Portfolio Update – March 2021 – The Madness Is Not Over

Now that we have put the month of March behind us, it marks the one-year anniversary of the coronavirus pandemic and societal restrictions. Hardly, this is something to celebrate, as it has been one of the worst 12-month periods for a very long time, and all we want now is for the madness to end and for us to be able to go back to normality.

We have reached a few months into the vaccination process and hopefully the worst parts of the pandemic should be behinds us. But, it seems like we are not yet over crazy events to surprise us in the markets. Two such impactful evens in March alone were the blockage of the Suez Canal and the blow-up of Archegos Capital Management, both of which were significant events to occur in March. We will look more closely into these events in this article and their potential impact on the economy in the near term.

My point is, that while stock markets are regularly posting ATH marks, there is quite a lot of uncertainty left in the economy, that can be a surprise on the downside for equities. The $1.9tn American stimulus package may help to keep up stock valuations for a little bit longer, but voices are raised that we are witnessing the final exuberant stages of a bubble.

Before we dive into a dissection of three most impactful events of March 2021, I received fantastic feedback on my last post with book recommendations for reading material on risk parity investing, which was published a few weeks ago. I was recommended the book Adaptive Asset Allcation, written by the team behind ReSolve Asset Management, and while I am only half-way through it yet, I think this is a recommendation worth sharing to a broader audience. Check out the description and the bottom of this article for more details of what to expect.

But let us now head straight to a catch-up of what exciting events March 2021 had to offer us.

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Portfolio Update – February 2021 – Dire Outlook for Bonds?

In the last week of February, the bond market came under scrutiny in a culmination of a rapid hike in yields and a failed US 7Y Treasury Bond auction on Thursday February 26th.

A complete dry-up of risk appetite in fixed-income space briefly pushed the 10Y treasury bond yield above 1.60% in an intra-day posting. This was the crown of a month-long trend throughout February with rising treasury yields. The 10Y yield closed the month at 1.41%, being up 55% YTD.

In this February 2021 Monthly Blog Post, we focus on the recent ripples on the bond markets, the outlook from here, and what you as a risk parity investor should ow do about your bond portion of your portfolio.

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Portfolio Update – January 2021 – What the Gamestop frenzy can teach the sensible investor

It is with a great portion of excitement that I have now sat down to finish up the first monthly portfolio update of 2021!

Good to have you here with me to review the month. In this new year, most of these monthly updates will remain familiar, but I have included some new features. Mainly, I have added a few more graphs in the portfolio review segment, which in more details shows the daily performance of my portfolio (also with comparison against the S&P 500) on a rolling 3-month period. I hope this will be a helpful tool for you when contemplating replicating a risk parity strategy.

The greatest news that has made the most headlines in January (besides the Capitoleum protests) has obviously been the short/gamma squeeze in GME and other heavily short stocks, as constructed by a group of Redditors in the subreddit r/WallStreetBets.

I am confident that you have not missed this, and perhaps you are already tired of that mania, which has already reached beyond its apex. I will not go into detail reviewing the occurrence itself, as that has already been covered by literally everyone - finance media and independent bloggers alike.

But even though the mania is not really related to the All Seasons Portfolio strategy - or even sensible investing at all for that matter - there are still elements that can be useful for the investor who is better at managing risk. I will therefore not ignore the short squeeze all together but I will focus on a few points that I have identified as important reminders for both sensible investors and FOMO traders.

Continue Reading Portfolio Update – January 2021 – What the Gamestop frenzy can teach the sensible investor

Portfolio Update – October 2020 – U.S. Elections and Risk Off

  • Monthly portfolio update: Election jitters and a risk off sentiment in markets toward late October brought down most asset classes. Most losses have been recovered since.
  • Diversified risk parity strategies such as the All Seasons Portfolio will bring stability to uncertain times ahead
  • Book tip: The Permanent Portfolio: Harry Browne's Long-Term Investment Strategy (link at the bottom of the post)
  • In case you missed it: My latest article about How VIX ETFs can improve portfolio performance and stability in volatile environments (Now available exclusively on Patreon; to be posted on this blog in late November 2020)

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

I hope that in these challenging times, you are staying positive and testing negative.

I can barely believe we are already in November - the darkest and gloomiest month of the year (here in Sweden it will now be cloudy, windy and murky for the next 2-3 weeks at least). And on top of it, the Covid-19 virus soon celebrates its 1 year birthday, and we are on the ninth month of working from home here, with renewed lockdowns all across Europe. It seems hard to find things to cherish about, but we'll need to try our hardest to not let that affect us too much. I have just received a delivery from Amazon for two books on risk parity, which I will be burying myself in while autumn storms blow outside.

This past week I have spend a lot of my time in analysing how investing in VIX (CBOE's Volatility Index) through a VIX ETF would have impacted a risk parity portfolio in the spring of 2020 and the Covid-19 crisis. As you may recall, all asset classes (including government bonds and gold) declined for 10 days in March, so I looked into if there were any asset class available that could have offset the losses in a distressed market.

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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.

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

Insight – 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.

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