It's mid-year and time to check my retirement portfolio asset allocation. I constantly watch the performance of my funds, ETFs and stocks, but I also need to periodically review my asset allocation to see if I need to re-balance or change my asset allocation. I thought it might be interesting to share part of the review process by looking at my portfolio's asset allocation and how I consider investment performance in that process.
Here is my asset allocation today:
I check the investment industry's average asset allocation as measured by MarketGlide for someone approximately my age, targeting a 2030 retirement. Here is the latest MarketGlide 2030 target date industry average asset allocation.
I use the MarketGlide allocation as a benchmark and try to stay close to those allocations unless I have strong convictions/views about certain asset classes. I can also use the passive index ETFs noted above for asset class exposure if I don't have strong convictions about specific investment ideas in an asset class. As you can see, my international and emerging markets add up to 22% vs. 20% for MarketGlide, but I am overweighted in emerging markets vs. international developed markets. My TIPs exposure looks high, but that is due to some allocations I have to gold and silver and those investments are sometimes classified as part TIPs. I'm clearly overweight in Large Cap Growth, some of which is due to appreciation over the past six months. I plan to make some changes to reduce the Large Cap Growth exposure.
Here are some select positions from my portfolio that I will be considering relative to my overall asset allocation. These are a subset of my total positions and I have hidden dollar amounts while showing returns and my alpha for each position. This view is from the LIkeAssets app available at the SeekingAlpha app store.
The Fidelity Large Cap Stock Fund (FLCSX)
FLCSX is from my company's 401(k) plan. I have been watching this fund for over a year and it has been persistently underperforming its benchmarks. You can see my -4% alpha on this investment. I'm planning to sell this position and re-allocate to other fund options in my 401(k) plan. I will use that as one way to reduce my large cap growth exposure. I have not been impressed by Fidelity's actively managed funds in my 401(k) and will revert to mainly index funds in my 401(k).
Flowers Foods (FLO)
FLO has performed very well over a short period of time, 20% above the benchmark. So well I plan to sell the position and use that to also reduce my Large Cap Growth exposure. I looked at a number of my stocks in this asset class category and decided on FLO because of its recent price appreciation. I got into it as a value and dividend play. The recent acquisition it made will likely help its competitive positions and could help drive margins higher, but overall I think a lot of that got baked into the stock in a short period of time.
Brazil Mid-Cap ETF (BRAZ)
BRAZ is one of my positions with exposure to emerging markets. Brazil has underperformed the emerging market index (EEM) over the past year. I thought it would outperform and therefore overweighted this market as part of my emerging markets exposure. I am still relatively positive on Brazil and emerging markets relative to more developed international markets. So I will stick with BRAZ exposure for now despite my -7% loss and -15% underperformance against the benchmark. I increased my position a couple of months ago.
Gold ETF (GLD)
I have done well in GLD and silver. I am paring back GLD, mostly as a result of appreciation over time and the resulting increase in exposure to this asset class. Consider this a rebalancing. I plan to continue holding precious metals allocations.
I'm reducing some Large Cap Growth exposure and will have some additional cash exposure while I do some work to determine my re-allocation strategy.
How do you measure your investment performance? Does it include dividends? Do you track a benchmark? Do you care about your asset allocation? If so, how do you determine it and track it. I would like to hear how other investors do this and what they need to do it better.
Please note that the stocks mentioned in this article are not suitable for all investors and each investor should consider his or her own financial situation or consult a financial advisor before making their own allocation decisions. Any securities discussed are used as a reference and should not be considered advice. There are risks in any investment strategy and prior performance does not guarantee future success.
Disclosure: I am long FLO, BRAZ, GLD.