Sunday, February 21, 2016

Experimenting with portfolio management

The month of February three quarters over and it has been a month of surprises. The biggest surprise, for me, is how well my rag-tag portfolio is doing. I truly admire the Couch Potato portfolios and the man behind them. Over long periods of time, the Couch Potato (CP) portfolios have performed very well. These portfolios have earned bragging rights.

Using Portfolio Manager I set up a couple of assertive CP portfolios at the first of the year. I chose the Vanguard ETFs assertive portfolio and the TD e-series funds approach. With no money involved in setting up my dream-team portfolios, it was easy to create CP portfolios with the exact value of my own portfolio at the first of the year.

Today my personal portfolio, one that I have watched fly high and dip low, is riding the crest of success. It is outperforming both the Couch Potato portfolios. It is not surpassing them by much but it is still ahead by a nose. This may surprise you but the recent cut in the D.UN dividend translated in a boost in the share value of Dream Office REIT and that increase in value helped bump me ahead of the CP portfolios.

My worst performing experimental portfolio is one I concocted using the stock screener function. I went for high dividend yield, the highest Columbine Capital Quant Ranking, oodles of analyst interest and coverage, great EPS growth, revenue growth, EBITD margin and return on equity. This portfolio of eleven stocks has been a roller coaster straight from hell. I'm not totally surprised but the extremes reached have been greater than even I imagined.

I never thought I'd be saying this, but the bad stock picks I made in the past have wilted to the point that they have almost no affect on my portfolio. These mistakes posing as companies could go bankrupt and I'd hardly miss them. If they come back, even a little, it will be wonderful but I'm not holding my breath.

Which brings me to why I am checking out alternative investing styles like the Couch Potato: I am getting to the point where I can sell my holdings and not fret over the paper losses. I can then repurpose this money. But if I do this, I want the new portfolio to meet three criteria:

  • continued good dividend yield -- more than four percent
  • not overly volatile -- a high sleep-at-night factor
  • simple to set up
  • simple to manage

I am leaning towards ETFs for supplying the answers to my retirement demands.

I think at the six month mark, I'll drill deeper into my imaginary portfolios and how they are performing.

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