New metric numbers and Fundrise


So first, new low on my metric.  -25,228 (Net invested Assets – All Debt).  Making a slight change to the metric by making it ‘Net Invested Assets’, because I moved some of my investments to a less liquid investment (real estate eReit with Fundrise).   It’s fairly minimal, less than 2% of my portfolio,  but still seems appropriate for me to  track via this measure.

So about that FundRise eREIT.   My biggest concern going back to last year was being able to move money out of it when needed.  The nature of the real estate investment is that it locks up money for longer period, but with better predicted returns.   The answer to this is,  I can’t be putting huge amounts in this investment, this is for money that really needs to be marked as 5 years or more.    My horizon for anything I put in to this investment is 5+, and is really about 12 years.

As I thought about this more, and read quite a bit more I saw a post by the CEO talking about how they would handle the next down turn.   He said basically your money will be locked up for a year when the next ‘crisis’ happens.  That makes a lot of sense.   I am treating this  investment as if I were doing the property research, buying the property, rehabbing and selling it.  At least from the perspective, that is how the money is going to be tied up.  IF you think about scaling it, it gets nearly impossible to return investment to your investors if everyone comes knocking when the next crisis hits

The only part is of this model is you have to trust, which is a little harder without face to face meeting (especially when that doesn’t scale well when your investments are small).  So a little blind trust here… But on the flip side.   I don’t need to buy the property, rehab and rent or sell it, I pay a fee to do that.    Plus there are economies of scale at work around letting a pro company do that (there own contractors, real estate agents, etc), that should more than make up the fees that investors pay.    I believe there model makes them well incentivized to do well and be stable on the projects that they pick.

I actually have more in a traditional REIT than I do in the eREIT.   The return on the eREIT should be a couple points higher than what I get on the traditional REIT( if it’s not, it should at least be in line).   If it underperforms it just becomes a small less liquid underperforming asset that makes up less than 5% of my portfolio … that is the worst case scenario.   Best case is 9-10% average annual return over the next 10 years.



Main metric down to -37K, and bid ask meanderings


My main metric of total debt – subtract liquid/invested assets is down to 37K.   It really should measure -37K, as it should turn positive in the next 12 month!

The other metric mortgage debt – liquid/invested is down to -15K.   This is fantastic.

There are other expenses coming, mostly home stuff and vacation.   There is 10K coming mid month, and another extra 7K coming.   If expenses stay about where they are, I would expect the first number to hit between -27K to -24K by early May.    Then to go up during summer with a fairly big bump in the August/September time frame.

Looking back on my projection from November 2017 (below), I’ve already exceed the liquid goal at 285K for the year.  I am putting in a risk metric of a 15% decline in the portfolio which would put us way off the mark at about 240K with a 17 month recovery.   This is the key here… stay the course when that happens and don’t get down when things move against you.   A 17 month recovery isn’t so bad, especially at it presents buying opportunities.


Month or EOY Liquid Mortgage
April 184533 337790 -153257
Nov 212046 323107 -111061
2017 210564 321441 -110877
2018 240162 301000 -60838
2019 272866 279808 -6942
2020 308943 257751 51192
2021 341647 234825 106822

What else.  I continue to move my portfolio around like I’ve described in previous posts.   so far so good, gains have been steady, buying has slowed on stocks.   I’ve sold some company stock recently.   I worry a little about the bond concentration.  I’m about 80% of the portfolio purchased, however that number will go down as I shift out some other stuff and move more cash towards this portfolio.  Specifically I’m trying to move out of my closed end foreign bond fund given it’s volatility and low trading volume.   It’s recovered enough so the loss is minimal and will help offset some of my taxable gains.

An interesting observation as I try to trade this low volume fund.  I can see the bid ask spread move as I move my ask, and I see algorithms that are clearly moving similar shares in parallel.   I also can see as I move down, the bid sometimes moves up (But rarely down), since I have the lowest ask.   It does work like real bargaining without the person in front of you.   I see what that bid is, I see the spread between the ask.  I can lower a bit if I want to see if they will come up a little.  I also see how me lowering the bid effects other sellers (do they come down to match.

At this exact moment I could come down 10 cents and sell, but that would cost me 200 bucks.  I’ve basically hit my point where I think it works for my portfolio.   I wonder what will happen with that 10 cent spread today.




Bond down day — buying in more

Bonds are down, and given my heavily influenced bond portfolio I am buying today.   Portfolio is down a quarter percent today but bonds are down roughly 2%.   I am now to 80% funded on most of my bond funds.   However I have more cash headed to this portfolio so I have to keep executing.

It is really nice that I can do this slowly without incurring trading charges via my fidelity funds.  It makes for a really good stable account without having the worry about the transaction fees eating in to it (which could easily be a couple hunderd dollars at this point given I buy in small chunks).

