- New investment: Mid-Term Government Bonds
- Average portfolio fee: 0.25% p.a.
- +4.52% YTD growth (up from 4.17% in September)
- Total portfolio value EUR 3,419.29
Good to have you back for the 10th portfolio update of my All Seasons Portfolio. October has been a good month and I hope that you too have enjoyed the autumn so far. With the falling darkness and bad weather, at least portfolio growth sheds some light in our lives.
The past months, I have been struggling with adding new funds to the portfolio, and I haven’t made any new additions since June really. Now, however, I have added about EUR 264 and went shopping for Mid Term Government Bonds. I did this in spite of my anticipated cash outflow coming in November to the tax authorities, by increasing my indebtedness and took a loan to pay my taxes. But aren’t loans a bad thing?
A man in debt is never free.
Ernst Wigforss, famously (in Sweden) requoted by Göran Persson, a former Swedish Prime Minister, now head of the board of Swedbank
Many are taught from a young age that debt is an inherently bad thing and that it should be avoided at all cost. The truth is, however, that you can accelerate your life and portfolio growth with a moderate amount of debt. Debt in itself is not dangerous, but rather the monthly cash flow that follows to service the debt can be disastrous.
Therefore, you should always avoid debt with high interest rates. Remember that compound interest is the world’s eight wonder as long as you have it work for you when you invest, but that it can dig a great hole in your future wealth if you pay for it. Therefore, if you chose to take on debt, make sure to only do so with lower interest rates than your assets will generate and make sure that you will never fall behind on your debt when servicing it every month.
Thus, also credit cards with benefits and perks can be useful, as they most commonly have a interest free period of about 30 days. That means that you can use the card for free and enjoy the perks, as long as you can settle the outstanding amount by the end of each month. If you fail to settle it, the interest rates are often 13-18% per year, which is a lot more than the about 7-8% that the stock market yields on average.
So, as I was able to attain a loan with a very beneficial interest rate, with manageable cash flow every month, I went for this option to settle my taxes, and could add to my portfolio. The difference between my anticipated portfolio profits vs. the interest rate I pay on the loan is positive, so on paper, this would be a good decision. But even if this is a good choice for me, always be careful and thoroughly go through your finances before leveraging your portfolio. If it goes wrong, and your portfolio decreases, you will still need to repay your loan. Seek professional advice when in doubt.
Monthly update October 2019
Moving on to my All Seasons Portfolio – how did it go in October?
As mentioned earlier, I had a new addition in my portfolio in the form of Mid Term Government Bonds. Now, I chose to purchase Invesco US Treasury Bond 3-7 Year UCITS ETF USD Dist (EUR), meaning that I am now exposed to both European and American mid term bonds for added diversification across markets.
With this addition, my portfolio is now even more closely tracking the aimed allocation splits, so next additions will likely be long term government bonds and equity:
Let us also look into the development of the portfolio. Worries over new interest lowering and dovish central banks had negative effect of the bond parts of my portfolio all across the board from TIPS, Government Bonds to Corporate Bonds. This is visible from the below graph in the slight declining amounts in the bottom four colored fields (except for the orange where which is where I added funds).
But, Gold and Commodities bounced back from lower performance in September. Gold went up 5.28% in just one month and Commodities saw a bump in value of 3.99%. You can see this also in the portfolio table further down. Also European stocks saw a good month, but this asset class moved more or less sideways as American stocks haltered. All in all, my portfolio increased 0.78% over the month.
In case you missed it: September 2019 Portfolio Update
As shown in this graph that I introduced to this blog last week, the weighted average growth is still in a positive trend, now at 4.52% compared to average purchase price. I am therefore still confident that the All Seasons Portfolio Strategy works in limiting the downside while enjoying upside.
For the cash flow investor in me, dividends are still at very moderate levels (understatement of the year, possibly). I have not expected dividends to be the main driver of growth each month, and most of my owned ETFs only pay out dividends twice per year, so I will continue to have these spikes every 6 months. Only my Corporate Bonds ETF pays out on a monthly basis.
Let us now end this month’s update with a look at what specific ETFs I own and their respective development. By the way, I am looking to do a new post in a few weeks with a deep dive into the Invesco Blomberg Commodities UCITS ETF and tell you more about it and why I have it in my portfolio. Let me know in the comments below if you would be interested in more of this type of content and I will have a test run shortly.
| Asset | Category | ISIN | September 30, 2019 | October 31, 2019 | Change MoM |
|---|---|---|---|---|---|
| iShares $ TIPS UCITS ETF USD (Acc) (EUR) | TIPS | IE00B1FZSC47 | 400.18€ | 392.36€ | -1.95% |
| Vanguard EUR Corporate Bond UCITS ETF | Corporate Bonds | IE00BZ163G84 | 379.61€ | 378.42€ | -0.31% |
| iShares € Govt Bond 3-5yr UCITS ETF EUR (Dist) | Govt Bond Mid | IE00B1FZS681 | 175.32€ | 174.53€ | -0.45% |
| Invesco US Treasury Bond 3-7 Year UCITS ETF USD Dist (EUR) | Govt Bond Mid | IE00BF2FNQ44 | 0€ | 262.78€ | N/A |
| iShares J.P. Morgan EM Local Govt Bond UCITS ETF USD (Dist) (EUR) | Govt Bond Long | IE00B5M4WH52 | 380.59€ | 383.32€ | +0.72% |
| iShares $ Treasury Bond 7-10yr UCITS ETF USD (Dist) (EUR) | Govt Bond Long | IE00B1FZS798 | 380.78€ | 372.80€ | -2.10% |
| Invesco Bloomberg Commodity UCITS ETF (EUR) | Commodities | IE00BD6FTQ80 | 320.46€ | 333.25€ | +3.99% |
| Xtrackers Physical Gold ETC | Gold | GB00B5840F36 | 467.77€ | 492.48€ | +5.28% |
| SPDR® MSCI Europe Small Cap Value Weighted UCITS ETF EUR Acc | Equity | IE00BSPLC298 | 170.85€ | 175.75€ | +2.87% |
| SPDR® MSCI USA Small Cap Value Weighted UCITS ETF USD Acc | Equity | IE00BSPLC413 | 456.40€ | 453.60€ | -0.61% |
| Total | 3,131.96€ | 3,419.29€ | +0.78% |
Thank you for taking the time to follow my journey with the All Seasons Portfolio Strategy. As always, feel free to leave encouraging comments and spread the word.
Sincerely,
Nicholas
