) and EWW (Mexico). None of these sectors or regions performed extremely well in 2019 when compared to US Large Cap funds. We expect that all 4 of these funds will perform well long-term and will continue holding them in this account.
Roth IRA 2: We actively manage this account. The largest positions are EWY (South Korea), FXZ (Materials), and EZA (South Africa). None of these sectors or regions performed extremely well in 2019 when compared to US Large Cap funds. We expect that all 3 of these funds will perform well long-term and will continue holding them in this account.
Traditional IRA: We actively manage this account. It was our worst performing account. This account’s largest positions are EWW (Mexico), EWD (Sweden), XLE (energy), and EZA (South Africa). None of these sectors or regions performed extremely well in 2019 when compared to US Large Cap funds. We expect that all 4 of these funds will perform well long-term and will continue holding them in this account.
M1 Finance DVETF (32 ETF Portfolio). I have this account set up on autopilot. We have a small contribution going into this account on a weekly basis. I love this platform. Every contribution that we make to this account rebalances the portfolio automatically. I highly recommend M1 Finance for both IRAs and brokerage accounts.
401k: This account is on autopilot. My 401k has few & not so great choices in it. I originally had this set up with just 1 mutual fund, a US Mid Cap Blend fund (NTIAX). This account grew to be larger than 5% of our investments, so I felt inclined to start investing in the only other index fund available to me, which is an S&P 500 index fund (BSPAX).
StockPile: This was just a small account to put our credit card points. Our credit card quit offering StockPile certificates for redeeming points, so I’ve decided to close this account.
**TDA Brokerage Account: I liquidated this account on 5/13/19 in order to move money to our M1 Finance account. Now that our M1 account is up to where I want it to be, we will be adding money back into this brokerage account and we will actively manage it. You can read the returns in this account in our 2019 H1 Semi-Annual Performance Report

Now, on to our portfolio holdings. Our portfolio changes with every buy & sell, so I publish this chart every weekend. This chart shows what our portfolio looked like on 12/31/2019:

Mistake noted: QQQ % below 52-week high should have been 0.00%

For comparison’s sake, the next chart shows what our portfolio looked like on 12/31/2018:

The next chart shows every position inside every investment account we have. I don’t normally publish this because it’s just too long. But, since this is an annual report, I thought some people might be interested to see some of the unrealized gains & losses of the positions we are currently holding.

Note: I cannot figure out my gains / losses with the mutual funds in my 401k, so I typically just show a 0.00% gain for these as a place holder.

Our current asset allocation by location, style and size is in the following chart. This is a rough estimate and could be by off by a few percentage points.

The stories behind our largest holdings:

EWY: South Korea. We aggressively accumulated more shares of this ETF last year from 3.09% of our portfolio to 9.74%. South Korea continues to be in a major slump and is still 23% below its’ 10-year high price. This ETF only gained 7.95% CAGR in 2019. This fund pays a reasonable 2.10% dividend while we await capital appreciation.

EWW: Mexico. We have shrunk our allocation in this fund from 11.08% to 9.58% by simply not adding much to it last year. With the new USMCA agreement being signed into law, we are hoping to see some mean reversion to the upside in this holding. This ETF only gained 12.64% CAGR in 2019. This fund pays a nice 2.92% dividend while we await capital appreciation.

XLE: Energy Sector. We have also shrunk our allocation to this fund from 9.71% to 8.53% by not adding much to it. The Energy Sector continues in its’ long-term bear market trend. This ETF only gained 11.73% CAGR in 2019. We are enjoying the 3.73% dividend yield while we await capital appreciation.

M1 Finance: We have grown our allocation in our M1 Brokerage account from 4.85% to 8.39%. We intend to continue to grow this position to approximately 10% of our portfolio. Our portfolio at M1 Finance is equally weighted towards all 32 of the ETFs we invest in. You can look at that portfolio allocation at this link. I cannot repeat often enough how much I love the M1 Finance platform. Check it out, I think you’ll like it too.

EZA: South Africa. We have slowly grown our allocation in this ETF from 5.43% to 6.87%. This single-country Emerging Market fund continues to severely underperform most other EM funds. It has only produced a 9.62% CAGR in 2019. We will continue accumulating shares of this ETF if the price stays depressed. We do enjoy the hefty 4.81% dividend yield while awaiting capital appreciation.

NTIAX: US Mid Cap Blend. This is my favorite fund that is available in my 401k. This position has grown from 3.90% to 6.86% of our assets. The US Mid Cap Blend asset class is my favorite asset class and I’m still employed, so this allocation will probably continue to grow.

EWD: Sweden. This ETF still has the same percentage allocated to it as we did last year. That’s unusual. This single country ETF performed well in 2019 by gaining 21.74% CAGR. This ETF pays a healthy 4.15% dividend.

RWJ: US Small Cap Value. We aggressively accumulated more shares of this small cap value fund. We increased our allocation from 1.43% to 4.19%. This asset class is generally one of the most productive assets, but in 2019 this ETF only produced a 20.31% CAGR. We will continue to accumulate shares of this ETF on any significant market correction. Yield is 1.22%.

Changes made to the Deep Value ETF Accumulator daily chart in 2019:

We added the iShares MSCI Thailand ETF (THD) to the line-up. THD has significantly underperformed since adding it and we are considering removing it sometime in 2020. We can attain our desired Emerging Markets exposure with other ETFs such as DGS & DEM.
Mid Cap Growth: We changed funds in this asset class from RFG to the iShares Russell Mid-Cap Growth ETF (IWP). You can read my last article on the Mid Cap Growth asset class to see why we changed funds, right here: Best Long-Term Performance U.S. Mid Cap Growth ETFs 1.2
We changed our look-back period from 52 weeks, to 3 years, and now it’s at 10 years. I plan to leave it at 10 years because some downturns can last several years, and we invest in ETFs that are 10 years old or older.

Here’s how the daily Deep Value ETF Accumulator chart looked on December 31, 2018:

Now, here is a current Deep Value ETF Accumulator daily chart dated December 31, 2019:

In conclusion, I want to repeat, if you are doing something more ambitious than dollar-cost-averaging into a target date fund, 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 great returns for 2020. Stay diversified friends.

Thank you for reading my blog.

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

Disclosure: We own most 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. There are affiliate links from M1 Finance and Google AdSense within this website.