All Seasons Portfolio – Page 9 – All Seasons Portfolio

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

Post author:Nicholas
Post published:September 12, 2020
Post category:Insights
Post comments:4 Comments
Reading time:55 mins read

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.

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

Post author:Nicholas
Post published:September 2, 2020
Post category:Monthly Update
Post comments:12 Comments
Reading time:29 mins read

Monthly portfolio update: Fairly stable month: bonds down on Fed policy shift, but offset by K-shaped recovery in stocks and commodities
Book tip: The Everything Bubble: The Endgame For Central Bank Policy by Graham Summers (link at the bottom of the post)
In case you missed it: I have ditched all intermediate-term bonds (post from 3 August 2020)
Coming soon: a post on real estate investing and how it fits in the All Seasons Portfolio. Stay tuned, and subscribe to newsletter for notifications!

Buongiorno!

I hope you have had a great summer under the circumstances, and are ready for the next (non-economical) season!

When posting this article, I have just come home to Sweden after a few weeks of visiting my girlfriend's family in Italy. For sure, the virus has put a great strain on the country, but it is good to see that things are moving in the right direction with society opening up. With few exceptions, new cases have been declining in Italy and Europe, which has bolstered investors with renewed confidence the past months.

Our vacation this year was not as we had initially planned (beaches in Sicily), but of a less touristy, and much more responsible, sort. Instead, we have stayed with her family and taken a few day trips to selected non-crowded destination (Venice has not been this empty for centuries). While more and more flights are opening up across Europe, it is still important to be cautious and not take unnecessary risks. One should not think that the danger is over, just because travelling is again somewhat possible. We can just hope for a full recovery as soon as possible.

But this is not a travel blog, but a financial blog, even though I wish to one day be able to sustain a life abroad thanks to my finances.

In this light, I have lately been thinking about how Covid-19 has affected the financial stability of countries, and how that in turn will impact sovereign credit ratings. For example, if debt-to-GDP would increase too much, if the affordability of the debt would fall, or if the economic outlook or stability of a nation would decrease, it will impact the country's ability to service its debt.

The ability to service debt - or a sovereign state's credit worthiness - is what the credit rating agencies Fitch, Moody's and Standard & Poor, are all analysing and rating. If a sovereign state has a good credit rating (AAA, Aaa etc.), this gives great comfort to the investors who purchase the country's bonds that there is a low risk of that the state defaults on its debt.

Portfolio Update – July 2020 – The value of currency hedging

Post author:Nicholas
Post published:August 7, 2020
Post category:Monthly Update
Post comments:0 Comments
Reading time:29 mins read

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.

Correction of my Portfolio – Ditching Intermediate-Term Bonds

Post author:Nicholas
Post published:August 3, 2020
Post category:Insights
Post comments:3 Comments
Reading time:11 mins read

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.

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

Post author:Nicholas
Post published:July 19, 2020
Post category:Insights
Post comments:9 Comments
Reading time:31 mins read

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.

Portfolio Update – June 2020 – We’re In The Clear: Shift To Stocks! But Not Really…

Post author:Nicholas
Post published:July 4, 2020
Post category:Monthly Update
Post comments:0 Comments
Reading time:22 mins read

Summary of June 2020 in the economy - Stock market is still uncertain
Monthly portfolio update: Fairly stable month: long-term bonds down, stocks, gold and commodities up
Book tip: Balanced Asset Allocation: How to Profit in Any Economic Climate by Alex Shahidi (link at the bottom of the post)
In case you missed it: Deep Dive post about how to hedge against inflation on my Patreon page was published earlier in June

I am so glad that you have found your way to my June portfolio update of the All Seasons Portfolio blog. It is a rainy afternoon here in Stockholm that I am writing this in early July. Still keeping social distancing and working from home quite a lot. Hoping to see a change soon, for the benefit of all fellow Europeans. We really need to get the economy going again, as I am sure you agree. Hope you have been able to keep your job though.

This month, I have come to the conclusion that the time for stocks is now, at least if you look at what is going on in the markets. Not sure if I am convinced this is the way we are heading, so I prefer to diversify my portfolio properly.

The stock market have bounced back from the steepest downturn in memory, and what looks like the shortest recession in history if you only look at the stock market development. The stock market is almost back at similar levels to where they were before all hell broke loose in February, regardless but S&P 500 saw almost flat development over June with +1.8%. Mostly, the climb in stocks were driven by tech and "stay at home" companies, as Nasdaq composite rose 6% over the month.

On top of that, central banks and governments over the world are launching new stimulus packages by the week, as we covered in last month's update. The two acronyms TINA and FOMO are the main forces driving the markets upwards. As a reminder, these stand for "There Is No Alternative" and "Fear Of Missing Out", meaning that investors see that there is no alternative to stocks to achieve return, and investors are afraid to be left at the station if they do not jump on the train as soon as possible. Both of these are driving great amount of money into the stock market, increasing demand.

I use the low-cost broker DEGIRO - one of Europe's leading online brokers - for my All Seasons Portfolio. To build your own All Seasons Portfolio, on DEGIRO you can find a great variety of ETFs listed on for example Xetra, LSE, Euronext, and Borsa Italiana. This even includes a selection of 200 commission-free ETFs (conditions apply)! Open an account and familiarize yourself with the platform today!

What is the All Seasons Portfolio Strategy and how am I implementing it? In theory, this strategy allows you continuous capital gains but limits the downside and big losses. Click here to find out more and read about how I will actually implement the strategy in practice to achieve the profits but avoiding much of the drawdowns.