Deanco Investment “Group” Update – October 2019 (Month 24)
For full update download this ^^^ PDF.
My individual positions (and all kind of additional information about each of them) can be found here:
I’d love to talk about investing with you. Link up with me on Twitter https://twitter.com/joeydean72
Month In Review
SCARY! We entered the Halloween month with me being scared of my investments. My results have been somewhat frightening all year. I haven’t been losing money but I’ve been having a much worse year than last year. NOT SCARY! But then, on October 1st, Charles Schwab (followed by almost all the other online brokers) announced they’d cut transaction fees…to ZERO! This was big news! I manage my fees and taxes closely and NO commissions are better than the current LOW commissions. This news has caused me to reassess everything about my investing. More on that!
2 Year Anniversary! My son, Preston, got interested in investing a couple of years ago. I had spent considerable time related to my investing at various times in my life but at this point was in a pretty low maintenance mode with things. I thought it would be fun to dust off some of the old stuff and see what I could do with it. I’ve been tracking everything with my investments for two years now. I started off two years ago in a bunch of index funds and constantly worried about my investments. I didn’t really like my allocation or the actual investments I was invested in. There was nothing particularly wrong with any of it, but it caused me to worry. I didn’t even know why I just knew I was worried. Over the past two years, I’ve done all kinds of new and scary stuff. Pretty much from day one I sold all those well-diversified index funds. I’ve been near 100% individual stocks at time over the two years. I’ve invested in precious metals for the first time in my life. I’ve sold our family home and downsized into a condo. I’ve read and learned an enormous amount about investing. I’ve discovered FinTwit and started sharing my own investing in my own format there. Writing down everything I do has helped enormously for a variety of reasons (both discipline and forced thought on relevant topics). I completely understand everything I’m invested in and come hell or high water I know why I own it and how it fits into my portfolio (and what I like about it and don’t like about it). Right now, I sleep like a baby as far as my investments are concerned. I’m ‘noodling’ on some things that I want to implement right now (really big things) but nothing is an emergency because I like where I’m at right now and know that I want to get to a different place in time. It has been a great two years!
No More Fees! The news of no commissions could dramatically change how I construct and manage my investment portfolio. I spent a good deal of time this month considering how this might impact my strategy. My position sizes can be as small as I want now and I can now incrementally add to and subtract from my positions without regard for transaction costs. This is really a big change to everything for me. I took some time this month to sit back and contemplate what would I do if I could do whatever I wanted to do. I digested this throughout the month and it went further than I anticipated. I am still actively ‘noodling’ on all this and have what I believe will be a great framework in place. I’m nailing down the final details of my new approach now. I will talk more about this in the coming months and begin moving my portfolio in this direction over the coming months.
From a performance standpoint, things are scary! Very scary! It was a great 2018. I could do no wrong. 2019 has been the polar opposite (bad news has been abundant). It is a good thing I have a long-term mindset! I think?!? Almost every single one of my stocks has been bouncing along 52-week lows. The fast-moving US stock market has now tracked me down and passed me up. I’m dead even with the blended benchmark. $VT is catching up to me fast. Oh well…1-2 years hardly even matter in the grand scheme of things.
Current Asset Class Allocation
- Stocks 56%
- Commodities 26%
- Bonds 17%
- Cash 1%
I suspect stocks can/will go higher. Just not mine 😦 That said, I still believe (and have since early 2018) that we are in a topping process in stocks. I think that any upside will be hard-fought with a greater probability of downside. Valuations are too high and there is way too much that doesn’t make sense right now for me to be fully allocated to stocks (where I’d love to be). I’ve lightened my stock exposure while maintaining 1) inflation protection (via cheaper commodities), 2) dry powder (via short duration bonds). When I find good deals on stocks, I will buy them. If the markets experience a dust-up, I will make major allocation changes. If no dust-up I like how I’m positioned now. That said I am in the midst of making a major reorg to how I manage my investment portfolio right now (so everything here will change in the coming months).
Over the past two months, I have been making some adjustments to my position sizes (making them smaller). I also decreased my bond position over the course of this month (which had gotten to be too high an allocation over the past few months). This month I’ve been doing work on what my “ideal portfolio position size” is. This is mainly due to now there are no trading fees anymore (hurray)! I’ve done a significant amount of work this month on all this and will likely be making major changes in my overall portfolio due to this in the coming months. I began making some of these changes this month (trying to stay ahead of earnings (and re-reviewing my existing stocks). I then stopped because I realized I wanted to make some pretty major changes to everything and I didn’t think what I was currently doing was going to meld with that.
- Sold: Partial
Positions (To Resize Positions)
- SCHO – Schwab Short Term US Treasury ETF
- VT – Vanguard Total World Stock
- Bought: Partial
Positions (To Resize Positions)
- SCHE – Schwab Emerging Markets
- ARLP – Alliance Resource Partnership
- VIAB – Viacom Class B
- HA – Hawaiian Holdings
- TUSK – Mammoth Energy Services
- XES – SPRD S&P Oil & Gas Equip & Services
- MU – Micron Technology
Thinking: I’ve basically been near schizophrenic in my investing over the past few months. Over the past few months, I’ve been working to cut down my position sizes to live to fight another day in case the stocks I am picking are just bad investments. I was doing this to be able to be positioned to own a more diverse pool of investments. As soon as I wrap this exercise up my broker decided to eliminate transaction fees. This is a very substantial change and caused me to reconsider much. I’ve really been struggling with my asset class allocation for most of the past year. I didn’t really feel like I had a good methodology to set my overall asset class allocation (and was mainly just winging it). Since asset class allocation is the most important thing in determining my future returns this was not sitting well with me. I started there and came up with a better solution to that. I’ll cover that more in detail later but I think it is a great workable solution that works alongside my regular monthly budget (and current life funding needs). Then I moved into how to handle my stock selection and individual position sizes. I’ve begun implementing additional changes in my portfolio this month as I continue to ‘noodle’ on this topic. I re-reviewed my existing positions (trying to stay ahead of 3rd quarter earnings announcements) and invested accordingly. I knew I wanted to decrease some bond exposure and increase my equity exposure (due to my new asset class allocation decisions). Late in the month of ‘noodling’ I think I hit the sweet spot on much of this so I stopped some of my individual asset reviews until I nail all that down. I anticipate many more substantial changes to my portfolio’s structure in the coming months as I get it matching my new desired methodology. After tracking all this for 2 years now I feel like this methodology is near perfect for my needs.
Things I’m Working On Now
- Investment Methodology Rework – As I’ve said all my investment energy right now is being spent digesting the changes I’m going to be implementing in my methodology. That is all…and plenty! I’ll post more about this in the coming months but I did cover some of this in the last part of this month’s video so take a look.