2021 Q1 Thoughts and Rebalancing

Given its been about 3 full months since I suggested the allocations for 2021, I feel its time to revisit and rebalance and perhaps add some more layers to the portfolio reconstruction.

Here is the baseline asset allocation that I suggested in December 2020. I will use this as the frame for changes. This allocation has done quite well over the past 3 months on the back of rallies in Bitcoin, Energy and 5G picks. Some positions have not done as well including the Bonds position as well as Gold. This has happened at the interest rates have risen especially at the longer end and real rates have increased dragging Gold and Bonds with it.

Here is how I am thinking about the changes to the portfolio in the short term (and compared against previous allocations). Tickers are primarily sourced from latest 13F analysis of Bridgewater – their articles and podcasts actually form the backbone of how I think about investing. Good thing about implementing this is that brokerage firms have stopped charging fees for trades – so while the number of tickers is pretty high trading fees should at least not be incurred.

Asset Classes Proposed Allocation Previous Allocation
(Dec 20 Blog)
Key Tickers to consider
Large Cap US Equities 10% 20%SPY / IVV
Reduced the exposure to drive more specific exposures in international and consumer staples and discretionary sectors
International Equities20%10%China: 5% (MCHI(2%), FXI(2%), BABA (0.5%), PDD (0.5%). Other to be considered – JD, BIDU, NIO, EDU, GDS, TAL, YUMC, BILI. More adventurous types may increase this asset class to 10%
International Emerging: 10% (VWO – 6%, EEM – 2%, IEMG – 2%, Other individual stocks – EPI, EWT, EWZ, RS)
International Developed: 5% (VEA (2%), EFA (2%), IEFA, VXUS (1%), EWJ)
Consumer Discretionary / Staples (US)20% This will be a diversified set of companies (with international exposure too)
WMT (2%), PG (2%), KO (2%), PEP (1.5%), COST (1.5%), MCD (1.5%), SBUX (1%), EL (0.5%), TGT (0.5%), MDLZ (0.5%), CL (0.5%), CVS (0.5%), DG (0.5%), MNST (0.5%), KMB (0.5%), STZ (0.5%), KHC (0.5%), CMG (0.5%), BF.B (0.5%), SYY (0.5%), GIS (0.5%), YUM (0.5%), HSY (0.5%), ADM (0.5%) – Other WBA, DLTR, CLX, MKC, K, TSN
Gold / Silver10%10%GLD, IAU (7%)
SLV (1%)
NEM (0.5%), GOLD (0.5%), IAG(0.5%), EQX (0.5%)
Healthcare4%JNJ (0.5%), ABT(0.5%), DHR(0.5%), ISRG(0.5%), SYK(0.5%), BDX(0.5%), EW(0.5%), HCA(0.5%). Other – BSX, CERN, ALGN, BAX, IDXX, MCK
Financials / Banks2%Included in OtherAt a high level, this can be achieved through XLF. Other options are JPM (0.5%), BAC(0.5%), C(0.3%), GS(0.3%), WFC(0.3%), MS, BLK, USB
Energy1%3%I had implemented this through XOM, XLE and BP. I have liquidated XLE and BP, and maintain the exposure through XOM which has a higher dividend yield.
Communications Infrastructure2%2%There are three subsectors for this:
Infrastructure (1.5%): CCI, CLNY, SBAC, Charter, Verizon, LBTYA
Semiconductors (1%): Analog Devices, Qorvo, Marvell, Intel
Software (0.5%): RNG, WDAY, Twilio
Commodity Index1%7.5%Commodities in December portfolio were suggested to be ~7.5%. Commodities still form a strong portion of the current portfolio (through the consumer staples / discretionary and energy stocks).
The 1% could be realized through VAW
Bitcoin and Other Cryptos5%2.5%Note – I am not suggesting any additional purchases. the 2% suggested in December would have increased to >5%. This is just a HOLD position
Real Estate15%15% No Change
Other15% Liquidating all bonds – In December, bonds were 10% of the portfolio. Given low yield and increasing yields make this a speculative investment.
5% of the December portfolio was geared towards US Equities “Other” – this has been better outlined

At an overall level, it may make sense to contrast this new portfolio against the key themes to analyze if this still works.

ThemesHow are the Themes addressed by proposed portfolio
USD currency debasement -Gold, Bitcoin, Real Estate, and some commodities exposure
-Additionally, large proportion of assets exposed to international market
Vaccine -Broad equity market exposure to bank on recovery
-Consumer Staples / retail and discretionary exposure
Inflation assumptions – Consumer Staples / Discretionary as well as Commodities, Energy
Segmented Recovery – Stocks pick form a bigger portion of the portfolio vs. indexes
Continuing rise of China – Strong China exposure (could be even increased further)
New Technologies – Communications infrastructure and broad equity exposure
Continued passive flows -Broad equity market exposure
Steepening of yield curve – Some financials exposure
-Liquidation of all bond positions
Biden Infrastructure plan-Addresses some of this through VAW, Communication Infrastructure and energy. However, there may be some need of focusing on ENC/construction companies

As I conclude, there are still a number of topics that I would like to write about as I get some time:

  1. Scenario analysis of key Macro drivers – thought experiment
  2. Introspecting on big errors in my investing lifetime
  3. What can be a good risk management approaches for individual investors?
  4. How should a person new to financial investing start to dip their toes in the market and when?

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