Category Archives: Performance Tracking

Performance Tracking August 2017

I made some changes to the reporting format. Monthly returns are still calculated with the simple Dietz method. Note half of the contribution is added to the denominator. I consolidated the DGI stocks and growth stocks into a single column with the heading “all actively picked stocks”. It makes more sense as dividend is no longer my focus although I still believe DGI incorporating other factors like quality and low volatility enhances total returns. I’m also starting to show annualized standard deviation, STDEV(monthly returns) X SQRT(12), and the Sharpe ratio, AVERAGE(monthly returns)/STDEV(monthly returns) X SQRT(12). For simplicity the risk free rate is taken to be zero.

SPY gained 0.29% for the month of August but the number doesn’t remotely do justice to the episodes of tension with North Korea. After shrugging off threats of a nuclear war is it any wonder that this market brushed aside Presidential antics and hurricane Harvey alike? Though bonds and gold disagree: AGG had one of its best months, up 0.94%; spot gold gained 4.1%. My portfolio delivered significant outperformance: the passive, active, and total portfolio returned 0.98%, 4.45% and 2.87% respectively, vs. 0.55% for the 60/40.

Generally speaking, there are two ways to outperform: 1) when the market is down, non-correlated assets like PM and crypto advancing; and 2) when the market is up, the leveraged option positions advancing even more. For most of August, the outperformance was of the first kind. The final week saw a preview of the “post August moon-shot” my model has been calling for and the outperformance was more of the second kind. YTD the total portfolio has now exceed SPY (13.88% vs. 11.75%) at a volatility comparable to the 60/40 even though it contains many highly volatile (albeit non-correlated) assets. The active accounts did even better (YTD 18.37%) but still with a volatility lower than SPY. I now expect to make back the ground lost in the fall of 2016 by the end of this year.

This month the return also benefited from market timing — in particular, adding to CEF and option positions on August 10-11. I had bids out in the third week of August that were never hit. Timing is an additional source of alpha and risk management that layers on top of all sources of return: equity, PM, credit, and crypto. Going forward I’ll cover trading and position adjustments in weekly updates instead of monthly.

Added Sept 4th: AllocateSmartly now tracks 39 different tactical asset allocation strategies. In August the highest monthly return was 2.63%, trounced by the 2.87% and 4.45% returns of my total and active portfolios. YTD the best return was 18.71% and the 2nd best 13.05% vs. 13.88% and 18.37% for mine. We shall see whether the market continues its upward trajectory as my model predicts.

Performance Tracking July 2017 and One Year Review

For calculation methodology see this post. Tracking growth stocks and fixed income CEFs started in April’17.

July was an excellent month all around. My total portfolio gained 2.22% exceeding both SPY at 2.06% and 60/40 at 1.37%. The active accounts gained 2.65% and the passive accounts 1.87%. YTD the total portfolio is at 10.71% vs. 11.43% for SPY and 7.89% in 60/40. For the actively picked stocks, growth stocks had a blistering gain of 10% only to be weighed down by the barely negative showing from the DGI compatriots. Combined they delivered 2.46% in July well above the SPY. Since April, my individual stocks are 0.6% ahead of SPY which is exceeding my expectations. In the “other” category, leveraged options are starting to perform although with a high volatility as expected. There were responsible for about 1% of the overall gains — nothing to sneeze at. Cryptocurrencies recovered a little, just ahead a controversial hard fork; though I don’t expect them to move much probably until year-end. It looks to me that institutions are managing the price levels to accumulate quietly.

AllocateSmartly is now tracking 39 different tactical and static allocations. In July, 2.22% would have placed my portfolio at 11th out of 39, while 2.65% would have tied for 6th. YTD 10.71% would have been 8th out of 39. The active accounts’ YTD gain of 13.33% would have been 2nd overall.

This is the 1-year anniversary of this blog which means there is 12 months worth of return data. My portfolio is still suffering from last July to November such that the 12-months performances are still lagging. On the other hand, the YTD numbers are excellent all around, both absolutely and risk-adjusted. The reason for this improvement is several-fold. Adjustments were made in the composition and location of CEFs that I have written about. In individual stocks, greater emphasis was put on growth over current dividend payout. Lastly, the relative performance of the precious metals was a large contributor to “tracking error” — I put that in quotes since the differential in performance is entirely intentional. PMs reached a peak in July 2016, declined hard for the rest of 2016 and are relatively stable in 2017. Below are two summary plots for my main taxable account at InteractiveBrokers. In terms of account value, today it’s over half of my active accounts, So it’s quite representative of the qualitative behavior of my total portfolio.

