Author Topic: Long-term Asset Allocation Portfolio in 2016-2046  (Read 4659 times)

FinBabylon

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Long-term Asset Allocation Portfolio in 2016-2046
« on: December 30, 2015, 12:03:30 AM »
I want to introduce you my long-term investment portfolio “Babylon Globe”.
Date of formation: 23 December 2015
Investment period: 30 years (general). The period of this exact portfolio is one year. After 1 year the portfolio will be rebalanced. Some assets will be removed and others will be added.
Amount of investment: $ 300 000 and more
Strategy: asset allocation strategy. We choose 7 strategic branches. In each branch we choose 2-5 assets, which show optimal technical, financial and fundamental parameters. In these 7 branches we invest 50-70% of our portfolio. Remaining money is invested in reliable ETF of bonds, gold and real estate (REIT).
7 strategic branches:
1)      Construction & Real Estate in USA and Germany.
2)      Alternative Energy.
3)      Internet resources.
4)      IT-Giants.
5)      Virtual Games.
6)      Medicine and Health.
7)      Finance.
In every sphere we choose shares, which have the best potential to grow by technical, financial and fundamental parameters. We invest in companies traded in NYSE, Nasdaq, Xetra and Berlin.
Babylon Globe in 2016:
Shares (proportion 63,97%): DHI (3,19%), LEN (3,27%), HEIG.DE (2,67%), NDX1 (3,54), VWS.DE (4,64), GTQ1.BE (3,97%), FB (3,52%),WMT (4,05%), MSFT (3,7%), AAPL (3,59%), ATVI (3,93%), EA (4,61%), MRK.DE (3,22%), QIA.DE (3,58%), ARCC (3,79%),CBSH (4,24%), CM (4,45%).
Bonds (proportion 12,01%): ETF HYD
Gold (proportion 12,01%): ETF IAU
REIT (proportion 12,01): ETF VNQ

Each quarter, we’ll summarize portfolio.

dmn

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Re: Long-term Asset Allocation Portfolio in 2016-2046
« Reply #1 on: December 30, 2015, 02:31:36 AM »
Do you mind to elaborate on your choice of strategy? In particular, I do not understand the following points:

(1) Why do you want to flip (some of your) assets every year? This will incur significant trading fees which add up over time.
(2) Why do you focus on these particular "strategic branches"? This limits your diversification and thus increases risk. You are leaving out major sectors of the economy (consumer goods, logistics, engineering, raw materials, ...), and to me it seems you are dramatically overweight technology with three of seven branches being internet, IT and virtual games.
(3) What makes you confident to identify those securities which "have the best potential to grow", a task at which even professional fund managers usually fail?

I am worried that you forego diversification (increasing risk) and that you incur higher fees (reducing returns) compared to a simple portfolio of cheap index funds.

FinBabylon

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Re: Long-term Asset Allocation Portfolio in 2016-2046
« Reply #2 on: December 30, 2015, 10:15:03 AM »
2 dmn: thanks for your reply.
1) We need to sell assets, which do not grow. Fees will not be so significant. I do not trade every day/month. Rebalancing is only one time a year.
2) Technology sectors nowadays and in future will grow better than consumer goods or logistics. Every year I can add or delete some sectors. May be the new sector will appear.
3) In asset allocation the most important parametr is not exact securities, but allocation of these securities. I am not confident on 100% that my choice will be better than market. The time will show who is right. I know that it is rather difficult taks.
Cheap index funds - you mean ETF? ETF include commisions of management companies from 0.1 to 0.7% too. In stock market you do not need to pay such fees.

dmn

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Re: Long-term Asset Allocation Portfolio in 2016-2046
« Reply #3 on: December 31, 2015, 03:53:22 AM »
1) We need to sell assets, which do not grow. Fees will not be so significant. I do not trade every day/month. Rebalancing is only one time a year.
And how do you know which assets do not grow? You can easily see which assets have not grown recently, but that is not a good indicator for future returns. On the scale of a few years, the price is dominated by random fluctuations. Selling underperformers can lead to systematically selling undervalued stocks, which would reduce your returns. Plus, you incur fees which certainly reduce your returns.

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2) Technology sectors nowadays and in future will grow better than consumer goods or logistics.
Whether or not a sector grows is not important for future stock returns. The stocks of new, growing industries are usually more pricey - the growth potential is already included in today's stock price. Keeping old, unwanted industries can lead to better results for shareholders than the new ones.

So basically, what I see is that you unnecessarily exclude some sectors, reducing diversification and thus increasing risk without any benefit.

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Cheap index funds - you mean ETF? ETF include commisions of management companies from 0.1 to 0.7% too. In stock market you do not need to pay such fees.

Yes, I meant ETFs with a TER of up to 0.2%. It is possible but not easy to have lower annual fees. Your strategy will certainly have higher fees unless you know of an extremely cheap broker or unless you switch only very few stocks during your annual portfolio revision. Keep in mind that when flipping stocks, you incur fees for selling and for reinvesting the proceeds.

In summary, I do not see the benefits of your strategy over ETF investing. In the long run, you should do fine due to long-term stock market exposure, but the risk-adjusted performance of a much simpler ETF portfolio should be better. An ETF should have similar long-term expected returns (assuming you trade only little so that you can match the low annual fees of an ETF), and the ETF should have lower risk because of its broader diversification. You obviously disagree, since you choose your strategy over ETF investing. But do you believe that your strategy will have higher returns, or do you not believe that it is riskier? And why do you think so?

