All investments carry risk. Historic performance does not guarantee future gains. No content on this website constitutes financial advice, but are only my personal reflections and descriptions of my experiences.

Portfolio Update – September 2020 – Which is the Best Commodity Index?

  • Monthly portfolio update: Fairly stable month (again): bonds recover, while other assets decrease slightly
  • Book tip: Hot Commodities by Jim Rogers (link at the bottom of the post)
  • In case you missed it: Where does Real Estate fit in the All Seasons Portfolio? (post from 12 September 2020)

Hello, and great to have you back for a new portfolio update.

I know that I am slightly delayed with publishing this post, as I usually spend a few hours over the first weekend of each month to write my thoughts and review the portfolio performance. This weekend, however, I just moved to a new flat, and found it hard to find the necessary time to write the update.

Anyway, in September I made some changes in the portfolio. Not big ones, but mainly moving assets from one exchange to another, from LSE to Xetra, mainly for cost optimisation and to get rid of ETFs denominated in USD.

This move only included my gold and commodities ETFs. The gold exposure remains the same (physically-backed, but only a different issuer: Xetra-Gold), but for my commodities, I have changed the underlying tracked index from Bloomberg Commodity Index (BCOM) to Rogers International Commodity Index (RICI).

As the special topic for this post, let me elaborate a but more on commodities indicies before reviewing my portfolio. It turned out to a slightly longer text than first anticipated, but well worth the read, so buckle up.

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Deep Dive – Where does Real Estate investing fit in the All Seasons Portfolio?

In this rather lengthy post, the following topics will be discussed:

  • In what economical environments are real estate biased to perform well (economic growth and inflation)?
  • Five ways of investing in real estate, regardless how much money you have
  • How to adjust your balanced portfolio when including real estate - a template for adjusting portfolios regardless of new asset class
  • A list of resources with some of the best books on real estate investing

There are numerous opportunities and strategies for making money by investing. The ultimate goal is always to achieve a combination of positive cash flow and value appreciation of your owned asset. It is just a matter of preferred strategy for the investor which dictates how you can grow your wealth.

With the All Seasons Portfolio strategy, you can achieve profits but with less volatility than on the stock market. This is achieved by having a balanced portfolio that is diversified between asset classes. Typically, those asset classes are stocks, long-term government bonds, inflation-linked bonds, gold and commodities, with the following allocation between them.

There are of course many more asset classes available than the five listed above. One extremely important such asset class is real estate, which is a popular investment object among investors. It is so attractive, because it offers profits in two ways: value appreciation of the property, as well as monthly cash flow from rental income.

In this deep dive article, we will be looking more closely at real estate investing - how you can get exposure to it and with how much capital - and how it fits into an All Seasons Portfolio. Let us first begin with the latter of these two topics by answering the question of what economic biases real estate have.

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Portfolio Update – August 2020 – How downgraded credit ratings may impact your portfolio

  • Worst month for the US Dollar in more than a decade: how it impacts European investors and how to protect against currency risk
  • Monthly portfolio update: Fairly stable month: impacted by negative currency movements
  • Book tip: Principles for Navigating Big Debt Crises by Ray Dalio (link at the bottom of the post)
  • In case you missed it: I have ditched all intermediate-term bonds

Hope you are having a good summer so far, even though I am guessing it is spent quite close to home this year. Unlike others here in the Nordics, I have worked through July, and will have my vacation from mid-August instead. Looking forward to get some time off to read about investing.

I am really pleased to see that there seems to be great interest out there for low-volatility investing and balanced asset portfolio allocations. I strongly believe that the past decade has made stock investing feel easy, but there are more risk in it that you might have thought. Over the long term, the economy, and thus the financial markets, experiences big shifts in the long-term cycle. Now, total debt levels to GDP are at extreme levels not seen since the Great Depression.

This ratio is enhanced by decreasing GDP world-wide due to lockdowns and increased debt to cope with the effects of the coronavirus. Are we nearing the end of the long term debt cycle and are nearing a great deleveraging that must ensue thereafter? According to Ray Dalio, we were nearing the end of the long-term debt cycle even a year before the Covid-19 outbreak hit the markets, as he describes in a video posted by Yahoo Finance from early 2019.