I am only at 58% in my stock funds, and still think there will be a pull back to enter, but I do buy little chunks here and there on down days and when I’m buying lots of bonds.

So right now my account is only 17% in cash, but I have ~15% of the portfolio in funds that no longer fit my strategy that I have been holding.   So that leaves me at about 68% of the way to being vested in my strategy.    I should probably just bite the bullet and make the changes to get there in the next month.   It probably is more logical to just do it, and then adjust if there is a market pull back.

I still have 30% on the sidelines


Still slowly buying in my portfolio.   Chomping off little bits (which doesn’t appear to be a good strategy at this time).   I know I’m still buying some of this stuff at a premium.   The bond funds I bought early have all done really well in the last month, and it seems silly continuing to buy at there highs, but I do buy in very small increments (500 or 1000 dollar increments).  I don’t pay transaction fees on these so it makes it a little easier to swallow making the smaller buys.   

I would love a stock correction at some point to get the last 30% in, of which over half in to ITOT.

ICF has been particularly hard to get in to, but i get buying in in little chunks.   You know

I know the whole purpose of this portfolio is to have draw downs be less so why not just get in at 100%.   I dunno, it just seems to make sense to me, but the logic is not working at the moment.  If I had gone in 100% at the start, I’d be up even more than I am now as the portfolio has performed very well.    I suppose that is putting some of the urgency on continuing to get these smaller chunks for now.   I think there is some amount of luck in the timing.

On the flip side, the AMZN I bought has done really well in my ‘more volatile portfolio’.   This portfolio holds my company stock, and small to medium investments in other long term stock holdings.   Right now those small investments are typically less than 5% of the portfolios value.

In this porfolio I also bought a small amount of CLXT, and that has been super volatile but it’s so small (less than 1%) it barely effecting thing.  Also a small amount of GILD which is another high yield stock, but I also think there is some growth potential there when some new drugs hit the market.   I’m also considering GSK as another play in this area (high yeild, with some good growth potential).  This is all part of my diversification out of my single stock holdings in to some other plays.   This is more trying to get some alpha, where my other portfolio is specifically to minimize drawdowns.    This portfolio I can accept drawdowns of 40% in a recession, while the other portfolio the historical risk is less than a 15% drawdown (max drawdown during the 07-08 was 13.89%).

Still Moving to Portfolio

I’m about 60% the way to my portfolio.   I am taking it slow, as I think there will be a pull back around the corner.   I buy when things are down a bit,  but otherwise taking it slow.

The ‘to go’ column measures where I need to put in the most work.   Right now the goal is to only leave about 5K extra in cash, but I don’t see getting there until sometime this summer.

Perct of Available Perct of Invested Goal To Go
TLT 11.99% 20.25% 18.50% 6.51%
IEF 8.53% 14.39% 17.00% 8.47%
TIP 13.01% 21.97% 12.00% -1.01%
ITOT 9.84% 16.61% 30.00% 20.16%
IAU 1.97% 3.32% 3.50% 1.53%
AGG 7.15% 12.07% 10.00% 2.85%
lqd 5.48% 9.26% 5.00% -0.48%
icf 1.26% 2.13% 4.00% 2.74%

ITOT also includes some SPY that I purchased awhile back.   For now I’ll just keep offsetting with that, no need to change that.   I’ve setup everything to ‘DRIP’ into the same security.

I have the most trouble executing on IAU,  and TLT.   Everything else I feel okay adding to.     The stock funds I’m just taking my time with, buying on pull backs.   The interesting thing right now is that as the market moves, many of these funds move in the same direction just at smaller intervals.   It’s definitely not as correlated as some of the other funds I’ve owned.

On the other side in my taxable account swapping out for some individual stocks.   Small amounts… just nibbling, as I think I’ll get better discounts in the future.   A little diversification, but not a ton.  More diversification within industry (bought some Amazon).


On another subject, I am 21,180 dollars away from being able to virtually pay off the mortgage.  Possible could temporarily get this to zero by the end of next month, but more likely to hit that metric at the end of August.  IT also dependent on stock prices, so I don’t expect it to stay there even if I hit that metric.

Measuring with my real metric (all my debts), it’s at 48,315.   Under 50K.   I have to look back at my previous logs here but I don’t think I’ll hit zero on that till sometime in 2020.



More movement to all-weather — my version


Move my portfolio to my version of an ‘all-weather’.    I am not a big fan of Gold as a hedge, so I keep lowering my exposure in my back tests and swap out for other things like (Silver, Real Estate, Other commodity funds).

