An Updated Summary of My Grand Unified Theory of Investing

 Check out my previous post for how we landed here...

Account:	IRA	Roth IRA	Stocks & Income
Current percentage of total holdings:	~26%	~2%	~72%
Investment philosophy:	Jack Bogle	George Soros	Warren Buffett
Headline summary:	“Don't Do Something, Just Stand There!”	“You Call That A Position?”	“Wonderful Companies at Fair Prices”
Account holdings:	• 54% index ETFs (IWM, QQQJ, QQQM, VOO) • 25% high yield stock ETFs (VIG, VYM) • 21% bond ETFs (HYLB, USHY)	• 100% one “high-conviction” stock (???)	• 31% stocks (AMZN, COST, MSFT, UNH) • 9% index ETFs (QQQJ, QQQM) • <1% double/triple leverage ETFs (CWUB, LABU, TQQQ, UPRO, URTY) • 14% index covered call ETFs (QYLD, RYLD, XYLD) • 32% preferred stock/bond ETFs (HYLB, PFFD, USHY) • 14% commodity covered call ETNs (GLDI, SLVO, USOI) entire portfolio detailed here
Are dividends reinvested?	Yes	No	No
Investment schedule:	N/A	Asynchronous	Synchronous
When do I intend to make changes?	Never	When I have a higher-conviction bet than the existing one	Monthly purchases; "I believe in all of these stocks - until I sell them"
Is account actively funded with new contributions?	No	No	No
Is account written about on this blog monthly / ever?	No	No	Yes

I Say "Invest Every Month." Have I Actually Done What I've Said?

TL;DR - no.  But I've tried.

If someone asks me what was the one thing I did right as an investor for the past 20+ years, it is that I have invested often.  Markets down, markets up; single, married; career going not-so-well, career going well; etc.  I would boil this invest-often philosophy into some expression like "invest at regularly scheduled intervals" or more simply "invest every month."  So here is the hypothetical follow-up question to be answered:  Have I actually done what I've said?

[As you can see, the title of this graph is "Number of Months Invested per Year" when a more correct title would be "Number of Months with Deposits per Year - Ignoring Withdrawals and Purchases funded by Sales."  I chose the former because it more clearly expresses the ability to save money to my investment account]

Recency bias strikes again.  From 2013-2020, "invest(ing) every month" was more or less true.  Before that, it seems more of an aspiration.  

Early in my career, I just didn't have extra money in most months.  2011 and 2012 were spent knocking out student loan debt (not the smartest choice, especially given market performance since).  In my best years I didn't hit 100%.  Even worse, there appears to be some correlation between market performance and number of months invested; the dreaded act of "timing the market." There is definitely some not-so-great, actually-quite-awful personal financing going on here for nearly two-thirds of my career.  Further data supporting here...

[Monetary amounts removed because 1) it's tacky and 2) in the context of this post, the amounts matter more in the relative sense]

In conclusion, "invest every month" is not the best advice.  Perhaps "invest what you can, when you can" is better, with the knowledge that approximately no one ever has regretted investing too much or starting too early.

An Updated Summary of My Grand Unified Theory of Investing

 Check out my previous post for how we landed here...

Account:	IRA	Roth IRA	Stocks & Income
Current percentage of total holdings:	~26%	~4%	~70%
Investment philosophy:	Jack Bogle	George Soros	Warren Buffett
Headline summary:	“Don't Do Something, Just Stand There!”	“You Call That A Position?”	“Wonderful Companies at Fair Prices”
Account holdings:	• 55% indices (IWM, QQQJ, QQQM, VOO) • 23% high-yield stocks (VIG, VYM) • 22% high-yield bonds (HYLB, USHY)	• 100% one “high-conviction” stock (???)	• 55% stocks (2 core holdings + others, QQQJ, QQQM, TQQQ, UPRO, URTY) • 8% index covered call ETFs (QYLD, RYLD, XYLD) • 37% preferred stock/bond/ commodity ETFs (HYLB, PFFD, SLVO, USHY) entire portfolio detailed here
Are dividends reinvested?	Yes	No	No
Investment schedule:	N/A	Asynchronous	Synchronous
When do I intend to make changes?	Never	When I have a higher-conviction bet than the existing one	Monthly purchases; "I believe in all of these stocks - until I sell them"
Is account actively funded with new contributions?	No	No	No
Is account written about on this blog monthly / ever?	No	No	Yes

