In the previous article, I talked about my performance for Forex portfolio in the first quarter of 2017. This article will lay out the equity investments portfolio performance for the 1st quarter. Unlike for forex, I don’t have much performance results for equity investment portfolio….at least for now.
Cash is trash.
For the first quarter of 2017, my stock investment portfolio was down 1.31%.
In the 1st quarter, I bought W.P. Carey (WPC). In this Seeking Alpha article, I laid out why I bought the diversified REIT.
First, I had a lot of cash sitting in my portfolio. Cash did not add any value to my portfolio.
Second, the ETFs barely moves and yet offers attractive dividends that would be distributed every month, with low expense ratio. Instead of having cash be lazy, the ETFs provided free money since they barely moved in price.
And lastly, the ETFs were commission-free through my broker, Ameritrade. When opportunities arise, I can freely liquidate the ETFs position(s).
All three reasons provided me with great flexibility and free money. The average SEC 30 Day yield from the “big four” is currently 2.43%.
The portfolio of the five ETFs mentioned above returned 2.77% in the past 5 years, with the largest quarterly loss at 2.65% in the 4th quarter of last year and the largest quarterly gain at 1.70% in the 1st quarter of last year. Year-to-date, it’s up 1.32%.
Estimated investment portfolio dividend yield is 2.8%, with largest being 6.4% and lowest 0%. I plan to increase the portfolio dividend yield by getting rid of non-dividend yielding stocks and/or buying dividend-yielding stocks.
I did not sell anything in the portfolio during the first quarter. However, I’m planning to make some changes this quarter, which will be released in the 2nd quarter performance article. But first, I will probably tweet out the changes.
32.30% of my portfolio is currently in cash. I plan to cut that in half. How will I do it? I’m not sure yet. I’m doing research on multiple companies. The one that stands out will be bought and an article about it will be posted, mostly likely on Seeking Alpha.
Note: Equity/Commodity active trading portfolio (Robinhood) performance will be posted later.
As you may know, I published my forex performance for 2016 and since inception. From now on, I will also share my quarterly performance. March 31st marked the end of first quarter, here are my performance results for FX trading.
Forex Trading Performance – Q1 2017
For currency trading, I was up 2.15%. I know, it’s low (in % terms at least). But, allow me to explain.
Before this year, my currency trades used to be in 1,000 units (or 0.01 lots), lowest I can trade. Since I usually had about 10 positions, each of 1,000 units, the nominal amount was large enough. After depositing more money and getting a clear picture of my Forex performance, I decided to increase my trades to 2,000/3,000 units (or 0.02/0.03 lots) for each position.
Getting a clear picture of my performance – average gain/loss, drawdown, trade duration, the percentage of profitable trades, etc – helped me improve my performance significantly.
This quarter [Q1], I further minimized my drawdowns. By minimizing drawdown, I minimized my returns. And that works for me. Stable uptrending P/L with a low risk.
It is true Forex is way riskier than other assets classes due to its leverage, mostly 1:50. But, that does not mean your portfolio has to include a lot of risks.
While 2.15% return this quarter from Forex trading is low, it’s still big in nominal terms for me and I’m getting a much better understanding of my weakness/strengths as I look through the metrics.
I don’t have the key metrics (besides the returns) and charts to share with you for this quarter for one reason: FXCM was Banned from the U.S. (I’m not even surprised after what happened on January 15, 2015).
FXCM is a retail FX broker and my former broker. They were banned by CFTC for defrauding retail foreign exchange customers and engaging in false and misleading solicitations.
As a result, FXCM customers were automatically changed to a different broker, Forex.com by Gain Capital Holdings, on February 24th. Unlike FXCM, this broker did not offer an analysis of trades. In addition to that, a third-party software did not offer an analysis of trades for Gain Capital’s customers since the broker did not allow the software to be connected with it.
Good news is that I’m currently in process of changing the platform to MetaTrader, which will make it easier for me to track performance metrics. The other platform, ForexTrader made it harder for tracking key metrics.
For the next quarter’s results, you can expect to see more performance metrics for FX trading.
Live On Twitter
As you may know, I tweet out trades/investments I’m making. That’s one of many reasons you should follow me on Twitter if you haven’t already. One of many ways I measure success is through twitter followers, believe it or not.
Over the past 40 years (1977 to 2016), S&P 500 has had inflation-adjusted annualized return rate of 7.20%, that’s having dividends reinvested. That means $1 grew to $16.14.
Without dividend reinvestment, S&P 500 has had annualized return of 4.12%, which means $1 grew to $5.02.
Can you see the power of time and compounding? I hope you see it.
Let’s assume you’re 20-years-old, saving $1,000 each year for the next 40 years. When you’re 59, you will have $40,000 in cash. That is considering zero inflation.
