3. I'm expecting inflation, increased GOLD and COMMODITY ratio, and lowered bond.
4. Ray Dalio is planning to introduce the ESG investment fund. I added a New sector, ESG, ICLN as for now. for the price, and exp ratio, ICLN is so far the best.
I think, it's necessary every quarter, or every 6-9 months. because, you want to take the profit and re-invest those profits to other sectors that shows the pattern, or you think it will bring you more profit.
how big of the change we should make?
Very little. I adjusted 1~2% per sectors, this time, I made bigger than 2% change on the bond sector, but it's only because I had to add ESG sector that covers 2% of the total MEGA portfolio.
except the 2007 & 2016, Energy sector didn't perform well. as Trump admin got in the office, I thought Oil will do better. but, the Shale innovation lead the oil company to compete even more and their profit margins were shrunken. with the lock down, the oil demand is also down.
With the effort of climate change, Energy Sector needs to be transit into green energy, and not sure if the SPDR will introduce a new sector called ESG or something. But, the oil industry won't give you good return, I think.
On my portfolio, I own some oil companies for diversification; BP, and COP. But, I'm on transition of ICLN (exp 0.46% with 0.57% yd). But no matter what, I'm maintaining the 2% level on my total portfolio. (XLE exp 0.13% with 10.86% yd)
FAANGMT (FB, AMZN, AAPL, NFLX, GOOGL, MSFT, and TSLA) lead the XLK market and XLC.
Will it continue? I will say YES, But won't be the happy ending.
(Source: https://finviz.com/map.ashx)
ask your family member who were born 1950~70s. the IT bubble hurt them big.
Check history or ask someone who were in the era of Trains.
high tech and innovation won't be hurt to own one, but also there are potential risks of bubble. bigger the market cap (Stock Price going up), there are potential risks that, it could be another historical bubble pop.
5G, Clouds, Automated Drive and more it's revolution in our lifetime, but we can't go 100% Tech. need to think rationally, and balance out our portfolio.
Past 6months, XLK did 26.2% and XLI did 32% followed by XLB 31.17%.
back to my recipe:
Tech: 14%
Consumer Dis: 14%
Health C: 13%
Industry: 7%
Consumer Sta: 6%
Utility: 5%
REIT: 4%
Material: 5%
Finance: 5%
Communication: 8%
Energy: 2%
ESG Energy: 2%
Now, why I put 14% and 13% on Consumer Discretionary (XLY) and Health Care (XLV)?
XLY showed good performance no matter what economic situation we are at. 5yr return was 101.17% 1yr ago 26.77% 6month out, 24.76%. very stable sector, and I think this might replace the bond. It rides with the inflation, people always need go shop (AMZN, COST, WMT, TGT, ACI, and more)
(Bridgewater's CIO, Bob Prince interview)
Health care (XLV) 13%: I see this sector got huge tailwind for the performance.
It's like back in time of depression. banks are falling, people can't trust the bank anymore, even when FDIC guarantees you to back up your money in the banks, people actually hid their money in their walls, attics, basement, and etc.
Even if we are in a safe status with the vaccine, this will lead current generation of people into a trauma, and focused on health care. Just like how older generations, didn't trust the bank and save all their cash in their house, people will stack up toilet papers, soaps, dry foods, and health care products to bring comfort in their mind.
Noticed the Communication sector increased from 5% to 8%?
Same reason as above. People noticed the office isn't necessary for every single job. can be replaced by communication sectors. MSFT, GOOG, FB, T, TMUS, CSCO, ZM and more can replace the office meetings and reduces the office spaces. REIT sectors are adjusting their portfolio. Iron Mountain, is one of the reit company, they are converting conventional office paper storage space into warehouse and they are able to charge more rent on those warehouse.
Bonds:
It's a combination of US treasury, Corporate, Emerging, and Inflation linked bonds. carrying total of 11% of MEGA portfolio, and it's an insurance against the market crash. We always need cash incase there are some sale on the stock market. However, bonds are under risk because of the zero interest policy by the FED. But it's not something you can totally ignore and go 100% Stocks.
(the BOND king, Jeffrey Gundlach's point of view)
If you checked my JAWX portfolio (All Weather), EDV, VCLT, MUB, EMLC, TIP, and LTPZ are the bond holdings, and compare to BLV and BIV, there are too many bond ETFs to manage. simplifying the portfolio on bond will perform better with sector investing.
Gold is always a good hedge against the market crash, but it's a good hedge against the inflation. our Fed printer is ready to give the money to the govt, and as our govt is planning to spend the money, inflation is on a right track.
(6Mo perf)
(1yr Perf)
(5yr perf)
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