An Updated Summary of My Grand Unified Theory of Investing

 Check out my previous post for how we landed here...

Account:	IRA	Roth IRA	Stocks & Income
Current percentage of total holdings:	~25%	~7%	~68%
Investment philosophy:	Jack Bogle	George Soros	Warren Buffett
Headline summary:	“Don't Do Something, Just Stand There!”	“You Call That A Position?”	“Wonderful Companies at Fair Prices”
Account holdings:	• 54% indices (IWM, QQQJ, QQQM, VOO) • 24% high-yield stocks (VIG, VYM) • 22% high-yield bonds (HYLB, USHY)	• 99% one “high-conviction” stock (???) • 1% bonds (AGG)	• 53% stocks (2 core holdings + others, QQQJ, QQQM) • 8% index covered call ETFs (QYLD, RYLD, XYLD) • 39% preferred stock/bond ETFs (HYLB, PFFD, USHY) entire portfolio detailed here
Are dividends reinvested?	Yes	Yes (AGG only)	No
Investment schedule:	N/A	Asynchronous	Synchronous
When do I intend to make changes?	Never	When I have a higher-conviction bet than the existing one (AGG → ???), or no conviction at all (??? → AGG)	Monthly purchases; "I believe in all of these stocks - until I sell them"
Is account actively funded with new contributions?	No	No	Yes
Is account written about on this blog monthly / ever?	No	No	Yes

An Updated Summary of My Grand Unified Theory of Investing

Check out my previous post for how we landed here...

Account:	IRA	Roth IRA	Stocks & Income
Current percentage of total holdings:	~23%	~7%	~69%
Investment philosophy:	Jack Bogle	George Soros	Warren Buffett
Headline summary:	“Don't Do Something, Just Stand There!”	“You Call That A Position?”	“Wonderful Companies at Fair Prices”
Account holdings:	• 52% indices (IWM, QQQ, VOO) • 23% high-yield stocks (VIG, VYM) • 24% high-yield bonds (HYLB, USHY)	• 53% one “high-conviction” stock (???) • 47% bonds (AGG)	• 58% stocks (2 core holdings + QQQ) • 42% preferred stock/bond ETFs entire portfolio detailed here
Are dividends reinvested?	Yes	Yes (AGG only)	No
Investment schedule:	N/A	Asynchronous	Synchronous
When do I intend to make changes?	Never	When I have a higher-conviction bet than the existing one (AGG → ???), or no conviction at all (??? → AGG)	Monthly purchases; "I believe in all of these stocks - until I sell them"
Is account actively funded with new contributions?	No	No	Yes
Is account written about on this blog monthly / ever?	No	No	Yes

Putting The Damage On: Sold AWK, CNI, KSU, NSC, SBUX, UNP, WM; Bought AGG, HYLB, USHY

It is a fine line between prudence and panic.

Having observed my portfolio peak on February 19th along with the rest of the market, then precipitously decline, then expediently rebound back to where it was...

Yesterday, the market crumbled in the final hour of trading. This is something, as a long-term investor, I probably should have ignored. But I did not...

I read some tweets, and recalled some books, from some trusted sources. I reconciled with my new-ish portfolio philosophy. Mostly, I thought about the days and weeks following February 19th - and the nagging feeling that I could have, and should have, done something.

I feel like the days and weeks to follow May 12th will offer a sort of a 'do-over' for the days and weeks following February 19th.

