$52,966.79 | Reflecting on Portfolio Strategy

Hey guys!

I bring you some good news – my Roth IRA account balance is the highest that it’s ever been. The market has been on an absolute tear lately, and my overall holdings have jumped to almost $53,000. So what does this mean for my portfolio vs. how the market is doing? Let’s take a look.

  • S&P 500 from January 4th – July 5th: +17.61% ((398.75 – 339.03) / 339.03) x 100
  • My portfolio from January 4th – July 5th: +16.82% ((52,966.79 – 6,000 – 656.90) – 39,641.18) / 39,641.18 x 100

I wanted to reflect on my portfolio’s strategy a bit on this update. Although my portfolio is at an all time high, it has been lagging the broader market in the last few weeks. With a lot of my “Growth + High Yield” portfolio slice in financials, the 10 year bond yield stagnating has led this part of the market to lag others. The share price appreciation shows that I’m down about 0.8% versus the market. Once you factor in dividends, I am likely still ahead of the market because my portfolio’s yield is more on average about 3% vs. the broader market’s yield of around 1.5%.

If you look at the picture above of my portfolio slices, you can see my “Stable Yield” slice is dragging my overall portfolio returns down. Those companies are meant to be the most conservative in my portfolio, so the fact that they’re underperforming in a bull market is not a surprise. Many of them, like Verizon and AT&T, have price to earnings ratios that look much cheaper than the overall market. The companies may not be rapid growers, but they provide a steady stream of dividends. Also, during times of market contraction, these companies will likely hold their value much better than the growth stocks that have run up so much lately. In short, while these companies are lagging the market, they are serving their purpose in my portfolio well and I’m comfortable keeping them there in case the market takes a dip.

My personal thesis is that we’ll see interest rates and bond yields rise over the next few months. Expanding economies traditionally see a rise in interest rates, and even if the interest rate rises are delayed, whenever they happen, banks and financials will earn much more on their currency reserves.

Jamie Dimon, the CEO of JP Morgan Chase (JPM) has talked about how the company hoarding cash in anticipation of rising interest rates and higher bond yields. Instead of buying government bonds at the currently low interest rates, the company is buying back its on shares and stockpiling cash to buy bonds whenever rates are higher. We’ll see whether this pays off, but if banks are betting billions on rising rates, I’m okay to stick to my thesis that should hopefully outperform the market over the remainder of the year.

If you want to check out my complete M1 Finance Roth IRA portfolio, you can take a look here: https://dashboard.m1finance.com/d/research/my-pies/details/UElFOjM0MTEzOTY%3D

Happy investing!


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