The Tuesday after the first Monday in November seems arbitrarily ordinary when you write it out like that, but for US investors it carries a unique importance. It’s election day. That day came and went on Tuesday to much stress and fanfare depending on whether your favorite candidates or ballot measures won or lost. I don’t know about you, but I could use a break.
The beauty of asset allocation is that it transcends party affiliation. Sure, politics affects markets. But diversification is there to help no matter who is in charge, and the sovereign law of compound interest doesn’t care who the nightly news is talking about today. Wise portfolio construction is the level head that steadies the ship in both calm and stormy seas.
So as you detox from the political bender affecting all of us, maybe take a moment to appreciate the stable things in life. Find the right portfolio, turn off the news, and take a walk outside. In both politics and money, the quiet voice of calm clarity requires focus to hear over the din of loud, attention-seeking voices. But it’s worth the effort.
Good questions
What other Portfolio Charts readers are asking
My wife and I are 62 yrs old, retired and we reallocated our retirement money and built the Golden Butterfly portfolio in April 2020 using VBR 20%, VTI 20%, IAU 20%, BLV 20% and 20% in money market. Of course everything except money market is down with BLV being the biggest loser by far! I was thinking of rebalancing our portfolio but am afraid of buying more BLV since it’s been the worst performer. What are your thoughts about BLV and my fears?
I understand the anxiety with long term bonds, as they’ve been hit particularly hard this year. But after studying portfolios for years now, I’m personally not worried. From my perspective, times like this are exactly WHY you diversify. Your Golden Butterfly portfolio has built-in firewalls that protect you even when one asset craters for a while. And it will work the same way when stocks or gold do the same.
Now that doesn’t mean that there won’t be bad years like this one. But generally speaking, sticking with the plan and rebalancing (naturally selling high and buying low) will work out better than changing course out of fear.
For a deeper dive, this article touches on the same worries with hard numbers.
Have a question? 🙋♂️
I’m NOT a financial adviser, but I’m always happy to help.
What I’m reading
Insightful market discussion worth sharing
After Record Year, University-Endowment Returns Drop Into Negative Territory — WSJ*
(*) This is behind a paywall, but search links can often be read in privacy/incognito mode.
“The median result for endowments and foundations in the fiscal year ended June 30 was a 7.8% loss, according to a preliminary estimate by Cambridge Associates—the worst showing since 2009.” … “Still, she said endowments were cushioned from steeper losses by diversification in their portfolios, which beyond public and private equity and fixed income often include hedge funds, real estate, private credit and cash.”
There are two good lessons here. First, even the massive college endowments with billions in assets and the brightest minds in the business are not immune from market losses. And second, those same smart people mitigate really big losses by thinking beyond standard stocks and bonds. While endowments do have access to special investment types not accessible to normal investors, several things like REITs, commodities, gold, and cash are all easily investible via low-cost ETFs.
When Should You Change Your Asset Allocation? — A Wealth of Common Sense
“There’s an old saying that your portfolio is like a bar of soap. The more you handle it, the smaller it gets.”
Seriously — I knew Ben Carlson was good, but it’s hard to picture a more perfect quote for his blog name. And there’s so much wisdom there, as constantly fiddling with your portfolio will not only drive you crazy but also measurably wear it down over time. Your best intentions are often the most counterproductive to your goals.
Vanguard to pilot voting rights for retail investors in challenge to passive ‘emperors’ narrative — ETF Stream
“Vanguard plans to give its 30 million retail investors more say in how their shares are voted in a 2023 pilot program. We called for this and are fans of this because it helps solve a legitimate ‘worry’ regarding the passive rise: concentration of voting power.”
It seems rather crazy that massive financial institutions like Vanguard and BlackRock have been using your shares to vote their interests with every major company in the world. So major kudos to Vanguard for taking the lead in democratizing corporate voting rights and putting the power back into the hands of investors.
In case you missed it
New features and updates at Portfolio Charts
It’s not what you think.
If you’re new to the idea of tax loss harvesting, this will not only explain how it works but also provide actionable tips for how to make the most of it while avoiding common pitfalls.
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Now that total market drawdowns for the year are coming into focus, have you wondered how the 2022 returns of your own unique funds compare to the deepest compound drawdowns in years past? With the Drawdowns spreadsheet, you can plug in your own numbers and quickly chart the results.
DRAWDOWNS
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