Earlier this month, I had identified six stocks that I wanted to sell. I had planned to do this over the second half of 2020, but now my prudence was telling me the time is now.

Here are the six stocks (plus one) that I have sold. They all feature anemic growth and undesirable amounts of debt:

American Water Works (AWK): $3.6B revenue, 4% revenue growth, $0.1B cash, $10.4B debt
Canadian National Railway (CNI): -6% revenue growth
Kansas City Southern (KSU): $2.9B revenue, 8% revenue growth, $0.1B cash, $3.3B debt
Norfolk Southern (NSC): $11.1B revenue, -8% revenue growth, $0.6B cash, $12.2B debt
Starbucks (SBUX): $26.7B revenue, -5% revenue growth, $2.6B cash, $22.9B debt
Union Pacific (UNP): $21.6B revenue, -3% revenue growth, $1.2B cash, $29.2B debt
Waste Management (WM): $15.5B revenue, 1% revenue growth, $3.1B cash, $13.5B debt

In their place, I have purchased the first bond holdings of this portfolio's twenty year existence: equal amounts of AGG, HYLB, and USHY. I also have established stop-loss trigger orders - some of which, as of this writing, are very close to firing - for each of the remaining non-Big Five stocks; upon execution, the proceeds will be reinvested into the same three bond ETFs.

The result of all these moves is to:

• Increase focus on my largest (i.e. core) holdings;
• Retain capital gains via automated decisioning; and
• Rebalance my portfolio in favor of lower-risk assets.

A Summary of My Grand Unified Theory of Investing

Check out my previous post for how we landed here...

Account:	IRA	Roth IRA	Stocks
Current percentage of total holdings:	~28%	~6%	~66%
Investment philosophy:	Jack Bogle	George Soros	Warren Buffett
Headline summary:	“Don't Just Do Something, Stand There!”	“You Call That A Position?”	“Wonderful Companies at Fair Prices”
Account holdings:	• 48% indices (IWM, QQQ, VOO) • 24% high-yield stocks (VIG, VYM) • 28% high-yield bonds (HYLB, USHY)	• 50% one “high-conviction” stock (???) • 50% bonds (AGG)	• 100% stocks (5 core holdings; entire portfolio detailed here)
Are dividends reinvested?	Yes	Yes (AGG only)	No
Investment schedule:	N/A	Asynchronous	Synchronous
When do I intend to make changes?	Never	When I have a higher-conviction bet than the existing one (AGG → ???), or no conviction at all (??? → AGG)	Monthly purchases; "I believe in all of these stocks - until I sell them"
Is account actively funded with new contributions?	No	No	Yes
Is account written about on this blog monthly / ever?	No	No	Yes

How an Extended Stay in Rollover Limbo, and Some Pandemic-Time Reading, Led to My Grand Unified Theory of Investing

On February 24th, 2020, I initiated two rollovers: one from my old job's 401(k) account to my existing IRA; and one from my relatively small, choice-limited, terribly underperforming Roth IRA set up by a naive young me in 1999(!) to a new Roth IRA account with a comparatively infinite amount of investment choices.

The former account rollover was executed fairly quickly, allowing me to do the thing I intended to do for both accounts: allocate most of my funds in index ETFs (IWM, QQQ, VOO), and the remainder in higher-yield ETFs (HYLB, USHY, VIG, VYM). My preference is always to be fully invested, such that I don't miss any market upside.

The latter account rollover took...a while. It finally completed on March 13th, 2020. In the meantime, the market - and the world - went through some drastic changes. And having been forced out of the market by this extended rollover process, I was now in the uncomfortable position of having to time my reinvestment back into the market.

