Tuesday 4 January 2022

End of DEC 2021 "12% solution" portfolio changes - terminated the experiment.

For the end of December the emailed trading signal is to invest 60% in QQQ and 40% in TLT. As this is the same allocation as last month, I don't need to do any trades this month. However as I had no trades during the quarter I would have been charged a $50 fee, so I decided to close out my positions and transfer the cash balance out of my IG trading account. I will use the proceeds to reduce the balance of my home equity ('portfolio') loan. Given the slowing Chinese economy, increasing inflation/interest rates, and concerns over the Turkish economy, tensions between Russia and Europe regarding Ukraine, I thought taking a bit of money 'off the table' might be prudent (especially when it is borrowed money!).

My closing IG trading account balance was A$15,133.93.According to the monthly "12% solution"  newsletter, the 2020 performance for this model was +40.6% and for 2021 YTD performance was +21.9% (in USD terms). My YTD performance ended at +37.35% (in AUD terms). The outperformance is mostly due to favourable exchange rate movement (the investment is in USD so the drop in AUD vs the USD has boosted the value of my portfolio in AUD terms). There will be some tax due on the realized capital gains when I do my FY2022 tax return.

The "12% solution" seemed to work out quite well in practice (although historic performance is not a reliable indication of future performance, yada yada), but it wasn't really worth the hassle given the relatively high trading/admin costs. There is probably a cheaper way of executing this model - possible via one of those 'no fee' trading platforms.

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mOOm said...

If you did it on a larger scale than the $50 fee is not so much. No fee platforms making their money by giving you worse prices instead. Mainly, I think this would be a hassle given the small size of the experiment relative to your net worth.

enoughwealth@yahoo.com said...

Yes, I'm basically just trying to simplify my life a bit by slowly weeding out accounts and activities that really aren't worth the time and effort.