It is a new decennium, and we close the books of 2019 as we leave yet another year behind us. New Year is an excellent time to pause for a minute and reflect over the past 12 months. For me, it is also a great opportunity to take a look of how my All Seasons Portfolio performed this first year, and, most importantly, what I have learned in the process.
The structure for this post, is to first have a quick recap month by month from January to December of my investments, and after that, we will close the chapter of 2019 with some lessons learned, and new thoughts for the year to come.
Let us begin with a few graphs, which will be somewhat familiar (if you have photographic memory) from the December Portfolio Update.
I did not do any rebalancing this first year, as I only added funds by buying ETFs in asset classes where I was underweighted. Despite this, the profits turned out pretty well this first year, and well in line with the theory. In theory, the All Seasons Portfolio should yield about 4-5% per year as standard, and then by rebalancing, this yield will be topped with 1-2% more, providing a low risk return of about 7%. That is very much in line with the stock markets average return over time.
The All Seasons Portfolio is not necessarily a dividend portfolio, and depending on where you live, it may be more tax efficient to only hold accumulating ETFs. That will no give you any dividends. But for me, there were some distributions made over the year.
Now, to the monthly summaries.
January 2019 (click to go to the post)
- Portfolio Value end of month: €353.33
- YTD profit: N/A
- iShares $ Treasury Bond 7-10yr UCITS ETF USD (Dist) (EUR) (Long-Term Government Bonds)
I began my journey in January 2019 by buying Long-Term Government Bonds. I do not know if you recall, but the end of 2018 was pretty gruesome for the stock markets all over the world. Also I was affected by this freight, so I was a bit reluctant to begin this experience by investing in the stock part of the portfolio. That was a mistake.
Stock ETFs soared in the first part of the year. But how could I have known? Even professional investors had weak knees in that time. So I was a bit disappointed already after a few weeks into this experiment that I had picked the worse performing of the assets.
On the other hand, I chose to see this as a teaching. I had already then learned that it is incredibly difficult to time the market. I could have bought stocks, and they could have dipped instead in a parallel universe. That gave me some more confidence in the All Seasons Portfolio Strategy and why it is a good choice: if you try to time the market you will loose, instead, be prepared for whichever way the market goes.
- Portfolio Value end of month: €1,067.60
- YTD profit: -0.40%
- iShares J.P. Morgan EM Local Govt Bond UCITS ETF USD (Dist) (EUR) (Long-Term Government Bonds)
- Vanguard EUR Corporate Bond UCITS ETF (Corporate Bonds)
Keen to kickstart my journey, I added €740 in February. This month, I bought more bonds (as I was still unsure of the stock market – oops), but this time both Long-Term Government Bonds (in Emerging Markets) but also Corporate Bonds, which do correlate a bit more with the stock market.
Other than that, February was a quite uneventful month. I was still figuring out how to shape this blog and the structure of the monthly updates. It is actually a nice and almost nostalgic feeling to have a look at the young me’s first steps for this blog.
- Portfolio Value end of month: €2,216.32
- YTD profit: -0.58%
- Invesco Bloomberg Commodity UCITS ETF (EUR) (Commodities)
- Xtrackers Physical Gold ETC (Gold)
- SPDR® MSCI USA Small Cap Value Weighted UCITS ETF USD Acc (Stocks)
March was a great month in terms of funds added. I had received a small bonus from work and wanted to make that money work for me instead. I also shared some thoughts on that topic, that if you receive a bonus or a raise, put that money into your freedom fund instead of wasting it on things you do not really need. Give it a read and led me know in the comments if you think I have missed something.
After March was over, I had assets in almost all of the classes of the All Seasons Portfolio Strategy, only missing TIPS/Inflation-Linked Bonds. Gold, Commodities and Stocks were on my shopping list. This shopping frenzy was a one off thing – I still try to only add about €250-€300 each month for steady growth in wealth.
In March, I also introduced a bit more graphs. It didn’t really make sense to show too many graphs with only 2 months of data, but now my posts began to look more tidy.
- Portfolio Value end of month: €2,603.45
- YTD profit: 0.72%
- iShares $ TIPS UCITS ETF USD (Acc) (EUR) (TIPS)
In April, I added that final piece of the puzzle when I bought a TIPS ETF. From now on, my job was to start getting the allocations right (you know, 25% Stocks, 5% Corporate Bonds, 10% TIPS, 30% Long-Term Government Bonds, 15% Mid-Term Government Bonds, 7.5% Gold and 7.5% Commodities).
I also reflected over why it is good to invest in American assets, even if you are an European. The United States are often a forerunner in the economic cycles – many crises begin to show in American stocks, but they also recover faster.
In April, my portfolio also had turned to profit for the first time, after having been slightly on the freezing side before. But now, with all my wished for asset types in my portfolio, things would only go up, I though. But then came May.