I thought about holding my nose and investing everything as soon as I could, just as I had originally planned. It just didn't feel right.
I thought about investing some now, and some later. It just didn't feel right.
I thought about investing all of it at a later date, based on some back-of-envelope math from the previous 2 bear markets. It just didn't feel right.
I thought about making some bets on volatility via VXX. It just didn't feel right.
I thought about rolling with an all-bond portfolio...it just didn't feel right.

So, I stayed in cash. Until today.

I've been reading a lot of investment books lately, including The Winning Investment Habits of Warren Buffett & George Soros: Harness the Investment Genius of the World's Richest Investors by Mark Tier. I already knew a lot of Buffett's philosophies - I've been trying to emulate him, as it were - but not about Soros. (I had previously read the chapter about his successor at the famous Quantum Fund, Stanley Druckenmiller, in the book The New Market Wizards: Conversations with America's Top Traders by Jack D. Schwager.)

I can summarize my understanding of Soros (and Druckenmiller) as that of a thoughtful, concentrated, high-conviction bettor. It is a philosophy that I haven't had room for in my Buffett-like stock account or Jack Bogle-like IRA account.

Coincidentally, I have had a high-conviction feeling in my gut for a stock outside of my current holdings for several weeks running.

Then, it struck me. Instead of treating my Roth IRA as just a smaller version of my IRA, I could treat it as vehicle for Soros-like bets. Half is in my one (mystery!) high-conviction stock. The other half is in bonds via the AGG ETF. If my convictions fade, I'll tilt into AGG, until another high-conviction stock is found; if my convictions strengthen, I'll tilt out of AGG. It just feels right.

For my next post, I will summarize my entire investment portfolio in both non-retirement and retirement accounts.

The Plan for 2020 and Beyond, and The Whole 16/5/2/1 Thing Explained

As alluded to in my 2019 summary, here are my investment plans for 2020 and beyond, as well as an explanation of my portfolio allocations.

At the end of each of my "Stock Of The Month" posts describing that month's particular buy(s), I list out all of my holdings followed by their individual current weighting at time of posting, color-coded for buy and hold. For example, here is December 2019's list:

NVIDIA (NVDA) 14.23%
Apple (AAPL) 13.29%
Amazon (AMZN) 12.31%
Tesla (TSLA) 10.77%
Microsoft (MSFT) 10.68%
Alphabet (GOOGL) 5.71%
Facebook (FB) 3.84%
Intuitive Surgical (ISRG) 3.54%
Adobe (ADBE) 2.47%
Salesforce (CRM) 2.16%
Visa (V) 2.13%
Nike (NKE) 2.07%
Costco Wholesale (COST) 2.06%
UnitedHealth Group (UNH) 2.02%
Intel (INTC) 1.90%
Comcast (CMCSA) 1.81%
Starbucks (SBUX) 1.68%
Waste Management (WM) 1.41%
Advanced Micro Devices (AMD) 1.03%
American Water Works (AWK) 0.95%
Autodesk (ADSK) 0.89%
Union Pacific (UNP) 0.83%
Norfolk Southern (NSC) 0.79%
CSX (CSX) 0.73%
Kansas City Southern (KSU) 0.35%
Canadian National Railway (CNI) 0.33%


While discussing stocks, I may refer to them as "16"s, "5"s, "2"s, or "1"s. For example, NVIDIA is a "16"; Canadian National Railway is a "1". This is referring to their individual targeted weighting, which does not change over time - i.e. there will always be four "16"s, three "5"s, seven "2"s, and seven "1"s, adding up to 100. (It is an idea borrowed from Warren Buffett's portfolio weighting in his Berkshire Hathaway portfolio, which historically has had 4-5 large holdings and 40-something other holdings.)

