September 1st, 2022 paycheck


Note: For the above data I’m only including the vested amount from the 401k until the total amount is vested. So, there will be a spike in a couple of years.

Screenshot of net worth via Personal Capital from January 2021 to August 2022 showing a steady rise until January 2021 where the value plateaus until the end of July 2022 before rising dramatically in comparison

I showed an image like the one above in the June 15th, 2022 paycheck. In that write up it was to illustrate the plateau I was experiencing and how the different charts could influence my response due to volatility. This time I’m showing it more as a way of illustrating a benefit to rebalancing (selling high and buying low) and buying what is down the farthest (through dollar cost averaging contributions and extra contributions, if possible).

In 2022 I decided to stop contributing to the M1 Finance account, however, I’m planning on changing this up; see the Closing out M1 Finance section. Meanwhile, every week for the past few weeks I’ve been buying the dip in my primary taxable brokerage account and rebalancing the 401k from my previous employer; this is in addition to my regular contributions.

The M1 Finance account, along with the other accounts I’m not making contributions to act as a control, so to speak, for the following findings; the percentages are based on all time, not year to date:

  1. My main M1 Finance Pie is down around 20 percent; no continued contributions or rebalancing, not reinvesting dividends.
  2. My Traditional IRA is down around 15 percent; no continued contributions or rebalancing, reinvesting dividends.
  3. My Roth IRA is down around 13 percent; no continued contributions or rebalancing, reinvesting dividends.
  4. My primary HSA is down about 17 percent; no continued contributions (since beginning of the year), reinvesting dividends.

Compare these control accounts to the ones with continued contributions and rebalancing:

  1. The 401k with my former employer is down around 5 percent.
  2. The primary taxable brokerage account is down about 10 percent.

All of these figures are compared to the total cost (how much I’ve spent purchasing the securities).

The investment literature says this should be the case and my personal experience seems to affirm the same. Therefore, I’m viewing this as confirmation regarding:

For buying the dip this time, I went with the total stock market fund in the primary taxable brokerage account. At the fund level of the portfolio, I’m overweight in the extended market fund (see Recalibrating portfolio), so, decided against buying the extended market fund. I’m underweight in the multi-factor fund, but it’s only down 9 percent (not 10 or more), which, according to the buying a dip protocol means I can’t buy more of it with this money. So, by process of elimination, the total stock market fund wins out; automated decision making.

Note: I also received the final check from my former employer. The multi-factor fund was down around 10 percent on Wednesday, so, when I buy the dip on Thursday, it’ll be to the multi-factor fund.

Accounts at my new employer

Section titled Accounts at my new employer

I managed to link my 401k to Personal Capital and the balance is showing.

The HSA doesn’t have a balance yet and I’m hoping, once it does, it will actually display as well, but it seems connected.

Closing out M1 Finance

Section titled Closing out M1 Finance

Odd as it may sound, I’m going to start contributing to the M1 Finance account again to begin the close-out process.

After looking at it, and seeing how buying the dip has been somewhat helpful over these last few paychecks, there are a couple of realizations I’ve come to.

First, the hope is, through continued contributions, I’ll be able to shorten the drawdown duration for the securities in the account. Second, the idea of tax-loss harvesting is beyond my scope of control and understanding to the point I don’t want to touch selling anything that’s down while I’m still in accumulation mode; wash sale rules and guidance are too strange (see Investopedia Tax-Loss Harvesting article).

So, here’s the plan, well, here’s the setup.

The main M1 Finance Pie has 4 slices, which are Pies as well (see M1 Finance on how it works):

  1. FI Experiments is a Pie for tracking the various asset allocations for testing purposes. This will be the last post with those in there as I believe I’ve learned what I can from that experiment.
  2. The second Pie was for near-term (every 5 to 7 years) purchases, such as electronics; I’ve changed my mental model, and that’s one reason I stopped contributing to M1 Finance. It uses the Mark 1 asset allocation.
  3. The initial purpose of the third Pie was to save up for insurance deductibles per The Financial Order of Operations; again, I’ve changed my mental model and the cash portion of my portfolio should cover this now. The Pie uses the Mark 1 asset allocation.
  4. The initial purpose of the fourth Pie was to save up for van-life, which is a long-term goal (over 7 years); therefore, it uses the Mark 0 asset allocation.

Instead of contributing to the main Pie, I would choose a sub-Pie and buy it. In the beginning of my investing journey I wanted to be able to earmark money for specific purposes and this seemed like a logical way of doing it; now I’m starting to think of the securities in a more generic way, which renders this approach obsolete. Further, as I was saving for all these future purposes it was difficult for me to keep the portfolio in balance; for example, the value of the negative correlation assets is still high for where I want to be despite not putting more money into Pies with those securities.

How did I adjust things?

In the main Pie I changed the FI Experiments Slice to be 1 percent, which means it should take a moment until future contributions go into that Pie because it currently occupies 5 percent of the main Pie.

I changed the second and third Slices to be 2 percent each. The electronics Slice currently occupies around 10 percent of the main Pie and the insurance deductibles Slice occupies around 60 percent of the main Pie.

I changed the van-life Slice to be the remaining 95 percent of the main Pie; currently occupying around 25 percent. This means future contributions will start by going to this Slice until it reaches around 95 percent, which should keep us from getting out of balance in the negative correlation assets.

Now, here’s the plan.

I updated the Mark 1 Pie to include the multi-factor fund and changed the allocation described in the Recalibrating the portfolio (again) section; 40-33-27 for the extended market, total market, and multi-factor fund, respectively. (Note: Changing the Pie itself means anywhere the Mark 1 Pie is used was updated; convenient that.) I updated all the other Pies to reduce the non-equities Slice to 1 percent and raised the equities Slice as needed to get the Pie to 100 percent.

