A tradition dating back to the days of FundAlarm was to annually share our portfolios, and reflections on them, with you. My portfolio, indolent in design and execution, makes for fearfully dull reading. That is its primary charm.

2020 was replete with adventures and surprises:

• a global pandemic that killed over 2 million people worldwide
• stock market crash which saw a 25-50% drop within a few weeks
• stock market rebound which saw many funds double in value
• a contentious election
• subsequent crazy claims about a “stolen” election
• historically high stock market valuations
• the biggest drop in economic activity since the Great Depression
• the most massive intervention by the Fed in its 107-year history
• a seismic shift toward remote working and schooling
• crude oil futures trading below $0 briefly and prices down substantially
• the collapse of CO2 emissions, which didn’t stave off another global heat record
• a quadrupling of the price of cryptocurrencies such as bitcoin.

In response to which, I astutely did very nearly nothing with my portfolio. 

I was, I think, awake and richly engaged with a world that was rocked by challenges. In response to Covid, I changed my way of moving through the world (consistent masking, no vacation, fewer shopping trips) and dramatically increased my support for the most hard hit members of my community (which translated to giving my original stimulus check to the QC Community Foundation and the Riverbend Area Food Bank, doubling my normal monthly commitments to several charities, ordering out almost one dinner in three from locally owned restaurants, and tipping as generously as I could). I tried to support sensible candidates for local, state and national office and spent rather a lot of time helping my international students overcome the feeling that America had turned against them. (It hasn’t.) I worked with family health challenges, including my son’s Covid infection, and the psychological challenges we all felt.

But I didn’t play with my portfolio. By design, my portfolio is meant to be mostly ignored for all periods because, on whole, I have much better ways to spend my time, energy and attention. For those who haven’t read my previous discussions, here’s the short version:

Stocks are great for the long term (think: time horizon for 10+ years) but do not provide sufficient reward in the short-term (think: time horizon of 3-5 years) to justify dominating your non-retirement portfolio.

An asset allocation that’s around 50% stocks and 50% income gives you fewer and shallower drawdowns while still returning around 6% a year with some consistency. That’s attractive to me.

“Beating the market” is completely irrelevant to me as an investor and completely toxic as a goal for anyone else. You win if and only if the sum of your resources exceeds the sum of your needs. If you “beat the market” five years running and the sum of your resources is less than the sum of your needs, you’ve lost. If you get beaten by the market for five years running and the sum of your resources is greater than the sum of your needs, you’ve won.

“Winning” requires having a sensible plan enacted with good investment options and funded with some discipline.  It’s that simple.

My target asset allocation: 50% stocks, 50% income. Within stocks, 50% domestic, 50% international and 50% large cap, 50% small- to mid-cap. Within income, 50% cash-like and 50% more venturesome.

Morningstar tells me that my non-retirement portfolio returned 22.5% last year. Because (a) I prefer managers who do not lose my money during downturns and (b) the stock upturn beginning in April 2020 was so explosive, I started the year near my asset allocation goals and ended the year slightly overweight in stocks (about 60% against a target of 50%) and substantially overweight in international stocks (about 40% against a goal of 25%).

I did make three portfolio moves:

1. I sold Artisan International Value after holding it since its inception. It’s a solid fund though it’s undergone management changes recently. Two factors motivated the sale, neither of which reflect poorly on the fund. First, I needed the cash for a combination of college tuition expenses and medical bills for my son. Second, I was hopeful of easing back on my international equity allocation.
2. I bought Palm Valley Capital, a domestic small cap value fund managed by two excellent absolute return managers, Eric Cinnamond and Jayme Wiggins. I needed to inch up my domestic exposure and have a lot of faith in the guys’ willingness to hold cash rather than plow my money into irrationally expensive investments.
3. I shuffled money from T. Rowe Price Spectrum Income to T. Rowe Price Multi-Strategy Total Return. The Total Return fund is close to Price’s version of a hedge fund for the public; the managers have done an excellent job of pursuing a market-neutral strategy with limited downside and mid-single-digit returns. Given the parlous state of fixed income markets, it seemed a prudent hedge.

Beyond that, I invested a small amount each month into five or six funds. In the chart that follows, I illustrate where I started the year (column 1), where I ended the year (column 2), how each fund performed during the brief, vicious bear market (column 3) and my brief reflections on each.

So here’s where I ended up:

What will 2021 bring?

A vacation in Door County? Experimenting with broccoli rabe and garlic scapes in my garden?

Oh, you mean with my portfolio!

Not much. I’ll continue to ramp up my investment in the new T Rowe Price fund and I’ll add to my two domestic ones, beyond my normal monthly. I’d love to have a more ESG-sensitive portfolio (the fate of the world vaguely hangs in the balance, tipped by our collective commitment to either gluttony or sustainability) but haven’t found a compelling option.

Finally, a word about my retirement accounts. I don’t talk about them because I don’t much have control over them anymore. For entirely sensible reasons, my employer dramatically limited our investment options and increased the incentives to save for retirement. Unfortunately, in the past year or so they’ve made a bunch of vaguely idiotic follow-up moves that closed off many of the funds and annuities I’d been investing in and substituted market-cap-weighted index funds that did not even have the same asset allocations. I’m irked and frustrated. I responded by greatly simplifying my portfolio, with the vast bulk of my retirement portfolio in T. Rowe Price Retirement 2025 and TIAA-CREF Lifecycle 2025 Index funds. I complement the core T Rowe Price holding with international small-cap (T. Rowe Price International Discovery) and EM value (T. Rowe Price Emerging Markets Discovery) investments. I also have TIAA Real Estate, which flatlined during Covid. Collectively, my retirement investments returned 15.5% in 2020 which is still far above the returns in my investment plan: I need to make about 6% annually to have a fair prospect of a financially secure retirement.