Performance Tracking December 2017

This is a quick review for December. A more in depth review for 2017 will follow.

For calculation methodology see this post.

$SPY gained a very respectable 1.21% and the 60/40 benchmark 0.90%. My total portfolio and active accounts had a third consecutive record month, gaining 5.56% and 8.83% respectively. For the whole year, $SPY gained 21.71% and the 60/40 14.13%, dividends included. My passive, active and total portfolio gained 13.59%, 46.75% and 30.94%, respectively. I’m more than pleased with the performance — the extra returns were greater than my W2 income for the year and more than justified the hours spent actively managing and trading.

The passive account without PM returned 14.33%, slightly above that of the 60/40, indicative of both the extent of the PM under-performance and the out-performance from slicing-and-dicing: in this case from international and emerging markets in 2017. Passive without PM had outstanding risk-adjusted metrics, due to a combination of lower equity percentage and the lack of correlation between US and international equities.

I was thrilled with the performance from my active accounts. Of the 46.75% annual gain, cryptocurrencies provided about 18%, with another 11% from various options positions, leaving the combination of individual stocks and CEFs about 3.5% over that of 60/40. I have exited 90% of my cryptocurrency positions by the end of 2017. In 2018, I expect the options positions to generate the bulk of the speculative profits. The standard deviation was over 9%, in-line with historical stock market averages but doubled that of $SPY which had a record low-volatility year. Granted much of the volatility was from the enormously positive Q4, indeed, YTD Sortino ratio is undefined since returns were positive for each month.

Transactions: added $CEF (Central Fund of Canada) which is a CEF (closed end fund) to my passive account. $CEF holds gold/silver bullions and is treated as a PFIC for tax purposes. It was purchased in my Roth IRA account to sidestep the annual QEF election issue. I also added to $GDX and $NAC this month. Annual re-balance started in the last few days of 2017 and is expected to be completed in mid January along with backdoor Roth and 529 contributions for 2018.

End of Month Portfolio Composition

PMs were at 11%, equities 54.6%, fixed income 24%, cash 7% and other 3.5%. The “Other” category was composed of cryptos 0.8%, 3X ETF 0.4%, and (market value of) options 2.3%. Exposure from options equaled 63.2% of the total portfolio, or a leverage ratio of 28X. Total portfolio equity exposure was at 118%.

Comparisons

AllocateSmartly tracks over 40 different tactical asset allocation strategies. The top December return was 1.78% and the top annual return was 26.67%, both below my total portfolio at 5.56% and 30.94%, respectively. With the exit of the majority of the cryptocurrency positions I anticipate reduced volatility to a certain extent — the PM and options positions will still provide plenty of juice.