I first wanted to start publishing the Investment Study on margin studies when I first purchased the domain back in September of 2017, so I’m kind of kicking myself for not starting sooner, as it would be really interesting to have seen the performance of these portfolios over the last 15 months. That being said, I did not expect to be so interested to see how these portfolios have performed over the last two months.
If you haven’t read up on the investment study, feel free to check it out here, otherwise, lets move on 🙂
… I don’t know if you’ve seen the news. Or heard your Uncle Lester moan about his retirement accounts. Or heard the boastful cries of the crypto police as they’ve come out of hiding for the first time since last Christmas. For the first time in a decade, we appear to be moving towards a bear market. A bear market is a period of time with falling stock prices. Not ideal, but ultimately if we believe in the strength of the United States economy, these are just hiccups on our way towards retirement.
On the heels of a Government Shutdown, our US stock market has been experiencing decline over the last few months, and that decline has taken a sharper turn toward over the last couple weeks. And this makes this investment study MUCH more exciting. Changing market conditions will give us the opportunity to see how different portfolio compositions react over time.
Before I get to the scorecards, I have a couple notes I want to make.
The Dollar Cost Averaging Study.
Since November, I’ve decided that I’d like to look at the effect of Dollar Cost Averaging on this study. Dollar Cost Averaging is splitting up an investment deposit into multiple smaller deposits, this is to reduce the risk of investing all of your money at the top of the market. Some experts argue, that if the overall trend of a market is up, the sooner you get your money in, the better. However, Dollar Cost Averaging is exactly how most of us invest in these markets. We invest our money as we get earn it.
So as of this update, the Investment Study now has two parts:
- The original study — how does a one time investment of 10,000 perform over time?
- The dollar cost study — how do these portfolios perform while also receiving smaller deposits every two months. For simplicity, I’m adding $500 a month to each portfolio’s balance, or $1000 every two-month update.
With the addition of the Dollar Cost Averaging Study, I’ve also added a sixth portfolio, mostly for the peace of mind of Uncle Lester.
Introducing The Mattress Portfolio:
This portfolio is …. if you just took all of your savings and hid it under your mattress.
100% dollar bills y’all.
Hopefully over time, each of the other portfolios will far exceed the performance of the Mattress Portfolio, but for this update, those who would have hidden money in their granddad’s grandfather clock would have permission to strut around and look important.
Current Score Cards: Investment Study Version 12/26/18
Static Investment Study:
Dollar Cost Averaging Study:
If this looks familiar, it should. However, as these portfolios continue to receive an influx of cash every two months, I believe that at some point the Dollar Cost standings will look different than the Lump Sum standings.
A look into each portfolio…
If you’re interested in learning more about each specific portfolio, they are described more in detail on the Original Investment Study post.
The Ivy League Portfolio
The Ivy League Portfolio experienced a 7.9% loss to $9,211.63 over the last two months, largely driven by the large losses in the US stock market, as well as foreign markets. To rebalance the portfolio back to the portfolio’s original allocation, two shares of IEF ( US intermediate term bonds ) were sold to purchase additional shares of US and Foreign ETFs.
The Midwest Portfolio, a portfolio comprised of ETFs and modeled after Ray Dalio’s All Weather Porfolio, performed the best over the last two months with a loss of only 1.98% to $9,801.63. To rebalance, shares of Bonds were sold to purchase additional shares of US stocks as well as additional commodities shares.
The Risky Robots
This aggressive robo-advisor based fund experienced a loss of 9.33% to $9,067.12 since the first of November. For rebalancing, shares of emerging market stocks, corporate bonds and emerging market bonds were sold to increase exposure to dividend yielding stocks (VIG) and foreign stocks (VEA).
The Simple Path
Because this portfolio is made up of 100% US stocks, this portfolio took the largest hit over the last two months. The portfolio value dropped 13.91% to $8,609.17 since November 1st. That hurts. I know this is the allocation of many of us within the FIRE community and even though I agree with many of the arguments behind the portfolio, it struggles during these types of events.
Because this portfolio is only made up of one stock class, no rebalancing will ever be needed throughout this study. (… and honestly that’s so nice and simple)
The Smoother Path
The Smoother Path portfolio also experienced a heavy drop, falling 12.35% to $8,765.38. To rebalance, one bond share was sold to buy an additional share of VTI
Things have gotten interesting!
I’m really intrigued by how the Midwest Portfolio endured the last couple months, even though the portfolio still lost money, it performed 6% better than the next best portfolio. This update has me more excited about the investment study. This information is not meant to be investment advice, this isn’t even meant to show my opinion on the best way to invest. Now I just want for these portfolios to beat the mattress.
I scheduled the next update of the investment study for February 27, 2019.
How are you doing? How are your investments doing? … you’re not selling are you?