December 31, 2014

End of another year. Watching my portfolio work, and sometimes not work.

For the first time in three years, I ended a year with a gain.  I made so many missteps along the road to learning what works, and more importantly what works for me. 

However, the plan I have in place is mostly untested.  It's theory.  But the last two days showed what it can do when it's at it's best.  It helped me pare losses by half today, and helped net a gain yesterday.   It let's me diversify without losing out on performance.  It let's me have a hands off approach. 

There are still questions about when to rebalance, in particular, volatility hedges.  But I hope to manage them with a steady hand in 2015.  For now my rule of thumb is one trading week after the first new 50-day high that had followed a dip of at least 3% from the last 50-day high in $SPY.

 Today I took the opportunity to reduce my average leverage via ETF mechanic to 2x from 3x.  This increases the leverage I rely on from margin, but I'm buying a little more safety in the long run.  I don't like the bid/ask on $UBT, though I can understand why someone might use it.  So I went with one half $TMF and one half $TLT instead.  Shorting $TBT is a possibility as well, but you have to manage that position more than a simple long. 

I switched out $UGLD for $DGP.  The latter is not an emulation of owning gold, but instead of trading it's futures.  As such it may not perform exactly the same as the price of physical gold, however, it was a choice I felt was right.

I've kept $UUPT because the volatility of currency is lower than that of bonds and gold, and I had already switched out $SPXL for $SSO.

To anyone that reads this, have a happy new year.  I will likely have a lot less to blog about in 2015, but I still have several stock positions open, including two commodity ETFs that are looking a little weak.  I'm optimistic going forward, both in the markets and the US economy. 

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