Portfolio Rebalance

I dropped $TMF for simplicity, and am only using $TLT for bonds now.

I substantially increased my account size, with the smallest increases in positions going to volatility hedge and gold.  Both were a little oversized.  I had gotten lucky with both as well.  But I think now it was too much and I was taking risk while not adhering to the principles of the permanent portfolio that I had laid out.

In the past twelve months, the account went from about 57k to about 80k, a really great year, especially given how poorly I had done until that point.

The way the portfolio spreadsheet works, it is not great at 'over time' type measurements.  After I plugged in average entry price (that I calculated via my trading app) and shares owned for each position as they stand now, it showed my overall gain as 16%, so that will be a baseline to use to measure overall gain for the next twelve months.

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Big day for the account, and to a lesser extent the permanent portfolio in general

I had been close to doing a rebalance of my volatility shorts, and realized that my $SPY component is actually lower than it should be.  The shorts had become way unbalanced, which is what happens when volatility dies slowly.

Because of these two things, every move higher was sort of neutral for my account.  I was somewhat hedged out of making gains off of a strong market, which is where it looked like we were headed.  But I stuck to my plan, and was going to wait until a new high of the S&P before re-assessing.

Late Thursday night the news came in that contrary to almost everyone's expectations, England voted to leave the EU.  Honestly good for them.  Everyone says it will do this or that, but truth is no one knows.  The market sure thought it was bad news though.

Invested in gold, the dollar, and bonds, all of them shot up.  And my volatility shorts moved enough to rebalance themselves almost perfectly.  Each now 10% lower than cost basis though.  The move between them was a net profit higher than the loss from my $SPY holdings (through $SSO).

I still need to increase my $SSO, but I feel it's a good idea to follow the trend, and wait for a new high, or at least a 50 day high if things go really sour.

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To Rebalance, or Not To Rebalance

I find it very difficult to come up with hard rules on when to rebalance the volatility shorts.  Outside of the possibility that one of the two shorts could get way out of hand no matter what rules one comes up with, it's more likely that the hedging in general will lose efficacy when no rules are triggered for an extended period of time.

So far they have been my biggest money makers.  In fact, I'd be just below even without them.  It's just been a very hard trip for this portfolio over the last year.  That's why it's important to not squander what has worked well.

I made a decision Sunday to rebalance.  It has cost me money.  I don't regret it yet, but I may later.  I had some rules about rebalancing.  One I ignored when $VXX had gotten quite high.  This made me money.  Now I've rebalanced without the trigger of either a new all time high in SPY or cutting losses on the position.

My rationale was that if $SPY hit all time highs from this point, I wouldn't lose much rebalancing now.  However, if $SPY crapped out and it turned out to be a rounding top, I could stand to lose quite a bit as my $VXX position was 50% larger than my $SVXY.

I may be on the verge of a rule based on reversals and risk, or resistance vs trend and risk.  Not sure exactly.  For now I think it was the right call whichever way the market goes.

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