If I were to list out all of my holdings followed by their targeted weighting, it would look like this:

Amazon (AMZN) 16%
Apple (AAPL) 16%
Microsoft (MSFT) 16%
NVIDIA (NVDA) 16%

Alphabet (GOOGL) 5%
Facebook (FB) 5%
Tesla (TSLA) 5%

Comcast (CMCSA) 2%
Costco Wholesale (COST) 2%
Intel (INTC) 2%
Nike (NKE) 2%
Starbucks (SBUX) 2%
UnitedHealth Group (UNH) 2%
Visa (V) 2%

American Water Works (AWK) 1%
Canadian National Railway (CNI) 1%
CSX (CSX) 1%
Kansas City Southern (KSU) 1%
Norfolk Southern (NSC) 1%
Union Pacific (UNP) 1%
Waste Management (WM) 1%

Adobe (ADBE) ??%
Advanced Micro Devices (AMD) ??%
Autodesk (ADSK) ??%
Intuitive Surgical (ISRG) ??%
Salesforce (CRM) ??%


Astute readers will notice that the current and targeted weightings are incongruent - particularly Telsa, and the "??" grouping.

Regarding Telsa: it is the Fifth Beatle of the "16"s. It originally was a proper "16", then I promoted Microsoft to take its place; now, it is officially a "5" (for things-must-add-up-to-one-hundred's sake) and unofficially a "16" (for the-reality-of-my-holdings's sake). (For what it's worth, Telsa is at least greater than a "5", and averages out the underweighting of Facebook within its grouping.)

Regarding the "??" grouping: yes, these "extra" stock holdings mean that my 16/5/2/1s will never add up to 100% of my portfolio. I am essentially attempting to stuff ten pounds of awesome into a five pound bag. However, I feel like the presence of "bench" stocks I like enough to own lends some stability to my portfolio if, for example, one of my "starter" stocks falters. Think of them as cash++...or a side slush fund.


So...with all of that out of the way, what are my investment plans for 2020 and beyond? In short, to make my primary investment ideas the properly primary holdings, such that the "16"s (and Tesla) are true "16"s.

Each of the "16"s (and Tesla) is from 2% to 6% short of their targeted allocation. And, since I am adding to my portfolio instead of reallocating existing funds, each purchase moves the goalposts a little bit further away.

It will likely take 2-3 years of monthly purchases to get each of Amazon, Apple, Microsoft, NVIDIA, and Tesla to reach 16% of my holdings - and today, I am committing to doing exactly that.

A Few Words About Retirement Accounts and Index Funds

The year is 2007. I am sitting in an Ameritrade branch office, deciding how I will be rolling over my 401(k) from my old job into a new IRA. I choose 4 actively-managed mutual funds rated highly by Morningstar, and a S&P 500 index fund because this is a retirement account. I am satisfied with my choices, and move on with my life.

Fast forward to 2019. The actively-managed vs. passively-managed argument has been decisively won in favor of passive. Every financial advisor worth anything is advocating for index funds. I, myself, recommend that my family and friends choose index funds for their investments.

My IRA choices remain unchanged.

In between, I have looked at my retirement account without looking at it. Sure, I've been checking my dividends and capital gains distributions all these years, and I've even rolled over another 401(k) in 2012. But as far as actually thinking about the individual funds within the account: I haven't. All of my time, money, and efforts are directed towards a non-retirement account - an actively-managed portfolio of stocks, the discussion of which comprises the bulk of posts on this blog.

So now, I finally get around to doing some basic comparisons of relative performance between my actively-managed mutual funds and the common indexes, and the results are ALL CAPS ATROCIOUS.

My 2007 Morningstar All-Star team has been underperforming; in some cases, severely so. I immediately sell 3 of the actively-managed mutual funds, and use the proceeds to buy ETFs for the Nasdaq 100 (QQQ) and Russell 2000 (IWM). My IRA is now primary comprised of those two, and that S&P 500 index fund suitable for a retirement account (VFINX). (The fourth actively-managed mutual fund chosen in 2007 is a global equity fund. I will continue to own it, against my own better sense, until the experts say that foreign stocks are not required as part of diversified portfolio.)

I say all that to say this: when presented the choice, buy index funds and don't look back.