Both figures cover the period from the end of 2015 to 7/28/2017. The first shows the cumulative gain vs. SP/EFA/VT. My portfolio outdistanced the benchmarks from the start and never looked back. The decline from July-November 2016 is visible. Then the climb resumed and appeared to be accelerating in the last month. The acceleration is due to the leveraged option positions that I initiated at the end of June and continued adding to in July. If the market continue to behave as my model predicts, the out-performance should pick up momentum. Looking at the relative performance of passive with and without PMs (at parity YTD), PMs appear to have finally turned the corner from the decline going back to July 2016. While I expect a lengthy build-up to a blow-off phase in several years time, PMs should no longer be a detractor for performance for the rest of 2017.

The distribution of monthly returns in the second figure is rather interesting. First of all, international (EFA) was bipolar in the last two years. It was barely positive(?) in 2016 and tremendously strong YTD. As such it had both large gains and losses. My portfolio had positive skew and less big monthly losses than the benchmarks. I dare say these were the return characteristic that professional managers would be proud of.

Performance Tracking June 2017

For calculation methodology see this post. Tracking growth stocks and fixed income CEFs started in April’17.

For June my total portfolio returned 0.9% exceeding both SPY at 0.64% and 60/40 at 0.38%. YTD the total portfolio is at 8.3% vs. 9.18% for SPY and 6.43% in 60/40. In terms of stock picking, growth stocks lagged this month as can be expected from the headwind faced by leading tech stocks. The DGI stocks were strong in part because of the realization of dividend payment (cash basis on when they were paid, shifting about 0.3% from last month). When the growth and DGI stocks were taken as a whole, they slightly exceeded SPY for the past three months which was better than expectations. CEFs continue to be a highlight of the portfolio as previously mentioned. Cryptocurrencies were a positive driver despite entering a correction since BTC reached $3000.

AllocateSmartly is now tracking 37 different tactical and static allocations. In June, 0.90% would have placed my portfolio at third overall, albeit a distant third. YTD 8.3% would have been 11th out of 37. The active accounts’ YTD gain of 10.29% would have been 2nd overall.

Going forward I see a difficult summer ahead with continued consolidation in erstwhile leading stocks. Gold may finally find a bottom in July. I have been hedging my miners using DUST and I’m finally looking to buy more gold coins for my passive accounts. To be discussed further in an upcoming market commentary.

Performance Tracking May 2017

For calculation methodology see this post.

S&P exceeded March highs and is now firmly in the 2400s territory. SPY gained 1.41% and AGG 0.69% resulting in a very respectable 1.12% gain in May for the 60/40 bench mark. My portfolio did well despite weakness in PMs which I expect to continue for another month. The total portfolio gained 1.76%. However the number is deceiving as gains from cryptocurrencies accounted for most of the extra over the benchmark. The DGI portfolio continue to struggle under the weight of energy, financials and pharma. Fortunately the growth stocks, which are tech heavy, are balancing them out. Overall the individual stocks about matched the S&P. CEFs, at 1.53% for May, continue to be a bright spot. Cash position in the active account stood at 8%. Funds are almost fully deployed for individual stocks. PMs including miners are counted separately where I’m currently underweight by 10.5% actual vs. 15% targeted. The cash position also includes funds set aside for more CEF purchases.

AllocateSmartly hasn’t yet updated numbers for May but I expect my portfolio to come out in the top half. So far the gains are on pace with my year-end goal: reaching a total invested portfolio of 20X, where X is my projected retirement spend. However, I would like to put more distance between me and the benchmarks. With the bull market unfolding according to plan there are opportunities to get the extra oomph, e.g. options. So far my model is pointing to the end of summer as the appropriate time to put on those positions.

Performance Tracking April 2017

For calculation methodology see this post.

Stocks had a good back half of the month in April, gaining almost 1%. Bonds almost matched that giving the 60/40 benchmark a 0.96% gain for the month of April. My passive accounts gained 0.7%, dragged down by PMs. PM miners provided a greater headwind to the active accounts. This is the first month I broke out growth stocks and fixed income CEFs from within the active accounts. The blended total of DGI and growth stocks slightly bested SPY. There is still cash to be deployed and I have been making changes to the DGI portfolio. The FI CEFs are again outstanding. The last big batch of purchase was around the hick-up on Mar 9th and they’ve been going up ever since. I still have some money to be allocated in them and will complete my purchases at the next hick-up which typically occurs every two or three months. The active accounts gained 0.85% leaving the total portfolio up 0.78% in April trailing the benchmark. YTD the total portfolio is up 5.32% vs. 4.86% for the benchmark.

Compared with the strategies tracked at AllocateSmartly, my April return is in the bottom quarter while YTD is still in the top 1/3. There is some cash drag in my portfolio: cash position is 14% in my active accounts; in addition, I count the emergency fund as well. This month I decided to pare down my emergency fund allocation and moved a CD to the active accounts to better take advantage of this bull market. I expect to be fully deployed by July.