Portfolio Allocation Update (November 2021)

 

Last week was another eventful week in markets.  Probably the biggest news was the surprisingly high CPI inflation print at 6.2%, the highest in 30+ years.  This sent investors running for cover, sending gold / silver into a rally, bonds sold off and stocks were mixed but down for the week.  Ironically, a very poor Michigan Consumer Sentiment reading, which itself would be negative for markets, encouraged some hope in investors that the Federal Reserve might delay interest rate hikes to avoid the economy slipping into a recession.  It seems clear that inflation is not transitory and will be with us for some time, so investors must prepare for this reality.  Whether we can continue to see the economy grow amid elevated inflation or fall into stagflation will depend on the actions taken by the Federal Reserve (tapering and rates) and the amount of government spending (infrastructure bill, Build Back Better, etc.).  Either way, you will need to pay close attention to your investment portfolio allocation to make sure you are staying ahead of inflation.

Here's the portfolio breakdown for this month:

Cash - 5.9% (basically just my emergency fund plus a little extra)Stocks - 20.8% US Large Cap - 7.1% (61% I manage myself in a trading portfolio and remainder is actively managed fund in retirement account)US Mid Cap - 2.7% (100% actively managed fund in retirement account)US Small Cap - 2.5% (100% actively managed fund in retirement account)International - 8.5% (100% actively managed funds in retirement account, including developed and emerging markets) - added some this month as I exited the rest of my bond portfolioCommodities - exited this month to lock in gains and moved most of it to a Bitcoin IRA, the rest was invested in art and private equityBonds - exited all positions this month, including TIPS (locked in a small profit and moved to cash)Real Estate - 24.8% (37% actively managed fund in retirement account and remainder is investment property I manage myself) - added more this month as I exited the rest of my bond fund in the retirement portfolioPrivate Equity - 13.6% (includes numerous small Seed Invest and Republic investments and a few direct investments - try to invest small amounts across a large number of companies following disruptive themes like artificial intelligence, genomics, proptech, fintech, blockchain, energy, cybersecurity, eSports, cannabis, etc.)Bitcoin - 23.2% (mix of direct Bitcoin ownership including a new Bitcoin IRA, some GBTC and MicroStrategy; continuing to add to small Etherium position and dollar cost averaging small amounts twice a month into ETH and BTC in my Coinbase account); I also have a small position in the the Proshares Bitcoin Futures ETF (BITO) in my trading portfolio which I sell calls against for cash flow.Gold / Silver / Other Alt - 9.8% (gold/ silver is 50% physical coins and 50% miner ETF's GDX and GDXJ (I like the miners because they pay a dividend and they also are a leveraged way to play gold since they tend to move up faster than the gold price, of course the opposite is true as well) - gold has started to rally in the last week or so and I think is still one of the most under-valued sectors right now; I also hold a small position in Metalla (MTA), a gold royalty company that should also have a leveraged return in any precious metals rally.  I made several additions to my new Masterworks account to invest in art this month (there were several interesting IPO's this month which look to have great upside and sold out rather quickly) - see my review of Masterworks here)Other - 1.9%This month, I added more exposure to small private equity deals and the new Masterworks investment as well as Bitcoin through rolling over an existing IRA to a Bitcoin IRA.  Fees were a bit high to do the IRA rollover (5% setup plus 2% trading fee), but the setup was easy, the coins are securely stored offline and they maintain $100M in insurance.  Over the long run this should outperform the commodity fund I had at Vanguard, which has had a nice run over the past year up about 50%.  Bitcoin IRA also offers a lending program where you can earn 2% by lending your Bitcoin, which will offset the account maintenance fees which are slightly less than 1% annually and allow you to add to your coins over time.  I did consider counterparty risk and after researching Genesis Global Trading (world's largest digital asset lender), I felt pretty comfortable in proceeding with that option.  If you are interested in other coins, they do have seven coins available currently including Bitcoin, Etherium, Cardano, Chainlink, Stellar, Litecoin and Bitcoin Cash and plan to add more in the future.  I focus my investing on Bitcoin and to a lesser degree Etherium and avoid speculating much in the "altcoins."   
I continue to keep a broad diversification across asset classes and favor hard assets like Bitcoin, gold/silver, real estate, and art especially in the current inflationary environment.  I like the potential upside that private equity offers relative to the public stock market, which is generally overvalued in my opinion (although if you look closely you can always find undervalued stocks which is the primary focus of my trading portfolio now).  Cash is a little higher than last month.  Overall portfolio grew 2.2% since last month.
I hope you find this post useful as you chart your personal financial course and Build a Financial Fortress in 2021.  To see all my books on investing and leadership, click here.    Stay safe, healthy and positive.