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June 15th, 2022 paycheck

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Learned that fractional shares will be coming to Vanguard soon. Right now it’s being tested out with a random selection of investors. In the meantime, I wanted to figure out a way to get the benefits of ETFs; mainly the control over realized gains and losses.

I converted most of my mutual fund stake to their exchange traded fund equivalent. This way, when I get paid, I can go ahead and send over x amount, buy as many ETF shares as possible with it, and send the remaining balance to the mutual fund.

I’m starting to get used to how money flows in the new place. As a result I’ve dropped my self-imposed minimum balance from 1,000 USD to 500 USD.

Surgery

Section titled Surgery

I seem to be all healed up. The human body is an amazing thing.

What to invest in

Section titled What to invest in

When I put money into investments it’s about one percent of my overall net worth right now; as my net worth grows, however, the impact of each contribution will diminish. With that in mind, I want to get the portfolio to a target balance early to hopefully be able to maintain that balance moving forward.

When it comes to the size question, I’m in a good place, however, when it comes to value versus growth, every time I put into the total stock market fund, growth increases too much.

With the previous check I purchased the total stock market, which shifted growth by about one percent. This time I put it against the extended market fund, which pushed value one percent.

The extended market was down over 30 percent from its 52 week high, which means I won’t put more money into it according to my personal budget. With this check, the extended market was down a little over 20 percent but less than 30. So, I’m basically purchasing the cheapest fund compared to its 52 week high within the guardrails of the budget.

Having said that, I’d like to start getting into the multi-factor fund. So, next paycheck I’ll probably go the full amount in the multi-factor fund and then continue purchasing the dip in accordance with the personal budget.

With all that said, if things keep going as they are, the multi-factor fund will be the only one I can purchase because the other two will be down over 30 percent from their 52 week high.

It’s probably worth noting that using the 52 week high is somewhat arbitrary and is only used to determine what’s down the most. The balance of the portfolio is the primary factor in determining what to purchase.

The plateau

Section titled The plateau

I mentioned recently the impact of “all the volatility” in “the market” for me was mainly a plateau. Of course, this could all change tomorrow—for better or worse—but, for now, it’s a plateau. I want to show more than tell on this because I think it’s an interesting illustration of the power of perspective.

The following images are snapshots of my net worth according to Personal Capital.

The first image is the past 90 days. There are five horizontal bands, equally distributed; it’s important that each band represents the same amount of net worth. My net worth starts at the top of the second band on day one and ends at the top of the third band on day 90. At my net worth’s lowest we hit the top of the first band; the highest is just above the top of the fourth band. And, for most of it, we’re riding along the top of the third band.

Hence, the plateau.

The first image is the past 90 days. There are five horizontal bands, equally distributed; it’s important that each band represents the same amount of net worth. My net worth starts at the top of the second band on day one and ends at the top of the third band on day 90. At my net worth’s lowest we hit the top of the first band; the highest is just above the top of the fourth band. And, for most of it, we’re riding along the top of the third band. Hence, the plateau.

Looking at this I might be freaking out because humans tend to reset the scale of charts. In this case, I may look at the chart and think I’ve almost hit zero once and have only managed to go up one band. But, here’s the thing, each band represents roughly four percent of my overall net worth.

So, the first image is hiding, for lack of a better term, 84 percent of my net worth, if the bottom of the chart was zero.

The second image is taken from the same span of months from 2021 and it appears to be a steady climb upward. There are three horizontal bands. My net worth starts at the top of the first band on the first day and ends just above the third band on the last day.

The second image is taken from the same span of months from 2021 and it appears to be a steady climb upward. There are three horizontal bands. My net worth starts at the top of the first band on the first day and ends just above the third band on the last day.

The thing with the second image is that each band represents twice as much change than the first. So, if each band in the first image were 5 USD each band in the second image would be 10 USD.

Rendering charts can be difficult though and I don’t think there’s any manipulation happening here.

Designers often want to represent the highest-high and lowest-low. Typically, we want to fill the screen. We want to trust that viewers will look at the scale and see the shifts in comparison to that. Unfortunately, while it adds visual drama, it represents a fraction of the net worth and change over time.

To be clear, most of this upward movement is because I’m putting money in; the value of the portfolio is down in value by over 20,000 USD compared to the cost basis (principal); so, roughly 10 percent of the portfolio.

The third image shows the time from just before I started tracking in Personal Capital up to June of this year. There are three bands, each representing a third of my net worth. The initial spike is from setting up and syncing my accounts. The steady climb that follows is primarily from my contributions; it’s too early for the effects of compounding and increased valuation to really take hold. The vertical line represents January first of 2022; when the volatility struck. And, for me, this where the plateau started. Further, this chart doesn’t seem nearly as scary as the first or as demotivating as the second.

The third image shows the time from just before I started tracking in Personal Capital up to June of this year. There are three bands, each representing a third of my net worth. The initial spike is from setting up and syncing my accounts. The steady climb that follows is primarily from my contributions; it’s too early for the effects of compounding and increased valuation to really take hold. The vertical line represents January first of 2022; when the volatility struck. And, for me, this where the plateau started.

My first bear market

Section titled My first bear market

From what I understand, the S&P 500fficially entered bear market status. As I track what to invest in next, the bear market status seems to be reflected there as well.

The extended market fund is down 35 percent from its 52 week high, which means, as of this writing, I won’t be throwing any extra that way. The total stock market fund is down 25 percent from its 52 week high, which means I could put money toward it. The multi-factor fund is down 17 percent from its 52 week high.

In theory, given how 2021 closed out, the total stock market fund will most likely close lower than 30 percent from the 52 week high soon.

The speculation is the market went down as interest rates are slated to go up again to try and curtail inflation a bit. Meanwhile, those investing on leverage are bailing out and many who jumped in during the good times are panic-selling; at least that seems to be the assessment I’m seeing the most.

Regardless, we’ll just keep on as we are for now; stress testing the approach and refining as we go.

Future things

Section titled Future things

I’m considering expanding the breakdown for the components. It would use the meter element from HTML to make it feel a bit more graphic, while maintaining the accessibility, which is important.

As I was thinking about the meter bit, I got to thinking I could include the value, growth, and core breakdown for the equities portion.

I’m not sure I want to add that level of complexity and bookkeeping though. The justification would need to go beyond these entries. I’m also not sure how much value it’d bring to readers or myself, to be fair.

To be honest I was thinking of getting rid of the breakdown entirely, but I do find it somewhat helpful on my end and it does guide my investment decisions. Just not sure the same would happen for the value, growth, and core components.

Maybe I’ll see how switching to using meters looks and revisit the idea.

If you’d like to share your thoughts, hit me up.

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.

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