I spent the first half of 2024 repositioning our portfolio to align with our goals. I took some trades off, some are “parked to a later day” when I will deal with them (for example, I converted some of the bad SPX trades into a “box” and now I keep rolling it away). When I build enough cushion I will get rid of them. But as of now, what are the goals?

 

The First Goal of Repositioning Our Portfolio – Strategic Allocation

 

Earlier this year, I decided to invest 60% of the portfolio net-liq into more adaptive (Strategic) investments to grow the portfolio faster and minimize drawdowns. I am still in the phase of re-allocating and building this part of the portfolio.

 

What repositioning our portfolio to Adaptive (Strategic) allocation means?

 

I started working on a model that tracks several metrics such as volatility, technical indicators, and some other data and I created two scales or rating systems. Our newsletter or challenge account subscribers receive emails with those metrics. But based on those ratings, I strategically move investments from aggressive to defensive positions. Though, I am still tuning the model, it is getting interesting results and most importantly a speedy warning to get out before a real trouble hits the market.

 

The Second Goal of Repositioning Our Portfolio – Futures Trading

 

I must admit – I discovered futures and I fell in love with them. I trade options and single contracts. This is my income generating vehicle. Above, I mentioned that 60% of our portfolio will be in Adaptive, strategic allocation. The remaining 40% will be allocated in futures trading and dividend stocks. Though I will be trading equities too, but not as primary income generating trades. The only issue with trading single futures contracts is capital requirements. It is really expensive (requiring a significant buying power) to trade futures. But it is way cheaper (in terms of buying power) to trade options against futures compared to SPX. So, futures it is. But I am building up enough reserves to overcome SPAN margin craziness.

 

The Second Goal of Repositioning Our Portfolio – Dividend Growth Investing

 

Of course, this is the core of our portfolio. This is a true passive income portion (20% of our net-liq will be allocated in this part). My problem was that I never had enough income to invest regularly significant amount of money to buy dividend stocks (and I am too old to start FIRE). My only alternative was to create an income stream that can be invested into the dividend stocks. That’s why I started the options and futures journey. And yes, it took me 10 years to learn the ropes (along with blowing up two or three accounts) and now, I finally, might be trading successfully. I am still a bit nervous about this claim, but I survived two bear markets… actually three, while trading options. And in 2020 I increased my dividend holdings by 34%. Not bad. No it is time to consolidate.

Another reason for this portion of the portfolio is, that both – the strategic portfolio and options/futures trading are management intensive strategies. No one can do it without learning what I have learned. And it takes time. As I said above, I am old and one day I will not be able to trade – you know dementia, or any other mental disease may kick in, and I will be forced to stop trading. I hope, dividends will be strong enough to take over my (and my family) income needs.

 

Portfolio benchmarks

 

I try to be honest with my trading and investing and post everything – good trades (I am proud of and bragging about), and bad trades (I feel terrible about but post them too). And I also wanted to start tracking my portfolio and comparing to other sectors and instruments to see, how my new strategy, mainly the adaptive, strategic investments work and protect my portfolio. So I started tracking a few investment vehicles, normalized their prices and now comparing it with my portfolio (blue line is our portfolio, the red line is the index or other vehicle):

 

Against commodities, our portfolio performs well and beats commodity sector. Why commodities? In bear markets, commodities do relatively well (in 2022 they outperformed everything out there)
 

Against emerging markets, our portfolio performs well and beats the emerging markets.
 

Against Gold, our portfolio performs well and beats Gold. Until recently, gold was doing better than our portfolio. Gold is another safe haven investors like to flee to, so I want to see how our portfolio does when everyone is panicking.
 

Against Realty Estate market, our portfolio performs well and beats the Realty Estate market. During downturns, IYR seemed to have lower drawdowns than the market, so I want to see how our portfolio does compared to this market.
 

Against 2x leverage Nasdaq, our portfolio lacks and underperform this instrument. During bullish mania, this investment boosts growth, but during selloffs, it crashes badly. Let’s see how strategic portion of our portfolio protects us from severe downturns.
 

Against Nasdaq index, our portfolio outperforms the index. During bullish mania, this investment boosts growth, but during selloffs, it crashes badly. Let’s see how strategic portion of our portfolio protects us from severe downturns.
 

This is one of the volatility metrics I monitor, so I am interested in seeing how our portfolio performs against CBOE short volatility index. So far, the index does better.
 

SPX doesn’t need any introduction. So far, we beat the index, but I want to see how we do when there is a selloff. So far, our portfolio seems to be more volatile than the index (thanks to the futures SPAN margin requirements), but when I fully build up our Adaptive, Strategic portfolio, I want to see how that impacts our portfolio volatility.
 

In 2022 bear market, TLT failed to protect investors. In fact, bonds fell harder than equities. It is something I have not seen before. Yet, investors use TLT as safe haven, so I am interested how our portfolio will do over a long period of time.
 

I think, comparing our portfolio full of equities and futures with dollar is a bit off, but dollar can move the markets. And if it does move the markets, I want to see how our portfolio does.
 

VBINX is a broader Index fund, broader than SPX, so I added it too.
 

VXZ is another volatility metric I track. When people panic, this baby goes up. It shoots up. I want to see if our portfolio shoots up with it.
 

We are beating energy sector.
 

Utilities are another defensive sector investors like to use when they panic. I want to use it to see how our portfolio does when they panic.
 

I started tracking these vehicles and our portfolio recently. I do not want to spend time filling out old data, so I will be updating these chart moving forward only. I hope, I will be able to see a better picture about our strategies and how they work in real life.