So as of right now, this is what I am headed to:

Ticker Name Allocation
TLT iShares 20+ Year Treasury Bond ETF 18.50%
IEF iShares 7-10 Year Treasury Bond ETF 17.00%
TIP iShares TIPS Bond ETF 12.00%
ITOT iShares Core S&P Total US Stock Mkt ETF 30.00%
IAU iShares Gold Trust 3.50%
AGG iShares Core US Aggregate Bond ETF 10.00%
LQD iShares iBoxx $ Invmt Grade Corp Bd ETF 5.00%
ICF iShares Cohen&Steers REIT ETF 4.00%

So mostly iShares… since they trade for free.   Lots of bonds 62%.   Stock is 30%, and other is 7.5% split between real estate & gold.   I got the gold down to where I can live with it. Still looking for other hedges, but silver, crypto, and others don’t seem to do it either (market crashes, I don’t see people moving money in to crypto).   Perhaps a good commodity fund might do it, or a less conventional REIT.   I like REIT’s but so far they don’t back test as well so I would still like to limit exposure.  My Sharpe & Sortino ratios fall, and us mkt corelation goes up, neither of which I like.   Gold tends to keep those values down.

Adding in general commodity tracking funds does about the same (lower sharpe/sortino, higher US market correlation).

So my back tests run Jan 2006 to present.   CAGR is 6.6%, with a max drawdown of 15.38%.  Compare that with a 60/40 stock bond split with a max drawdown of double that (31.93%).  A longer period to recover, and a longer 6.92% CAGR.    I am not after max return here, I am after lower drawdowns I can stomach in this account.  This account is specifically the one I will use as the main savings account (in case of funds needed we can draw from this).    Losing 15% I can stomach, especially when evaluating it historically with a 7 month recovery from the bottom (14 Months in total in the red from start to end).   In comparison to 50/50 or 60/40 splits, where you look at several years for the portfolio to return to profitability (Nov 2007 to Oct 2010).   It’s hard to stay the course over nearly a 3 year down period.

Psychologically I find it easier to stay the course over the short period.  I also find it easier to ‘give up the higher gains’ during bullish periods than playing a waiting game during bears.

So this isn’t an entirely static portfolio.   If the market tanks, I’ll shift from 62% bond, 30% stock, to something closer to 50%-60% stock…. buy the dips.   As stock rise, I’ll slowly shift back to this core portfolio.   While it is hard to time the market, to me it’s fairly straight forward to see when the market dips and/or crashes.   When that happens you buy, there may be more downside, but that’s okay.   You can buy more later.   When markets become hot like they are now, it’s okay to shift some out of stock again (less room to fly… but if your wrong, you still have exposure).

I am going to manage another account as a ‘growth account’.   This is where I hold my company stock, and a few (3 or 4) other stocks I have well researched.   Perhaps taking a flyer on some smaller positions in some more speculative stocks.   It’s money that can make a big difference if I get things right, and if I don’t , it’s not a big deal.   It should tend to be less than 25% of the value of the main portfolio.

So at 6.6% growth adding 9600 to this account yearly and starting at say 200K in 10 years the account should be around 500K (see monte-carlo simulation below, going for the just under 50%).

Take the other account an estimate an 8.5% growth rate  (may be some larger draw downs here, but that is what the S&P has returned over this period around 8.71%).   Will be contributing about 9600 a year to this account (mostly in the form of stock grants).  This account should be worth about 250K in 10 years.   So a total of 750K.

This of course doesn’t include retirement, lets project that in 10 years which is about 1.8 million (8% with full contribution + match).   That is roughly 2.5 mil in invested assets in 10 years time.   This is the most ideal scenario.   That would be enough to be fairly flexible.

Monte carlo simulation:

Summary Statistics

Summary Statistics
10th Percentile 25th Percentile 50th Percentile 75th Percentile 90th Percentile
Time Weighted Rate of Return 4.22% 5.27% 6.42% 7.51% 8.51%
Portfolio End Balance (nominal) $429,689 $468,711 $515,000 $563,049 $609,948
Portfolio End Balance (inflation adjusted) $361,271 $391,310 $425,902 $462,709 $500,732
Maximum Drawdown -12.64% -12.64% -12.64% -11.14% -5.09%
Maximum Drawdown Excluding Cashflows -15.81% -14.66% -12.64% -11.14% -5.09%

Ray Dalio All Weather – my take

So I am came around to Ray Dalio’s all weather porfolio through the back testing I’ve been doing in the last couple months.   Apparently a lot of people have been brought to this portfolio mix through Tony Robbins of all people.

So the basics, mapped to a few funds.

VTI Vanguard Total Stock Market ETF 30.00%
TLT iShares 20+ Year Treasury Bond ETF 40.00%
IEF iShares 7-10 Year Treasury Bond ETF 15.00%
DBC Invesco DB Commodity Tracking 7.50%
GLD SPDR Gold Shares 7.50%

The general idea is diversity across stock and bonds (most long term).  Assets are less correlated (Gold/Bonds/Stocks/Commodities), so it smooths loses over time.   One asset goes down, it is counterbalanced with the others.

