Welcome to my 5th installment of semi-annual reports. The first half of this year has been an amazing follow-up to the last quarter of 2018. Most markets are hitting all-time-highs and so are most investor’s portfolios. Check out what Mr. Charlie Bilello posted on Twitter just a few days ago. Now that’s a banner half year report.
“What gets measured, gets managed” 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 performance. 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. 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 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 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.
Here are the links to my past performance reports:
H1 – 2017 Performance Report – The Deep Value ETF Accumulator
2017 Annual Performance Report – The Deep Value ETF Accumulator
H1 2018 Semi-Annual Performance Report – The Deep Value ETF Accumulator
2018 Annual Performance Report – The Deep Value ETF Accumulator
So, how did we do in the first half of 2019?
I’d say fair to middlen.
Now for my semi-annual rationalizations (or excuses):
Roth IRA 1: This account has recovered well since the clobbering it took in late 2018.
Roth IRA 2: Not as good as I’d like, but no complaints.
Traditional IRA: This account lagged significantly. The main reason for this is that the 2 largest positions are EWW Mexico and XLE Energy, which have both significantly underperformed the broader markets. I don’t like that, but we’re in these investments for the long-haul and I’m convinced that mean reversion will do its’ job when we least expect it.
TDA Brokerage: We liquidated this account on 5/13/19 and started migrating the funds over to our M1 Finance brokerage account. The last holding in this account was FNI China/India. When it was profitable, we set a 5% trailing stop on it and the stop triggered in May. I’m satisfied with the results.
M1 Finance Brokerage – DVETF 32 ETF portfolio: This account is on autopilot. I started the account in July 2018. I’ve been adding to this account once a week with automatic contributions. I love the M1 Finance platform and I am satisfied with results so far.
401k: This account is on 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! I am pleased to see that this account has recovered significantly.
StockPile: This account is on autopilot. This is just a place to stash our credit card reward points. Thank you to my credit union for offering StockPile gift certificates for credit card points.
Now, on to our semi-annual asset allocation. I publish this every weekend, so this chart is what our portfolio looked like on 6/30/19:
Our portfolio is not static because it changes with every contribution to our account, but here is a snapshot of how our portfolio was broken down by region, style and size on 6/30/19:
The story behind our largest holdings:
EWW – Mexico: This holding has contracted from 11.08% of our portfolio to 9.97%. This ETF is currently 17% below its 52-week high and 43% below it’s all-time-high. The 2.21% dividend is satisfactory while awaiting mean reversion.
XLE – Energy Sector: This holding has contracted from 9.71% of our portfolio to 9.18%. The energy sector has been in a slump since 2014 and it is still down significantly. Energy is very volatile, but profitable for the patient investor. We enjoy the 3.52% dividend while awaiting capital appreciation.
EWY – South Korea: This ETF dropped in price significantly this year, so we have been aggressively accumulating shares. So far, we have grown our holdings in EWY from 3.09% to 8.66%. These types of trees take about 18 months to bear fruit, please be patient.
M1 Finance Brokerage: This account is a portfolio of all 32 ETFs that I want to own. It is set up as nearly equal weight as I can make it. Most of the ETFs get 3% of the portfolio while 4 of them get a 4% allocation. I cannot say enough good things about this platform. I love it!
EWZ – Brazil: We were able to trim some profits in this ETF in January. Our allocation to Brazil has been reduced from 8.89% to 6.81%.
NTIAX – US Mid Cap Blend: This position has grown from 3.90% of our portfolio to 5.89%; thanks to a recovery in mid cap stocks, my contributions and a generous company match. Thanks company.
EZA – South Africa: This position has grown from 5.43% of our portfolio to 5.71% due to capital appreciation. This our most volatile holding. It’s an emerging market single country fund. Holding this is like trying to ride a greased pig. If you own this, try to enjoy the ride with the 3.65% dividend.
REZ – Real Estate Sector: This sector ETF has treated us very well so far this year. We were able to trim profits in REZ which has reduced our REIT holdings from 11.08% to 5.17% (tactical rebalancing). I like owning this sector.
RYU – Utilities Sector: This sector ETF has also been a profitable holding. We trimmed some profits from it and reduced our Utilities sector holdings from 7.45% to 5.13% (more tactical rebalancing).
Changes made to the Deep Value ETF Accumulator daily buy list in H1 2019:
No changes so far this year.
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 June 30, 2019:
In conclusion, I want to reiterate, 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 the rest of 2019. Stay diversified friends.
Thank you for reading my blog.
Respectfully yours, Micah McDonald, aka the Deep Value ETF Accumulator
PS: Bonus chart attached below. The chart below is a snapshot of every holding in every account we own. It also shows our current profit/loss in each position (as of 6/30/19).
Disclosure: I 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.