That is quite scary when you think of it, and if I was heavily invested in stocks, I would be terrified. Luckily, several assets in the All Seasons Portfolio and a balanced portfolio will protect against such downturn. You will find a link to Ray Dalio's book Principles for Navigating Big Debt Crises (2018) at the end of this post. If you have not read this already - it is now more relevant than ever.

Even though it is interesting, that is not the main topic for the day. Instead, we will be discussing EUR Hedged investing.

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Portfolio Update – July 2020 – The value of currency hedging

  • Worst month for the US Dollar in more than a decade: how it impacts European investors and how to protect against currency risk
  • Monthly portfolio update: Fairly stable month: impacted by negative currency movements
  • Book tip: Principles for Navigating Big Debt Crises by Ray Dalio (link at the bottom of the post)
  • In case you missed it: I have ditched all intermediate-term bonds

Hope you are having a good summer so far, even though I am guessing it is spent quite close to home this year. Unlike others here in the Nordics, I have worked through July, and will have my vacation from mid-August instead. Looking forward to get some time off to read about investing.

I am really pleased to see that there seems to be great interest out there for low-volatility investing and balanced asset portfolio allocations. I strongly believe that the past decade has made stock investing feel easy, but there are more risk in it that you might have thought. Over the long term, the economy, and thus the financial markets, experiences big shifts in the long-term cycle. Now, total debt levels to GDP are at extreme levels not seen since the Great Depression.

This ratio is enhanced by decreasing GDP world-wide due to lockdowns and increased debt to cope with the effects of the coronavirus. Are we nearing the end of the long term debt cycle and are nearing a great deleveraging that must ensue thereafter? According to Ray Dalio, we were nearing the end of the long-term debt cycle even a year before the Covid-19 outbreak hit the markets, as he describes in a video posted by Yahoo Finance from early 2019.

That is quite scary when you think of it, and if I was heavily invested in stocks, I would be terrified. Luckily, several assets in the All Seasons Portfolio and a balanced portfolio will protect against such downturn. You will find a link to Ray Dalio's book Principles for Navigating Big Debt Crises (2018) at the end of this post. If you have not read this already - it is now more relevant than ever.

Even though it is interesting, that is not the main topic for the day. Instead, we will be discussing EUR Hedged investing.

Continue Reading

Correction of my Portfolio – Ditching Intermediate-Term Bonds

It is time for a kind of blog post that I hope will be as few in number as possible, but which I fear are inevitable from time to time. I have corrected a mistake, and want to tell you about it.

In my All Seasons Portfolio, I have until 20 July 2020 (the time of writing this post) held a certain amount if intermediate-term treasury bonds, i.e. bond with a duration of less than 10 years. I have held this in addition to my long-term bonds (20+ years) as part of the bonds portion of the portfolio. The splits have been 10% intermediate-term bonds and 30% long-term bonds, out of the whole portfolio.

As I have come across new and better information, I have chosen to reconsider the decision to hold intermediate-term bonds. They are not a bad investment as such – on the contrary, they are good when considering the risk-adjusted return – but they do not suit the All Seasons Portfolio Strategy. 

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Deep Dive – What Assets Should You Invest In To Protect Your Portfolio Against Inflation?

The Covid-19 coronavirus has rocked the boat during the first half of 2020 and made a huge dent on financial markets and on the growth of the economy. We are still only in the beginning phases of the turmoil, and it is only in the future that we will truly get a picture of all consequences and how the virus will affect the world economy and global trade. 

In this article, we will be taking a closer look at what actions central banks and governments have taken to stimulate the economy; how such stimulus may affect inflation; what asset you can invest in to be protected against inflation; and how such assets fit in the All Seasons Portfolio Strategy.

Even though many things are uncertain, a couple of things we do already know for sure though, and that is that many are likely to lose their jobs and that many companies are likely to have no choice than to file for bankruptcy. This would have devastating consequences for the economy in many countries, but even more so for the people affected by the growing unemployment rates.In a response to the potential crisis and alleviate the harmful impacts, governments and central banks have acted quickly and they have acted strongly. 

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