I sold the commodity funds, which are part of the alternatives (low-correlation) listed above; they were up around 30 percent when I sold. As the other securities become positive, I plan on selling them.

When you remove a Slice in M1 Finance the cash is reinvested in the rest of the Pie; this is not what I want to do.

Instead, what I do is reduce the allocation of the Slice to 1 percent, sell the Slice for its current value. If the security goes up or down between trading days, the value should be near zero, at which point I remove it from the Pie and let the pennies reinvest. It feels clunky, but I don’t know a way to say, “M1 Finance, please remove this Slice and don’t reinvest it in this Pie.” This mainly impacts folks still in accumulation mode, I think. Anyway, I want this cash to end up in the settlement account to choose what I want to do with it later.

Any cash in the M1 Finance settlement account will be used to purchase the main Pie; not taken out of M1 Finance until I’m ready to close the account:

  1. contributions,
  2. dividends, and
  3. the sale of other securities.

I’m still debating on what contributions look like moving forward.

Will I do all contributions to M1 Finance or a percent of the total contribution? When I buy the dip, will it go to M1 Finance or not?

For this paycheck, I split my normal contribution between the multi-factor fund in the main taxable brokerage account and M1 Finance. When I bought the dip it went to the total stock market fund in the main taxable brokerage account.

It’s worth noting that even though I have all these Pies and Slices, they use the same underlying securities. So, even if a Pie shows a loss, I might end up in a gain situation for a holding.

Regardless, part of the reason for doing it this way is because the total cost basis in the M1 Finance account is lower than anywhere else, which means it should rebalance, adjust, and recover faster compared to the other accounts with higher total costs and values; smaller contributions move the needle farther.

We can’t avoid making mistakes, experimenting, or taking losses and I’m glad to be doing it now while the dollar amounts aren’t substantial compared to my total lifestyle cost or cash flow ability.

Rolling over the 401k

Section titled Rolling over the 401k

Continuing to hold the 401k with my previous employer. The S&P 500 fund was up and I used part of those gains to buy the other funds; roughly 2,000 USD of the S&P 500 to buy 1,000 USD each of the total small- and total mid-cap index funds. (From here on, I will be following the buy a dip protocol because psychologically I don’t have any feelings of regret using the buy a dip protocol compared to doing something more akin to a full rebalance.)

The rationale for continuing to sell and buy is I’ve seen how much rebalancing through contributions has been helping with taxable accounts during this downturn and I believe it will continue to be helpful here; that’s the hypothesis and we’ll see how it plays out. I’m only hoping to reach near zero (a value closer to what I and my former employer have put in) by September or October.

As for the rollover itself, if I only purchase one security, the portfolio will be out of balance. Further, the Traditional IRA will be marinating until around 2030. Finally, I’m not looking to make future, regular contributions to the account. Therefore, the Traditional IRA will use the Mark 0 asset allocation. While this may put the rest of the portfolio out of balance, it won’t be as out of balance had I only bought one security and I shouldn’t feel a need to watch it very closely, if at all.

Recalibrating the portfolio (again)

Section titled Recalibrating the portfolio (again)

Recently made the time to figure out Morningstar’s ticker tool and updated the spreadsheet to show me my equities in the grid of small-, mid-, and large-cap compared to value, growth, and blend.

This has led me to adjust the targets for each of the individual funds.

With this move, I don’t need to rely on Portfolio Visualizer, which seems limited to small-, mid-, and large-cap, without adding value, growth, and blend or Personal Capital’s grid-view that has more buckets than I want. Instead, I can use the Morningstar grid data for each security and let the spreadsheet build the view for me.

My current, personal blended portfolio looks something like this for where it will settle based on targets for the individual funds:

The list includes the 401k from my previous employer, which I’m planning to roll into my Traditional IRA. I’ll sell everything from all three funds, however, only two (the small- and mid-cap funds will stay gone).

The mix after doing the rollover should look something like this:

For a basis of comparison, the following is for the Vanguard S&P 500 fund, which is quite similar to other, similar index funds:

(To read more on calculating the matrix, check out: Calculate portfolio matrix.)

Note: Even though I’m shifting the targets for the funds in a way that makes the individual securities out of balance, the macro-allocations are still in balance.

Feel a bit like Tony Stark at the moment:

Get ready for a major remodel, fellas, we’re back in hardware mode.

Process improvement

Section titled Process improvement

Right now, when I make these posts, to get the lead-in data at the top, I have to jump through a fair amount of hoops:

  1. I update all the values for my various holdings.
  2. This populates a table I export to a comma-separated values file.
  3. I upload the file to Portfolio Visualizer.
  4. Then I update a different table with the percent equities and the small-, mid-, and large-cap breakdowns.
  5. Updating that table updates the table I use for posting here.
  6. I do a cross-check every once in a while with Personal Capital by adding all the small-, mid-, and large-cap percentages there to see if I’m totally off somewhere.

I’ve adjusted the setup to use the Morningstar data for portfolio spread within the matrix. This means I only need to update the values and the rest is handled for me. Every year I’ll check the Morningstar data to verify I’m still using the correct percentages.

This is going to save me a fair amount of time. This improvement, coupled with this being the last entry with the FI Experiments section should reduce update time by a few minutes per post at the least.

I’m also considering displaying the breakdown of value, growth, and blend for each market-cap weight in the lead-in data.

FI experiments

Section titled FI experiments

This data was taken on August 22nd, 2022 and will be the last in the series for now.

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.