The results typically return around 7% per year, with less volatility (max drawdown of 12.85% through the 2008 crisis).

This fits my risk profile for my more immediate investment account which I generally use as a saving account.   I know myself and I can stomach a 15% drop in my taxable accounts, but not a 50% draw down which you would have seen in the last market crisis.   It’s too hard to stay the course through an event like that… been there, done that.   It’s not worth a 1/2 percent point to 1 point year over year for for the risk of a drawdown of 50%.   Even a 60/40 stock/bond split back tests to a drawdown of 30%, almost 3x the drawdown of the Ray Dalio all weather for basically the same returns.   At any rate, I still have trouble stomaching a 30% drop, particularly if I’m going to need to withdraw any cash from this portfolio.

So return on this portfolio is 6.83% from 2007 to present.   Max drawdown of 12%.  Modeling it with my typical 800 dollars added monthly.   We get to 10% compound annual growth.

This is great… But as we all know, past results do not necessarily equal future returns.  The tough part of this for me is the 40% TLT which I believe will go down in value over the next couple years when interest rates rise (even if slowly).   My other issue with this Gold and Commodities.   I actually have a pretty easy time with commodities (although they have performed poorly over the period I back tested).    Gold I have a harder time with.   Will it continue to be a counterbalance.

A couple of major pieces missing here are foreign stock, and both domestic and foreign real estate.   I’ve back tested some with these, and they tend to add more volatility to the portfolio.

At any rate, i’ve started creating a few more back tests changing a few things.  These lead to higher Sharpe and Sortino ratios with similar returns.   This one doesn’t have any of the additional mentioned sectors, but does shift some from TLT (22% vs 40%, shifted to TIP and PTTRX more general bond type funds).

Ticker Name Allocation
VTI Vanguard Total Stock Market ETF 30.00%
TLT iShares 20+ Year Treasury Bond ETF 22.00%
IEF iShares 7-10 Year Treasury Bond ETF 15.00%
DBC Invesco DB Commodity Tracking 2.50%
GLD SPDR Gold Shares 7.50%
TIP iShares TIPS Bond ETF 10.00%
PTTRX PIMCO Total Return Instl 13.00%


The PPTRX, DLTNX, VBMFX also invest  in US Treasury’s but provides some additional diversification in to some other areas (Muni’s, Mortgages, Corp Bonds, International Bonds).

At any rate, these portfolios produce returns that are typically within .25 CAGR over the last 12 or so years.   The above portfolio has a much higher sharpe and sortino ratio.   I can also adjust these some to look back in to the 90s to see that the portfolio performed similarly during that period.

Overall, I seem to be moving to a portfolio that looks like this


Ticker Name Allocation
VTI Vanguard Total Stock Market ETF 30.00%
TLT iShares 20+ Year Treasury Bond ETF 18.50%
IEF iShares 7-10 Year Treasury Bond ETF 17.00%
GLD SPDR Gold Shares 7.50%
TIP iShares TIPS Bond ETF 12.00%
VBMFX Vanguard Total Bond Market Index Inv 15.00%

It’s my all weather with a little more bond diversity, rebalance quarterly.   It’s easy enough to manage with 6 funds.   The only twist on this is, how much of this comes through as taxable divdends, about 58% is what I’m seeing on average.   So there is some math here to do to figure out how much your losing in taxes (22% of 58% of your earnings per year at around 6.5-7%).   If my math is right, it’s about .9% of your return goes back to uncle Sam.   So take that 6.5%, and drop it to 5.5%.   Still not terrible.

Now, two wrinkles.   I manage a second portfolio that is worth about 25% of this portfolio.   In that portfolio I get my company stock.   For some non rational reason I seem I don’t sell a ton of this stock (I tend to buy it each month and make the 10% from my ESPP, by selling long term shares).    I can model this some, and it adds about 2% to my returns over the long haul.  Assuming it will mirror the Dow somewhat and I will continue to rotate out of the stock keeping it within 10-25% of portfolio things look good.

I’m overanalyzing here too.   The other piece of this is rotating in and out of cash from market signals using a simple timing method (moving average to asset) for the period.  I can easily look at this with SPY over a 20+ year history, and see the CAGR is about the same, while cutting your max drawdown to a third.   They say stay in the market,  and don’t try to time, but if that reduces risk and you can be  consistent about it, why not?

Why not… If you do it given the last month though, you would have lost out on the 8% return in January and this could have been catastrophic, while being fully vested in December and losing nearly 10%.

So after all this overanalyzing, I’m a little closer to where I want to be to manage my risk in my taxable accounts.   I am curious though how inflation effects things ( and I can see my inflation adjusted CAGR is quite a bit lower, but still better than my 3.875% on my mortgage).