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My 2020 Portfolio Results

Jan. 13, 2021 8:34 AM ET4 Comments
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Seeking Alpha Analyst Since 2013

"It's not supposed to be easy. Anyone who finds it easy is stupid."  Charlie Munger


My primary investment goal is to grow the value of my portfolio by making low risk investments. After tax, total return is my metric for success, so it is not easily related to either market returns or the returns of others, since everyone's tax status is different. My methods are first to diversify across assets classes, second stay invested through market cycles, and third, assure that most of my equity portfolio achieves at least market returns by deviating from market weighting only when I believe a stock is mispriced.


Summary

  • How I did in the past year.
  • An account by account break down.
  • What's next?

2020 ended with 30% of my taxable investment assets in cash and bond funds with the balance in individual stocks and stock funds. My individual stocks were CMP, DUK, JNJ, MMP, RHHBY and WFC.

My total return on the taxable account was 16.55%.

The distribution yield on that account which included interest, dividends and capital gains distributions from my mutual funds totaled 4.62% on the 2019 year end total and 4.09% on the 2020 year end balance.

No new cash was added to this account and none of the distributions were reinvested. On the other hand, some of the distributions were used to fund my expenses in retirement. The some of the rest was added to my spending account for 2021.

Due to a decrease in interest rates on my bond funds, my distributions in 2021 will be reduced, but I will begin to receive RMDs from my IRA account. Based on those facts, total spendable distributions should approach 3.52% of my 2021 starting taxable balance which should more than cover all my spending needs.

About 5% of my investment assets are in my IRA account and due to the fact that it holds most of my energy linked stocks, it went negative in 2020 ending down 3.32%. The stocks that I hold in the IRA are KMI, SLB, OCSL and XOM. As of 1/12/21 it is positive 4.7% with the energy rally early in January.

About 20% of my investment assets are in my Roth account and at year end it held 40% of its assets in two intermediate term bond funds. The Roth was in 2 international stock index funds (31%) and these stocks, BRKB, CMP, KHC, OCSL, SPG, STKL, and WBA.

It was the out-performer among my investment accounts in 2020 increasing in value by 26.23% powered in part by profitable trading in CMP, ARCC, OCSL and STKL.

Over all, all my investment accounts grew by 16.35% for the year even with about 1/3 in bond funds. After spending from my taxable assets I start 2021 13.56% ahead of 2020's start.

For 2021, due to the elevated valuations of both equities and bonds, my hoped for target growth is 6% less than half of 2020's appreciation after expenses. This is the target I am aiming for, not my expectation of the results. My plan is to reduce my equity exposure this year by shifting all distributions not needed for spending into short term bond fund and cash. At age 71, I have no need for investment growth, and a very high desire for capital preservation, so I can imagine a 60/40 portfolio by year end as opposed to the 67/33 portfolio today.

Changes that I have already made in the portfolio before the end of 2020 include starting two new shorter term bond fund positions reducing interest rate risk in the taxable account. I also started a new position in my Roth account in Vanguard PrimeCap Core Fund at 3.5% of the Roth account. (Note, this fund is closed to new investors). This month I began a 0.37% position in LMT in the Roth. I increased my Roth bond fund exposure to 42%. The bond fund money stands ready to deploy into equities should I see low risk opportunities develop over time.

Analyst's Disclosure: I am/we are long CMP, BRCB, STKL, SPG, DUK, SLB, LMT, XOM, KMI, JNJ, MMP, RHHBY.

I hold or held positions in each of the assets mentioned and could buy or sell any of them at any time.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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