- Portfolio Value end of month: €2,746.36
- YTD profit: -0.12%
- iShares € Govt Bond 3-5yr UCITS ETF EUR (Dist) (Mid-Term Government Bonds)
Once more, my profit was back on the negative side, but not for long. I had added more Mid-Term Government Bonds to the portfolio. After the strong beginning for stocks in 2019, they turned down by about 6%, which was good for other assets in my portfolio. Long-Term Government Bonds performed well, which they usually do in turbulent equity markets.
My Small-Cap Value Equity ETF lost about 9% of its value in May, but that didn’t really dent my wealth at all, thanks to how the All Seasons Portfolio is set up to withstand nervous markets. I still slept well, not worrying about my investments.
- Portfolio Value end of month: €2,986.52
- YTD profit: 2.27%
- SPDR® MSCI Europe Small Cap Value Weighted UCITS ETF EUR Acc (Stocks)
Also June saw some volatility on the stock market, and investors crawled their way into safe havens. Gold and Government Bonds are typical such havens that money flow into during times of uncertainty, and that was true also this time. The gold prices saw a really great bump in June, and was up about 10% over the month. As I was a bit too overweight in gold (and still am) – about 15% of my portfolio in June was allocated in Gold, vs. the aimed 7.5%, that was great for my wealth. I am getting closer to my preferred allocation nowadays though.
In June, I thus learned that it good to include gold and commodities in one’s portfolio, as a hedge against slow high risk environments on the stock market and as a protection against inflation.
- Portfolio Value end of month: €3,031.27
- YTD profit: 3.81%
July was a pretty OK month across the board. Gold had stabilized a bit, while all other assets had seen a slight increase in value. Summer vacation in the portfolio perhaps?
It was a quite uneventful month now that I look back. I had no new additions, but the value increased by €50 (about 1.7% from June). I suppose this is how you would like your investments to behave: steady growth without the nasty surprises.
- Portfolio Value end of month: €3,038.63
- YTD profit: 4.06%
If July was calm, August again saw some movements. Perhaps traders were off on holidays or Trump tweeted something (who remembers anymore?), and Brexit and trade wars were on the agenda as always.
Anyway, stocks had a bad month in August, but Gold, TIPS and Long-Term Government Bonds weighed up for it. My portfolio moved more or less sideways thanks to the All Seasons Portfolio allocations.
- Portfolio Value end of month: €3,066.28
- YTD profit: 5,08%
In September, I took another swing at improving this blog. I added some new graphs that visualize my portfolio’s returns in a clearer way.
Economic growth was again back on the agenda, and the month gave stocks a bump upwards, while safe havens slumped. Gold, Commodities and TIPS lost a bit, but the month was kind to my portfolio – thanks for that!
No new ETFs were added in Q3. Partly because I figured that my great additions in March were to be compensated, and partly because I chose to spend a bit more on holidays this summer. Italy was great by the way.
- Portfolio Value end of month: €3,333.93
- YTD profit: 4.68%
- Invesco US Treasury Bond 3-7 Year UCITS ETF USD Dist (EUR) (Mid-Term Government Bonds)
In October, I was again back in the buy side of the spread. Now, some Mid-Term Government Bonds were on my shopping list.
Portfolio value was steadily inching upwards, despite all sorts of bonds loosing out, while gold and stocks saw a good month.
I also wrote a piece on debt and if you really should avoid it at all costs. Some debt could be good, at least such debt that is helping you finance assets that give you cash flow. Consumption is generally not a good excuse for debt.
- Portfolio Value end of month: €3,626.75
- YTD profit: 4.48%
- iShares $ Treasury Bond 20+yr UCITS ETF USD (Dist) (EUR) (Long-Term Government Bonds)
November and its cold weather washed over my All Seasons Portfolio with a slight decrease in value. Nothing to be frightened of, but rather just tenths of a percent.
I added some Long-Term Government Bonds, and again with terrible timing… I have given up all hope on timing the market, as I recall that this ETF lost about 5% within one month (see December). So I’ll just stick to this investment strategy that prohibits me from trying to be smart.
In November, I also wrote a piece on why you should invest in Commodities, and also about my particular ETF. There are a few good similar Commodity ETFs to choose from, but I went into depth on the splits in the index. I was rather proud of that post, so give it a read: Why you should invest in Commodities and about Invesco Bloomberg Commodity ETF.
- Portfolio Value end of month: €3,653.12
- YTD profit: 5.24%
Ah, December, the final month on my first full year with the All Seasons Portfolio. It was a good month when looking at yield, so a good end to this first chapter.
Commodities and Gold did well this month, and my portfolio was up more than 1%, maybe because I am still slightly overweight in both gold and commodities? But also stocks had a great end of the year with two consecutive good months so that helped my profits a lot.
In December, I also wrote an article on why you can still invest in government bonds, despite the yields. The assets will still move depending on the market, even though the governments are not paying interest. Slight negative yield is still better than much negative yield. Take a look, and let me know what you think.
What have I learned?
