But first, although an insanely short period to look at, I wanted to see how some of the portfolios we've played around with here have came through the carnage of last week. Using testfol.io, the Vanguard S&P 500 ETF (VOO) was down 10.29% and the Vanguard Balanced Index Fund (VBAIX) which is proxy for a 60/40 portfolio was down 6.06%.
First batch.
Second group
This next one is interesting in terms of capital efficiency. It's 10% in NFXL, a 2X Netflix ETF and 90% in TFLO. For the last week, it was down 1.67% versus the 6.06 for VBAIX mentioned above. The backtest below goes to NFXL's inception which is not far back.
We never looked at that ETF specifically but we have played around with that concept plenty. Obviously the 10% all going into NFXL could be divided up into several different ones. I only chose Netflix because it avoids the headline risk of Microstrategy and Tesla. I'm also not sure that 10% is optimal but it obviously wasn't catastrophically wrong from day one.
None of these seem to be catastrophic to me which if nothing else means all the related blog posts had at least a hint of productivity to them. To the old adage I used to talk about more frequently, take bits of process from various places to create your own process. Maybe by now, it's more correct to say to adapt your process versus creating it. It would be difficult to go all in on any of these strategies but I do think there are elements that can be added to something closer to a "normal" portfolio. Realistically, all the ones we've explored pull a little from the portfolio I've been managing for more than 20 years. This is time well spent even if just for me and I will continue to blog about this stuff.
One interesting footnote is that the Fire Funds Wealth Builder ETF (FIRS) which is a Permanent Portfolio inspired ETF was only down 3.06% last week. I own a few shares of that one personally as more of a matter of curiosity.
Now something harsh for advisors. As advisors, it is times like now where we really earn our money and show our value. The thing about this is that being right isn't the most important thing. We are paid to keep our heads. I think we are paid to generally have some sort of plan, see yesterday's post, that we can easily articulate to clients. And it's ok if that plan is to hold on no matter what.
The current market event really will end at some point and the market will go up again. It's easier to endure when you realize this event is not different in that regard. My only real worry in these events is not wanting to cause more anguish for clients. In some sort of circuit breaker triggering crash tomorrow, I am a seller of SH and I will be ready spreadsheet wise to flip that into some sort of broad based index fund depending on how it plays out but that might not be easy for clients.
If market conditions warrant any of those actions, I have no idea whether I will be "right" a month from now. To reiterate from the other day, the S&P 500 was above 6000 not too long ago, any buying done in the 4000's will be the right thing for clients in the long run but it might be the very painful thing in a month or three months from now or whatever.
If you are fascinated by markets, I am, then these are fascinating times and the focus as an advisor can in part be about how to solve this problem for clients. As I write this about 90 minutes before futures open, Bitcoin dropped several thousand dollars which doesn't have to be negative for equities but doesn't seem like a positive. Be ready for anything tomorrow.
The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.
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