FinBabylon

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Re: Long-term Asset Allocation Portfolio in 2016-2046
« Reply #4 on: July 05, 2016, 09:22:25 AM »
Half year pasts. Let's summarize the results.
Our long-term investment portfolio “Babylon Globe” gets 6.07% between 22-23 December 2015 and 1 July 2016. Rather good results for asset allocation portfolio. S&P 500 for this period increases in 3.75%.

Kaspian

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Re: Long-term Asset Allocation Portfolio in 2016-2046
« Reply #5 on: July 05, 2016, 11:20:10 AM »
I'm not trolling here, but 6 months is nowhere near long enough to properly measure results.  Especially considering that during 68% of that timespan Babylon Globe was either tied or less than the S&P.  Do you rebalance in order to try and take some of the "wins" off the table?  I assume the recent spike there is tied to recent bond and gold prices? 

FinBabylon

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Re: Long-term Asset Allocation Portfolio in 2016-2046
« Reply #6 on: July 05, 2016, 11:44:30 PM »
I'm not trolling here, but 6 months is nowhere near long enough to properly measure results.  Especially considering that during 68% of that timespan Babylon Globe was either tied or less than the S&P.  Do you rebalance in order to try and take some of the "wins" off the table?  I assume the recent spike there is tied to recent bond and gold prices?
You are right, it is very short time to make any evaluation of strategy. 29.5 years are in future.
I rebalance portfolio one time a year, in the end.
The recent growth has been due basically to gold and some good stocks.

MustacheAndaHalf

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Re: Long-term Asset Allocation Portfolio in 2016-2046
« Reply #7 on: July 05, 2016, 11:54:02 PM »
FinBabylon - Why, with no other posts on this forum, are you advertising this?
Do you expect people to invest their money with you at some future point, based on your posts here?

GeekyGirl

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Re: Long-term Asset Allocation Portfolio in 2016-2046
« Reply #8 on: July 06, 2016, 08:02:56 AM »
FinBabylon - Why, with no other posts on this forum, are you advertising this?
Do you expect people to invest their money with you at some future point, based on your posts here?

I was wondering the same; if this is more like a way to track your portfolio and share results, maybe it should be in the journal section.

FinBabylon

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Re: Long-term Asset Allocation Portfolio in 2016-2046
« Reply #9 on: July 12, 2016, 06:26:07 AM »
FinBabylon - Why, with no other posts on this forum, are you advertising this?
Do you expect people to invest their money with you at some future point, based on your posts here?
No, i want just to show people my portfolio. My strategy will be open in future too. So everybody just can repeat it without me.

FinBabylon

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Re: Long-term Asset Allocation Portfolio in 2016-2046
« Reply #10 on: October 09, 2016, 11:44:49 PM »
9 months: +13.56% including dividends

FinBabylon

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Re: Long-term Asset Allocation Portfolio in 2016-2046
« Reply #11 on: January 11, 2017, 04:42:54 AM »
Year pasts. Let's summarize the results of Asset Allocation portfolio.
Our long-term investment portfolio “Babylon Globe” gets 7% between 22-23 December 2015 and 30 December 2016. Rather good results for asset allocation portfolio. S&P 500 for this period increases in 10.45%. It is more important for this strategy to get stable and good results on long periods of time, so our 3% of market losing is not terrible. Let's see in future results for minimum 10 years.

Babylon Globe in 2016:
Shares (proportion 63,97%): DHI (3,19%), LEN (3,27%), HEIG.DE (2,67%), NDX1 (3,54), VWS.DE (4,64), GTQ1.BE (3,97%), FB (3,52%), WMT (4,05%), MSFT (3,7%), AAPL (3,59%), ATVI (3,93%), EA (4,61%), MRK.DE (3,22%), QIA.DE (3,58%), ARCC (3,79%), CBSH (4,24%), CM (4,45%).
Bonds (proportion 12,01%): ETF HYD
Gold (proportion 12,01%): ETF IAU
REIT (proportion 12,01): ETF VNQ

In december 2016 I change 5 stocks and change the proportion of assets. New portfolio:

Shares (proportion 70,41%): TMHC (4,21%), KBH (3,96%), HEIG.DE (5,81%), EKT (4,46), SIE (3,83), GTQ1.BE (4,34%), FB (3,58%), WMT (4,33%), MSFT (3,87%), AAPL (3,61%), TTWO (3,07%), EA (4,91%), MRK.DE (3,25%), QIA.DE (4,37%), ARCC (4,11%), CBSH (3,6%), CM (5,08%).
Bonds (proportion 9,88%): ETF HYD
Gold (proportion 9,9%): ETF IAU
REIT (proportion 9,8): ETF VNQ

wienerdog

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Re: Long-term Asset Allocation Portfolio in 2016-2046
« Reply #12 on: January 11, 2017, 06:10:06 AM »
Just wondering why you changed assets?  From a very high level it looks like you are chasing returns since the S&P 500 did better.  Also for the people following you might calculate your fees also compared to VOO since that is what you are comparing it against.

You are doing a good job on documenting what you are doing.  Most post their next big thing but then never follow up on what it has done.