Investment update for December 2018

Well, despite some of the headlines we’ve seen about the market tanking again, November was an “up” month for me in comparison to how October left me. It just continues to show how the markets work (up one minute, down the next, but overall following an upward, though jerky, trend).

I believe a lot of folks don’t realize how much the Fed has an influence on the markets. For the 7-8 years after the “great recession” of 2008-2009, the Federal Reserve, or Fed, pumped a huge amount of money into the economy in order to keep deflation from happening. Due to that amazing amount of easy money, the markets responded by essentially tripling in value over that time. However, over the last year or two, the Fed has been increasing interest rates and pulling money out of the market. The result is that the markets are having a hard time, with the Fed putting the breaks on.

Many companies are enjoying strong profits, and the P/E ratio of the S&P 500 is 22.05 (est.) which is what it was back in 2015. Think about that, companies are more profitable than they were in 2016 (total return 11.96%) or 2017 (total return 21.83%) – but they can’t increase their price. There just isn’t much new money in the system, and it appears that the profits from 2016 and 2017, at least, were partially driven by easy Fed money.

So what to do? I plan on staying the course, like so many others of you. Over time, the market will increase. We will just have to weather the ups & downs.

Retirement Accounts: Remember, my allocation for these is:

  • 30% Bond Index Fund
  • 17.5% S&P500 Index Fund
  • 17.5% International Index Fund
  • 17.5% Small Cap Index Fund
  • 17.5% REIT Index Fund

So for the month, I’m up about 2%, with the big gainers kinda matching the big losers of earlier in the year.

  • S&P500: +2.8%%
  • Small Cap: +5.5%
  • International: +1.9%
  • Bonds: +0.8%
  • REITs: +3.9%

My 401K/Deferred account at work is up a similar amount

Dividend Income Account: Allocation:

  • 25% Dividend Stocks
  • 25% REITs
  • 50% Bond Index Funds

This is up about 2.3%, with several of the REITs (especially HealthCare) going up strongly. Many of the dividend stocks (Chevron, Cisco, etc.) bounced back after big loses. Bonds went up, although my total bond market index greatly outpaced by intermediate bond index fund.

Value Investing Account: I sold off my value stocks in late November to pay for my Roth IRA rollover. I rolled over about $100K from regular IRA to Roth, and paid the taxes out of this “fun money” account. Due to the losses of the stocks, I was able to “harvest the tax loss” and reduce my taxes a little for 2018.

Allocation now:

  • 39% USAA Market Index (my brokerage is USAA)
  • 61% in Vanguard Value Index fund

Both of these were up in November. USAA’s extended market was up 1.8%, but Vanguard’s value index was up 5.1%. Again, these guys both got hit last month, so for the most part, it was gaining back ground.

For the year, I am down 1.99%, so I am hoping for a strong December to at least get me into positive territory for the year. So far, it hasn’t worked out that way. I guess we will see at the year end round up.

How did you do in November?

 

Mr. 39 Months

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