What does your Dream Team look like?
Hidden Levers: asks the same dry questions: your investment horizon and how potential losses in your portfolio feel like. HL asks you to predict how you might feel some time in the future! It looks at risk, volatility, has some cool data and shows big as Dallas, how your portfolio performed during the Pandemic Sell-Off. It does not help us understand how well funds performed relative to peers or offer alternatives to swap out of one fund for another. It does not let us look at many metrics I think are really important and does not enable me to build your values and preferences in. Why does this matter to you? If all you want is a single “risk number” Hidden Levers does that and might give you the illusion of security. But know…the next bear market won’t look like the last one and I don’t want to be driving looking out through the rear-view mirror. Two years from now I think we will see the shortcomings, and that is not how I like to work.
Positivly / Totum / Magnifi: Three integrated programs…starts by asking 34 questions that may not seem to make a whole lot of sense when it comes to thinking about your portfolio. It is very intuitive, lets us basically google your portfolio! It drills into the fund data that is updated on a regular basis. It doesn’t give a picture of what a sell-off might look like as much as it tells you what is in your portfolio. It also helps separate the better performing funds from the laggards and lets me reduce the underlying fund management fees. It lets me search for any criteria…like low-volatility funds; higher dividends: better risk adjusted return; higher fiduciary scores and then lets us search to see what stocks are actually in the fund. Why does this matter to you? If you like getting down into the weeds (which I do) and to be able to approach your portfolio with curiosity and questions like “am I invested in Russia” or “do I own “Apple” …this is the way to go. For the time being, I will be using both pieces of software…and won’t let one go until I find it is no longer useful.
Most people think bonds are sleepy, boring and slow-moving…but the chart below shows that bond yields…the amount that YOU are paid…topped in April. I did not see a reason for yields to decline like this…as the inflation rate has moved higher, month after month. What was making us all as nervous as a cat in a room of rocking chairs was the reality that declining bond yields indicated the economy was weakening. Not good news.
😊😊Why does this matter to you? Cash flow. That is all that really matters at the end of the day. The reason we have more cash than bonds is that once you buy into a bond, or a bond fund…you lock in your yield. No way to change it. And, locking in your “cash engine” part of the portfolio at less than 2% has not been one bit attractive. So, the only solution is to wait. Will this be the time that yields move back up? You know my views: a 0% fund rate is totally uncalled for. Rates, please move up!
If inflation and interest rates look like they are going higher…is there anything we should be worried about? This chart says a lot! During the market sell-off in 2013 when Fed Chief Bernanke moved up rates we had a negative rate of return on bonds. This was the last time rates move higher, and the market cried like a baby.
😊Why does this matter to you? When “real” interest rates are negative…that means your money doesn’t keep up with inflation and it buys less. This is how it works: you earn 1.3% (today’s 10-bond yield) but inflation is now 5.12%. That means you are losing 3.82% in your purchasing power…TODAY. We won’t be “well” til we have a yield that outpaces inflation…6%!