Nibbling went well, here is what I actually purchased and total gain loss since purchase. This represents a VERY small part of my portfolio.
So most of this happened just a few weeks ago (1/27/2020). AMZN, LULU and GILD have all been held a bit longer, but the others were just nibbling when the market dipped.
GSK is the only one trailing the market, but I do still like the annual div yield of 5% GSK. GILD has also been a relative loser in my portfolio, but again, I like the dividend and still see long term upside and value in these.
So lets make another comparison to see how terrible I am at stock picking. Since Jan 27th I have earned 3% on my stock picks. QQQ has gained 6.8%, SPY 4.3%. Not impressive at all. Hence this is why this is less than 1% of my liquid holdings.
Another comparison, and this is unfairly weighted. My total portfolio (everything is less than 1 year purchase) is up 41.2%, QQQ is up 37%. So I am beating the market, but that is because my largest holding is the largest holding of QQQ which is on fire as of late (MSFT). This does not include dividends either.
Last comparison. My ‘stable’ portfolio is up 12% in 10 months. It also pays a 2% div. This is clearly trailing the market by quite a bit, but this is by design, with an expectation of less drawdown when the market retreats. This portfolio maxes out returns at about 19%, with a max draw down (2007-2008) of 11.4%.
This same portfolio from above will be re-balanced during a 25% or more decline will shift to the portfolio that returns 40%+ plus a year. Once the 40% return is achieved from re-balance, will shift back to the more stable return profile.
The above statement requires a lot of discipline, but I believe it make sense. It is basically a move to higher proportion of stocks on a decline, with a reverse out of taking profits at approximately a 30-40% increase in portfolio. This is done with a little bit of leveraged funds, but still only has a downside risk of 28% over the entire portfolio (vs 50% or more). The Sharpe ratio on these strategies tend to be in 1.3-1.5 range, with Sortino ratios > 2.
Executing that portfolio will likely be done in 5% increments, at a 25% decline move 5% to more leveraged buys. At 30%, move another 5% and so on, until you reach 40%. 40% may never happen, or you may go lower than 40%, but it doesn’t really matter. Once your leveraged index recovers that loss (could be months to years), you start cycling out of it. The leverage can be done using 2x/3x index funds, or 2-3 year options. I will have to do a further analysis of this to determine what is the best way forward, or proper mix of those two instruments. Options would be the less expensive route, but are time limited so harder to calculate proper execution.