April 15th, 2022 paycheck


Making progress toward getting my 401k in balance. For the past few contributions I’ve been ramping up the small-cap fund via buying the dip; now it’s almost to the point of the same cost basis as the S&P 500 fund. I decided to shift my contribution from 80-20 favoring the small-cap to 20-80 favoring the mid-cap. I plan on continuing to sell the large-cap gains and buying the small- and mid-cap funds. Once it’s balanced I’ll change to an even split and rebalance as necessary.

Portfolio balance overall

Section titled Portfolio balance overall

Looking pretty good. However, when it comes to individual funds, it’s time to buy the mid-cap in the 401k and the total stock market fund in the taxable account.

This is due in part to shoveling so much toward the funds favoring small-cap, however, that’s not the only reason.

I’m thinking of adding another fund.

This would not be an optimization move or because I expect to get higher returns; that would be denying the macro allocation principle. Instead, I’m looking at the overall distribution of the equities portion of the portfolio and wondering if I can tilt the mix away from core a bit.

The cap-weighted total stock market fund lets me hold the average investment portfolio of all investors. If someone buys more stock in a company, it’s market capitalization goes up and, when the index fund is rebalanced (or I purchase more lots), more of my value will be in that company. Right now, the average portfolio heavily favors large-cap, growth stocks and I do not; when a company gets close to being too big to fail, it shouldn’t need more of my money to sustain itself. Further, the average portfolio favors technology, which, having lived through the dot-com bubble as someone trying to break into web design and development, I have my doubts. Finally, if you shift the sector of your company (to technology) because you believe it’ll increase the stock price—not value to your customers—that’s also not me; might feel like a straw man and was an argument stated to me, so, anecdotal, not a straw man.

The extended market fund lets me shift the size factor toward small- and mid-cap companies with the goal being a pretty even split between the three.

The multi-factor fund I’m pretty sure I’ll go with favors momentum (strong, recent performance), fundamentals (cash flow and conservative over aggressive investing), and value (low price compared to fundamentals). There are multiple identified factors and models out there (recent learning on my part). I’m appreciating the Fama-and-French five-factor model, which doesn’t include momentum, however, incorporates the others found in this fund—to the best of my knowledge. The goal here is to see what shifts to get closer to an even distribution between value and growth with a smaller percentage of core according to the Personal Capital grid. I’m pretty evenly split right now but the portfolio isn’t at its target allocations overall yet.

More specifically, and looking at returns, with the total stock market fund almost 80 percent of the returns are from large-cap companies. Further, half of the returns are specifically from large-cap, growth stocks. That’s not me. When a company hits a certain point in its growth, I’d like to cash out a bit; unless I buy the individual stock because I just believe in the company that much and want to be a full-fledged owner instead of an owner by proxy.

By adding the extended market fund, the returns shift to something a bit more evenly distributed. Roughly 28 percent of returns coming from large-cap, growth; roughly 32 percent from mid-cap, growth; and the remainder from small-cap, split almost evenly between growth and value.

Bringing in a small amount (about 10 percent) toward the multi-factor fund shifts returns a bit more. Roughly 27 percent from large-cap, growth; roughly 33 percent from mid-cap, growth; and the rest from small-cap. The difference here being only about 16 percent is from small-cap, growth leaving roughly 23 percent for small-cap, value.

What helps me psychologically here is based on market capitalization, each size is returning their concentration. In other words, with the cap-weighted total stock market, 50 percent of returns are from 70 percent of the investment. Meanwhile, with this allocation, each cap-weight is contributing about what its concentration is projected to be; small-cap is estimated at 37 percent concentration and accounts for 39 percent of historical returns, mid-cap is about 30 percent concentration, and large-cap is about 33 percent concentration.

(The aggregate expense ratios as of this writing would be 0.04, 0.05, and 0.07, respectively. So, not grotesque.)

In theory, this would put me more in smaller companies that favor fundamentals rather than growth, which is more me. I can still ride the rise (and fall) of companies as they progress from small to possibly large and back again (see Kodak), however, it’s more of a byproduct and less of the goal itself.

A couple things of note are:

  1. The multi-factor fund has only been around since 2018.
  2. These are returns, not concentrations based on value versus growth.
  3. I don’t know of a tool that can give me the matrix view from Personal Capital using a projected portfolio of index funds and exchange traded funds; the Personal Capital matrix is based on my actual portfolio not a target I built.

With that said, I’m going to keep working toward the allocation for the two fund solution and see where that gets me before adding a third.

Again, this isn’t optimization for outperformance (I might actually have lower returns if folks continue to do the straight total cap-weighted stock market and chill method); see investment policy. This is about aligning the portfolio to my character.

Of course, if more people follow this path, the more the total stock market fund will reflect this allocation mix, which should mean I’d be able to sell off the extended and multi-factor funds. With that said, I believe every investment style is necessary to make each perform better and worse, so, you do you.

Odd place

Section titled Odd place

Feeling a bit better now.

I’ve decided to try and improve my résumé as well. That might seem left field but I’ve actually never gotten a job I’ve applied to with a résumé; in 20 years.

Over the years I’ve tried a lot of formats; chronological, functional, hybrid. Lots of numbers. Just a few numbers. One page, five pages. All the history. Only the last 10 years. Just the facts and slightly silly.

Over the years I’ve received at least a thousand rejection letters; not a single interview from the résumé to a job I actually pursued. In fact, my career is kind of like my dating life; they find me.

Anyway, I’m bringing in the professionals.

I’ve hired one writer and career coach; we’re testing the iteration she came to. I have a session with a second résumé writer in a few days; we’ll be starting from the same point as the first—with my most recent two attempts. And I signed up for a webinar from Simon Sinek and gang to improve my résumé; I’ll be starting with the one from the first writer.

We’ll see how it goes. Paying for all that, coupled with the market being down, is why my debt is a bit high at the moment.

FI experiments

Section titled FI experiments

Details are in the January 15th, 2022 paycheck.

The hypothesis is when the Mark 0.0 mix is down, it’ll be down more than the others. Further, when the Mark 0.0 is up, the others will be up and not too far behind the Mark 0.0. We will track the change since the previous paycheck as well as the change since we started tracking January 2022.