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January, 2024: 14 31
Disclaimer - IMPORTANT - Read this first!
| Investor's Journal is a diary focused strictly on investments and personal finance issues, primarily from a contrarian and retiree point of view. Follow along with an average guy's failures and successes as he learns, by trial and error, the fine art of value investing. |
1/14/24- Our net nest egg total has dropped $8541 or 0.32% since the end of last year and now totals $2,673,499.
Liquid assets have fallen 0.42% since our 12/30/23 entry and now stand at $2,069,999.
It is time to swap out our basic 25 liquid assets, replacing them, except for just a few being held over, with a new set. The previous batch helped us to gains of about 20% in 2023. Let's see how well the fresh securities do. No guarantees, but I think these are likely to be winners overall too. As with last time, they'll be retained for a year and a day. Here are the holdings and their categories for 2024:
Dividend Assets CHK; CMCSA; F; FINV; JWN; NXST; SD; WFC.
Value Assets ALSN; BOOT; CPE; GPOR; INMD; INSW; JKS; NEXN; PBF; SBOW; SWN; ZYME.
Growth Assets CELH; MNDY; NARI.
Exchange Traded Funds [ETFs] QQQ and VBR.
These asset ticker symbols and their categories will be shared in each of the subsequent entries over the coming months, through at least the end of next December.
Hope everyone enjoys a rewarding, meaningful, and joyous new year.
1/31/24- Our nest egg total has seen ups and downs in this first month of 2024, but the result so far is a rise of $30,141 or 1.12% since the end of last year. It now is $2,712,181.
Liquid assets as of today are $2,108,541, having risen $38,542 or 1.86% since our entry on 1/14.
Our basic 25 holdings remain as in our last entry, and the plan is simply to post them through the end of 2024 or till they have been held a year and a day, whichever later. Once again, they are as follows:
Dividend Assets CHK; CMCSA; F; FINV; JWN; NXST; SD; WFC;
Value Assets ALSN; BOOT; CPE; GPOR; INMD; INSW; JKS; NEXN; PBF; SBOW; SWN; ZYME;
Growth Assets CELH; MNDY; NARI;
Exchange Traded Funds [ETFs] QQQ and VBR.
On average, in U.S. presidential election years, the S&P 500 index (or its equivalent in the long distant past) over 83% of the time has been higher by the end of the year. Of course, this is no guarantee that most assets will be higher at the end of the current year. Still if someone told me that under roughly these conditions it has rained 83% of the time, I would be inclined to take my umbrella.
There is a gambling related formula that can be applied to how much risk we ought to limit ourselves to when the probability of a win is known. It is called the Kelly Criterion. A simplified version of it is 2p – 1, where p is the probability that we'll win.
It is not clear that such a calculation is applicable to the stock market. However, within certain volatility tolerance limits, it does seem useful as we face a number of market moving variables this year. The average times the S&P 500 (or its earlier equivalents) has been up in any given year is a little more than 60%. So suppose we take a year (or a year and a day in taxable accounts) as the period of our "bet" on the market and use VOO (a Vanguard ETF structured to mirror the S&P 500 Index) as a proxy for the market. The probability of a win is about 60%.
Using the formula, we see that it should be fairly safe to risk 20% (2 times .60 minus 1 being .2) of our available investment assets in that wager, the other 80% being left for now in secure assets such as money market funds or short-term Treasuries, currently yielding about 5%.
Now consider that in presidential election years the win rate is 83%. How does that affect the formula's suggested max to be invested in VOO? Here 2p - 1 = 2 times .83 - 1, or 1.66 - 1, or .66 of our available investment assets that would be placed in VOO for the current year, the remainder of our liquid assets again being in money market funds or short-term treasuries.
Whether or not this is a completely valid use of the Kelly Criterion is indeed debatable, but the Kelly formula might be an interesting tool to consider if we wish a relatively conservative approach to how much to sink into the stock market in any given year.
Obviously, if the market goes up, as it would on average, we'll arrive at a new higher total from which to make such allocations in the next year, but if the market uncharacteristically is down in 2024, we'd have fewer funds with which to place our "bet" in 2025.
Disclaimer and Disclosure Statement
Neither I nor Investor's Journal will be responsible for losses by anyone who obtained ideas from this site.
This diary is intended for personal interest and general information only. You are advised to do your own research (as well as to consult highly compensated professionals) before spending money on anything.
I know of no reason anyone should take my financial musings seriously. At best I am a dedicated amateur providing a bit of investment-related insight and entertainment, at worst an amusing diversion.
My wife, Fran, and I may at times own shares of some of the assets mentioned here. But neither of us receive any benefit from reference to them, unless you count the mutual misery when we get it wrong, or the opportunity to gloat when we get it right.