Everyday Portfolio Update for May, 2012

Portfolio Returns for April, 2012

The Everyday Portfolio selects up to 11 assets from a diversified basket of asset classes on the final trading day of each month. Below is the new allocation for the month of November as well as the performance numbers from October.  Click to read more about the Everyday Portfolio strategy here.

Optimal Portfolio Return: .53%

S&P 500 Return: -.67%%

The Everyday Portfolio outperformed the S&P 500 this month

due to its overweighting of less volatile assets.  More on this below.

*Note: Optimal returns mean no trade friction and no trade commission. In a real world results will be slightly higher or lower due to slippage. Please see our portfolio at covestor.com.

May 2012 Portfolio Allocation

For the month of May, the model continues to hold around 50% in less volatile, fixed income assets and 50% in equities. The ‘high-beta’ position is emerging market debt which continues to climb higher.

 

Commentary

I mentioned in the beginning of the year that the portfolio is starting to increase exposure to equity as volatility lowered suggesting a bullish move.  The market has indeed rocketed ahead on low volatility.  Though the portfolio underperformed the market as it rallied higher it still managed to capture a portion of the gain. It is up over 2% on the year. The best part of this move is that the 2% was captured with incredibly low daily volatility.  This is the intention of the portfolio strategy.

Interestingly, the volatility of the market has increased in the last few weeks as everybody saw a ‘head and shoulders’ pattern emerge.  This put people on edge and enabled the market to again move higher as people were out of position.

The portfolio shifted some from equities back to less volatile assets for the month of May. It is taking a bigger position in TIPS as well as intermediate treasuries.  This tells me that the market is in for consolidation of its recent run up.

Regardless, the Everyday Portfolio is doing what it should – making it easier to sleep at night. :)

If you’re tired of volatile returns with your passive “buy and hold” portfolio, join us at COVESTOR where we trade the Everyday Portfolio live and you can follow along!

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