RM Portfolios Update: June 2018

Welcome to the June update for the different portfolios which I track at The Rich Moose. I use Canadian-listed ETFs for the models I share to keep the tracking, purchasing, and selling easy for Canadian readers. Only the 3x Leveraged Portfolios use U.S.-listed ETFs.

See the list of my favourite Canadian ETFs on this page.

Vanguard All-in-One Portfolio ETFs

These Vanguard ETFs hold multiple assets inside a single ETF. It's nearly a perfect solution for investors who want to buy just one ETF and hold it forever without worrying about re-balancing, tax trigger issues, and excessive costs. Read my post reviewing these products to get an idea of how they are designed.

Here are the June monthly & year-to-date returns of these portfolio products (benchmark data).

Vanguard Growth ETF
June:  +0.89%
YTD:  +3.27%

Vanguard Balanced ETF
June:  +0.78%
YTD:  +2.54%

Vanguard Conservative ETF
June:  +0.66%
YTD:  +1.79%

The decision between choosing the Growth ETF, Balanced ETF, or Conservative ETF depends on your tolerance for risk and your investment time-line. The Growth ETF should have the highest returns and highest draw-downs over time while the Conservative ETF will show lower returns with more stability. The Balanced ETF is a middle-of-the-road option.

Dual Momentum Strategy (RM Style)

Dual Momentum is a strict, rules-based investing approach which uses an easy performance evaluation to decide your investment holding for each month. Most months the holding will stay the same; trades occur around two times per year on average. By evaluating just once each month, you can eliminate the negative effects of market noise and spend very little time investing.

The Dual Momentum strategy—as tested by Gary Antonacci of Optimal Momentum—has shown fantastic results over complete market cycles. Read his website, book, and research papers to get a full understanding of how the strategy works.

See our version of Dual Momentum performance since 2014 by visiting the Portfolios page.

This month we are staying in U.S. stocks which are very clearly outperforming the rest of the world right now.

YTD Performance:  +2.31%
Last month's performance:  +1.99%
Current recommendation: XUU.TO

When determining our monthly position, we consider the past performance of just three eligible holdings: XUU.TO, XEF.TO, VSB.TO. The best performer based on specific criteria becomes the only holding for the next month.

Leveraged Barbell Portfolios

The Leveraged Portfolio strategy uses a unique mix of short-term bonds and leveraged stock ETFs to achieve growth while limiting downside risks. It's essentially a barbell strategy where all the risk and growth is contained in a small portion of the entire portfolio.

If you choose to implement the strategy, make sure you treat each account as a whole portfolio. Do not put bonds in one account and leveraged stock ETFs in another account!

Leveraged portfolios are re-balanced just once per year. For this reason, I will always track the Year-to-Date returns only.

Canadian-listed ETFs (2x Leverage Stock ETFs)

HSU.TO (50%) & XSB.TO (50%):  +0.80%
HSU.TO (30%) & XSB.TO (70%):  +0.68%

U.S.-listed ETFs (3x Leverage Stock ETFs)

UPRO (40%) & BSV (60%):  +0.11%
UPRO (30%) & BSV (70%):  -0.01%

These allocations are just a few examples of how Leveraged Portfolios can work. Leveraged ETFs amplify positive and negative returns so they should always be paired with low-risk assets to meet your personal risk tolerance. In a non-registered account, you may use margin debt to purchase your stock index ETF for somewhat better tracking.

Comments & Questions

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Net Worth Update: June 2018

Monthly Summary

In June 2018 we are beginning to see some new breakouts to the downside after the initial February correction. The broadest market indicators: the S&P 500 and MSCI EAFE indices have not hit their January highs. The market looked pretty good in the beginning of the month, but towards the end it slid back again.

At this point, I'm worried the major trading nations of the world we may escalate into an all-out international trade war, promulgated in large part by President Trump. The stakes of this game (trade agreement negotiation?) are very high on economic terms, not to mention civil unrest. It translates to higher prices, larger debts, lower profits, poorer populations, and God only knows what else. The last time anything happened on this scale the world was in the 1930s, the U.S. was a newly emerged economy, and fascists and communists were gaining power over large countries.

In my own portfolio, I am currently quite cautious. Our registered accounts are holding U.S. stocks, as per the Dual Momentum signal. But our remaining portfolio sits mostly in cash. Almost surprisingly, U.S. stocks are not doing to badly considering the issues. I don't know how long that will last...

Emerging markets, the cheapest large equity asset class, are still dropping. China hit new 2018 lows, India is in decline, and Brazilian stocks are basically in a free-fall (again).

Developed markets outside of the U.S. are also doing quite poorly with European stocks near their 52-week lows. Japan, the remaining major international market, is at the lowest point so far this year.

In May, we finished the month with a total of $667,450 in our investment accounts. We were barely up for that month on a investment return basis. This month I once again added a regular contribution to our joint non-registered account and we made a small positive investment return for the month. We are also back over our starting point for the year.

I hope through sharing our real numbers you will be inspired to start saving and investing young—it pays!

The Current Numbers

Here are our current Investment Assets as of the last trading day in May. We invest in TFSAs, RRSPs, and a non-registered joint margin account. We use a version of Dual Momentum and a moving average/breakout trend strategy to determine what we buy and when we sell our ETF positions. I often employ leverage in positions, so our results tend to swing a bit more each way than the underlying indices.

January 1 of the current year is in brackets to help illustrate the change during the current year. Net Worth Change reflects the total increase/decrease of this past month including new contributions.

The Investment Return is the total year-to-date return on our investment positions, corrected for new contributions at the end of the month. Due to the end-of-month adjustment, the true rate of return on a daily adjustment basis would be slightly different dependent on the intra-month return on the new contribution.

Total Investments:  $677,224 ($670,856)
Monthly Net Worth Change:  +$9,774
30x Rule Safe Annual Income:  $22,574  ($22,362)
YTD Investment Return:  -4.21%

Background Story

My wife and I are late-20s professionals working in the public sector. We don't earn enormous salaries, but by keeping our spending under control we save a large portion of our incomes each month. Our Investment Assets are 100% the result of our own hard work and the return on investments; we have not received any gifts or won any lotteries.

While we both work in pension careers, for this purpose we don't include pension values in our net worth nor pension contributions in our savings. Our investment assets and contributions are from our net paycheques.

We invest primarily with index ETFs using a dual strategy portfolio that I personally developed and maintain. To keep our investing costs as low as possible, I use Questrade and Interactive Brokers as my online brokerages. Questrade is my go-to choice for registered accounts. Interactive Brokers offers powerful tools, low commissions, and low margin interest for our joint margin account.

Comments & Questions

All comments are moderated before being posted for public viewing. Please don't send in multiple comments if yours doesn't appear right away. It can take up to 24 hours before comments are posted.

Comments containing links or "trolling" will not be posted. Comments with profane language or those which reveal personal information will be edited by moderator.