If you are on the blog page in a web browser from a computer, please subscribe to this using the "Follow by Email" link to the left. If you're on a mobile device you should see something in the frame that allows you to subscribe. Having your email helps me to notify you when Google mucks up email distribution.
~~~~~~~
Friday's action took my invested positions to a bit over 97%, so from this point forward it is simply a matter of getting the remaining 3% (or so) invested as conditions permit. Here's what filled on Friday:
Click on the image to enlarge.
Note that I made a mistake in order entry and I specified "PM" instead of "AM", resulting in loss of the standard 10-minute-buffer between open and when I like to activate my trades. The trades became valid at 9:40:05 PM THURSDAY night because I entered the orders Thursday night, which means they were visible immediately at the open. Not a big hit, but not great either. Attention to detail....
Re-running of the optimization produces the following target portfolio:
Yellow refers to positions that I hold, and the 3 remaining positions to fill are at the bottom. Additionally, I do not have exactly the allocations shown, so my orders for Monday will "true up" the portfolio to align with the target. Here are the trades for the remaining positions (0.09% in PKG is too small) and for the "true up":
True-up investments:
Click on either image to enlarge.
If all of these fill I will be at 100% invested, according to the target portfolio shown above in yellow.
The new efficient frontier and my current position with this composition of stocks is as follows:
The present portfolio is the yellow diamond and the target portfolio optimized Sharpe Ratio is the purple dot at the intersection of the straight line and the blue efficient frontier. Note the scales -- I'm really close, so for the most part, this is immaterial.
The numbers on the target portfolio versus where I am presently sitting is as calculated:
Basically, the SR's are equivalent, so all I am attempting to do is deploy $3,000 to take my position to a fully-invested status. The historical performance of this portfolio gives a reasonable expectation that 14% return at a very low volatility is achievable. The SR of 1.89 is notable.
Because most of these stocks are part of the Dividend Champion series from David Fish ( http://www.dripinvesting.org/tools/tools.asp ), I have every expectation that income from this portfolio (which is not included in the return numbers) will be as good as or better than 2017. One of the criteria of selling is that the dividend is cut, so if that occurs, the position will be sold and replaced with a better performing position. Here is the 2017 performance of this fully-invested position, had I held it for all of 2017:
Portfolio 1 is this Greenfield Optimized Sharpe Ratio Portfolio, in the allocations shown above, and Portfolio 2 is a simplified portfolio comprised of the following mutual funds and their allocation:
Note that this list and composition of an income portfolio is somewhat arbitrary but produced 8.34% CAGR at a standard deviation (volatility) of 1.31%, yielding a SR of 5.41 in 2017, with only 0.18 correlation to the S&P 500 market. The point is that I am seeking a portfolio with capital appreciation at a risk-adjusted holding level that produces more guaranteed income than a risk-adjusted income portfolio. If you know of other methods to accomplish this please let me know in the comments section below -- I'd love to learn what you are proposing.
I note that the portfolio is presently holding $1,805.86 in net gains, just from these 4 days of trading -- the new year has started off with a bang. I note that at any given time the combined Value at Risk (VaR) and Conditional VaR are about $3,700, meaning, that with my setup there is a 5% chance on any given day that the portfolio value could fall this amount. Hence, $1800 paper gain could be wiped out with a 5% chance of occurance on Monday, and it could happen again on Tuesday, Wednesday, etc. There are no stops in the portfolio, as these decrease performance over the long haul.
So, the net of all of this is that I think I'm on my way to showing how this portfolio does in 2018 with the approach. It took 4 trading days to get to 97% investing level, and the stocks are all considered quality stocks that pay a constant or increasing dividend on a year-over-year basis.
The first opportunity to consider the sale of a position will come with JPM, which reports earnings on 1/12 before the open. If either EPS or revenues are showing negative on a QoQ or YoY basis, the position will be tagged for sale.
Also note that if any position has the 50d MA crossing the 150d MA or the 150d MA crossing the 200d MA from above then the position will also be sold, as these situations negate the original conditions at the time of purchase.
Finally, realize that if any dividend is cut or otherwise lowered, the position will be tagged for sale, as this violates the original screening criteria.
~~~~~~~~~
As with all my ramblings, you are responsible for your own investment decisions and I am not. Please do your own diligence, and please take ownership for your actions.
Regards,
pgd
No comments:
Post a Comment