Now, let’s assume you invest in the market that will give you inflation-adjusted annualized return of 5%, without dividends. When you’re 59, you will have $97,622.30.
Lastly, let’s assume you invest in the market that will give you inflation-adjusted annualized return of 5%, with 1.5% annual dividend. When you’re 59, you will have $141,731.09.
Oh My God! The Power of Time and Compounding!
If you want to invest, invest now. Don’t let all-time highs scare you.
S&P 500 is currently yielding 1.93% dividend. Since the late 1800s, the lowest dividend yield was 1.11% in August 2000. The average dividend yield is 4.38%.
The returns you see above and below are before taxes. Tax laws might be different in 2056.
In this post, I will outline some of my plans to be a very long-term investor. I’m mostly trader and investor with less than the 5-year horizon.
Money Should Not Be Emotional
Over a year ago, I tried to open a ROTH IRA (retirement) account. After filling out the answers to countless questions, the application asked me to provide a proof of income. At the time, I did not have a job. So I just gave up on the application and did not think about it until last January.
I spent so much money in December and January alone, the expense amount freaked me out. I asked myself two key questions:
What can I do to save more?
What are the non-mandatory expenses?
One of the ways I can save more is, believe it or not, recycling bottles/cans (I don’t consider it income). In a family house of 6, we drink a lot, especially water. I drink about 12 bottles of water a day….using the same bottle. I fill the bottle with boiled water. Others just waste the bottles. I rather profit from people’s mistakes.
All those bottles collected in about two weeks made me $5.65, worth almost 6 pizzas, 2 each day. Or 6 yogurts, 3 each day.
If I make $10 every month for two hours of work, I can make $120 a year. That money can add up over the long term once invested in dividend-yielding ETFs.
I will not continue collecting bottles/cans (side hustle) once I get a full-time job/live on my own. I’m doing this now because I don’t even do my own laundry….yet.
I also figured out the non-mandatory expenses to cut back on, specifically on “ex”-food items I used to buy on a pulse. Small purchases (gum, candy, etc), for example, can add up over time. Those purchases are paid in cash. Well, I don’t carry a lot of cash. I carry reasonable amount. How you define ‘reasonable’ is up to you.
Why I don’t carry a lot of cash:
No track of cash flow. Credit card allows that
Risk of theft
Worried about losing the wallet
To avoid small purchases
Savings and Investing on Auto-Pilot
In January and February, I decided to open multiple accounts to keep my cash, rainy day savings, investments and deposited more money into my Robinhood brokage account.
Why multiple accounts? Because I don’t trust FDIC, which “protects” or “insurances” depositors to at least $250,000 per bank. I’m paranoid someday FDIC won’t be able to protect every depositor, after a major hack or something. Who knows, it might even take a long time to get depositors’ money back.
What if I lose my debit card? I wouldn’t want all/most of my cash in that account. At most, I keep 30% of my cash in the checking account. Now, my cash and short-term securities (stocks, etc) are diversified among multiple accounts.
Besides the savings account (almost 1% interest), I opened two more investments accounts. These accounts are different than Ameritrade/Robinhood.
Financial Literacy Is Very Important
The first account is Acorns, an investment app that rounds up user purchases and invests the change in a robo-advisor managed portfolio. For me, there’s no fee since I’m a student and under 24. I don’t trust robo-advisers, but this case is different. There are only 6 ETFs which I have looked into and decided they were good for the long-term in a diversified portfolio. 75% of its users are millennials.
The second account is Stash, an investment app that allows users to pick stocks in themed based investments around wants (Clean & Green, Defending America, Uncle Sam, etc). This app is also targeted toward millennials. Unlike Acorns, Stash charges you even if you are a student. But, the first three months are free. Like Acorns, Stash has a subscription fee of $1 per month for accounts under $5,000 and 0.25% a year for balances over $5,000.
Studies show 48% of Americans cite a lack of sufficient funds as their main barrier to investing. Luckily, technology is transforming the way people invest. Start small. Before you know it, it is big.
Both of the micro-investing apps are like savings/IRA accounts for me since I can grow my portfolio through dividends. I have checked out the ETFs Acorns invests in, they are good. I have checked out the ETFs Stash offers. Most of them are good. I have invested in the stable ones with low expense ratio relatively to its dividends.
Unlike ROTH IRA, I will need to pay taxes on realized capital gains, dividends and income interest.
Whopping 69% of Americans have less than $1,000 in a savings account and 50% of them have $0 in that account. All these people playing Candy Crush should be thinking about their future. Be a Robo-Saver and Be a Robo-Investor.
Note: All of my $$$ comes from off-book jobs, scholarships, prizes, and living under mommy and daddy’s roof (Can’t wait to move out). This post doesn’t mean I will stop trading. I will continue to trade forex, stocks, and commodities.