This first year with the All Seasons Portfolio has brought many valuable lessons with it. Most importantly, all these blog posts have given me a great opportunity to sit down, relax and really reflect on my investments and why things turn out as they do. It also helps that this blog forces me to really keep track on what happens in my portfolio, and how different assets develop over time. You can also try to keep a journal in Excel or Google Spreadsheet – I’m sure it will help you become a better investor.
I have also learned that it is better to have a broad portfolio, with which you are prepared for which ever direction the market goes, instead of trying to time the market. Most often, you would just end up having wrong and either missing out on profits when selling too early or buying in a bear market. Better to sit still in the boat with a diversified portfolio and let your portfolio work for you, and rebalance when needed.
With the All Seasons Portfolio, you will also learn more about macroeconomic factors when investing. As different assets behave very different in different economic environment, or ‘seasons’, you will see how these factors impact your investments.
The key word here is risk adjusted return. That is something you will get with the All Seasons Portfolio. I am not sure about by Sharpe Ratio – a measure of your gains vs. the risk you have been exposed to – but I would suppose it is quite decent. I will look into whether I can start showing this number going forward.
You can also see how much money you can accumulate into your portfolio/freedom fund with monthly investments together with compound interest. I ended this year with a portfolio worth about €3,700. And if you can’t put aside €300 every month, the most important investments are those that actually get done. So invest what you can and you will eventually see that amount grow over time.
Even though all of the above are important lessons for me, actually, the most valuable lessons have come from your great comments this past year. I love any questions you have and to try to respond best as I can – I am sure discussion is a great opportunity for both you and I to learn more when we reflect. I encourage discussion, and the most important part of this blog for me, is to inspire and that you learn something as well. So thank you so much for all your comments! Really!
What to expect in 2020?
If you keep reading this blog, or if you are a new reader (welcome), you can first of all expect from 2020 that I will keep going strong. I am more motivated than ever to be investing with this risk parity model and to share my experiences with you. I hope you and I will have a great year ahead!
This second year will be a bit different from the first though. I knowingly chose to start small and just accumulate small amounts each month, rather than starting with a lump sum in January and go straight with a €5,000 portfolio. My thought with this, was to show that you can get a long way with just small additions each month, and I hope this shows that you can start small. Even though this meant some struggle before getting my assets split correctly.
This second year, now that I have accumulated about €4,000, will be a bit easier. Now, already from January 2020, I will have almost the right splits, meaning that I can focus more on adding funds where needed and soon starting to consider rebalancing – which is a great part of the strategy. I will therefore show my portfolio’s development year-to-date 2020, as well as from the start in 2019.
I will also keep improving this website and your reader experience. Now in January, I have already added a new “My Portfolio” view, which shows you my portfolio in real time (up to 20 lag) with figures retrieved straight from Bloomberg. So now you don’t have to wait a month to follow my portfolio and there is no more waiting until I get the blog post written for each month.
I have also cleaned up the ETF Portfolio Inspiration page with improving the portfolio lists and made the text easier to comprehend. Please give these two new additions a look, and let me know if they are any good!
I will also be very much looking forward to continuing our conversations, both in the comment sections, on social media, and by email. This is actually the best part of this blogging experience for me, to know that my thoughts here are being read and to deepen our learning by talking about our mutual interest.
So let us know officially close the books on 2019. Welcome 2020. I am absolutely certain this will be a great year, and I am so looking forward to it. Hope you will be with me next year as well.
Best wishes for the year to come,
This Post Has 2 Comments
Hallo Nicholas. Yo have forgotten to show the % of allocation of various Etf in the 26 Etf portfolio. You did it in other portfolios but not in the one with 26 Etf. Also I think so much diversification is not needed and also you will spend more money when rebalancing so many Etf. Basic Ray Dalio portfolio can be done with 5 Etf. I agree with you that adding some asset classes like emerging bonds, tips, or emerging markets equity for example, is surely a good thing, but you do not need 4 Etf just for the Inflation linked part of the portfolio. One or two should be enough…
Also, as I already noted, the Robbin’s version of Ray Dalio portfolio is an oversimplified one. Tips have a larger % in the original risk parity asset allocation. They are around 35%. That % is also used in the rpar etf which is an Etf that mimic risk parity asset allocation made by an ex Bridgewater man.
I hope you have good investing in this 2020. See you next month!
The list of 26 ETF is actually not meant as one portfolio, both rather a fund universe, from where you could find inspiration to build a portfolio similar to the ones listed before by picking one or two from each category. Therefore I have left out the percentages, and I agree it would be ludicrous to have such a large portfolio.
I am actually considering simplifying my current portfolio, as I have 12 ETFs, and I am thinking whether to slim it down to 5-6 ETFs.
I have been struggling to find more info about the TIPS. RPAR had about 25% here, but isn’t that high, considering also other asset classes move up when inflation is high, such as gold, commodities and stocks? I have 10% TIPS in my aimed allocation now, but there no real empirical evidence behind picking that amount.