Portfolio Update 1/2/09: Alright

So far in 2009 the markets are doing alright.

But the WylieMoney portfolio could not keep up with the ETF 20 and has fallen back to third place.

WylieMoney Slowly

ETF 20

WylieMoney 20 Mostly Managed

Three Fund Index

Lazy 20 Mostly Index
S&P 500


Dibbler said...

I have been following your experiment since it started. One thing that we have learnt from the market crash in 2008 is that some kind of risk management is needed in every portfolio.

Your model portfolios contain mostly funds that contain stocks and bonds. It seems you have attempted to represent all the different flavors of stock and bond funds in equal amounts.

Going forward, what kind of mix of real assets (e.g. precious metals, real estate funds) and absolute return funds (e.g. target date funds, managed futures) do you recommend as hedges against the kind of volatility that we have seen recently with stocks and bonds?

Given the market has been smashed, but that eventually we should expect a recovery, would you consider changing the dollar amounts or order that you add the next funds to the Wylie Money Slowly portfolio based on whether they are international or domestic stocks, bonds, real assets or absolute returns?

I realize this adds more complexity to what was initially intended as a simple experiment but the circumstances do require investors to think hard about how to position themselves for the recovery.

Wyliemoney said...

Howdy Dibbler,

This experiment involved loosely, 55% in US stocks, 15% in bonds and 30% in International stocks. I have no plans to re-balance. I'll see how long I keep it up. I'm glad to hear there are people checking in on it.

You can see in my actual IRA, I have a different allocation.

And in my 403(b) I have shifted out of bonds altogether and am about 30% International 70% Domestic equity.

My Brokerage has more real estate and commodities and energy equity than my IRA and the 403(b) does not include these options. I also have more bonds and cash in my brokerage.

I'm not sure the best mix- I believe diversification across investment types, sectors, categories, fund companies is more important than trying to guess what exact asset mix is best. But your risk should match your time horizon and your risk tolerance and your risk tolerance should be honest.

I would never put 100% in equities in my brokerage which is money I hope to use in the next few years. But I have a long time before I retire so my 403(b)/IRA mix is pretty aggressive.

I hope my perspective helps. Good luck figuring out what is best for you!