TMFHelical (99.03)

My (non CAPS) 2007 In review - Part2

January 08, 2008 – Comments (2)

In part 1 - I commented on how my IRA did in 2007.  That was a nice review and written largely to have as a record, then reformatted to post in CAPS as this is.  But review is only part of evaluation, there is also the 'where am I now' concept.  I like my portfolio right now, but I also know that is part self-imposed mental hoodwinking. Heck, I've like my portfolio pretty consistently as I continued to change it in 2007 (inconsistent, I know).

Aside:  Been reading 'Your Money and Your Brain' by Jason Zweig.  Pretty familiar stuff as I've been a junkie for behavioral investment commentary for more than a year now, and have read a lot of his reference material.  Heck I have a bookmark for Meir Statman's website (the link to which I see was just subtly changed).  I find I invest very much in tune with Behavioral Portfolio Theory (not necessarily good, but at least I know).

Besides asset allocation along traditional lines as describe in part 1, I try to look at a couple of other aspects of my portfolio as mental checks.  The traditional style is as follows.

Asset Class                2007
Income Securities        30%

Overseas                    25%

Small Cap                   25%

REIT                           10%

Alternate Yield            10%

I also look at Market Cap (often actually use EV).  With the current port I break it down as:

Small Cap < 2B - 38%

Mid Cap < 10B - 23%

Large Cap > 10B - 39%

That looks OK to me, and feels comfortable.  I don't have any real goals on this, but do want to see some balance, and I think I have that.  If it is too heavy one-way or the other (and has been before), I ask myself if that is what I really want (I was a bit large cap heavy in the past). 

The other way I look at my portfolio is a Risk Assessment.  This too is purely speculation and not valuation based (though valuation can play a role).  I simply code each holding as whether I feel they are currently high, moderate, or low risk.  This is tricky, BAC for instance I consider low risk, but I do expect a lot of price fluctuations in the coming months.  So it is important to note that I do not consider volatility as risk - or better put, I fully expect more volatility in some stocks than others, and that doesn't make them more risky IMO. The best way I can describe my risk assessment is the chance that 5 years from now a stock will prove a sensible investment i.e. have delivered at least inflation (not necessarily market) beating gains.  Before I break out holdings, which I expect many would disagree with as risky or not, I want to note that I last did this assessment at the end of August (after the market drop) and concluded I was too conservative in my portfolio.  I added or added to risky selections, which so far have not played out positively.  Of course 5 years out is still a long way off (but I am writing this down to one day check).

High Risk - 16%

CSE, ACAS, CFC-PB, CTRP, LEE, IBKR, VLCM, BWLD

Moderate Risk  - 44%

NLY, GIGM, AIB, DEM, PBR,  HRP, ZNT, CNS, AJG, IBOC, VTIV, FMD

Low Risk - 40% 

SDA, BAM, HCN, RPM, SO, JNJ, BAC, GE, BBBB, OTTR, PRAA, MRH 

This is a comfortable mix for me.  I don't target this blend necessarily (because that would likely bias how I assign the risk) or check it too often.  If this seems odd to you (I know it does), go through the assessment yourself.  It might surprise you.

OK thats the IRA.   1 more post late in the week about other accounts.

Zz