Fountain in France
This morning we come to the Copernicus review or what I think of as the young investor portfolio. The Copernicus is one, if not the easiest portfolio to manage. My advice to the young investor, open an account with a brokerage firm such as Vanguard or Schwab and save in a Roth IRA account. If you can max out your annual contribution to a Roth IRA account, then set up a second traditional account and feed that portfolio as well. Follow The Golden Rule of Investing.
Why go with the Roth IRA account first? The logic operates as follows. If taxes were to remain constant over ones working lifetime, there is absolutely no difference or advantage between a Roth IRA and a traditional IRA. If taxes were to decline over a working lifetime, as was my situation, then it is better to invest in a traditional IRA. If taxes increase, it is better to use the Roth IRA. The logic is simple. Pay taxes at the front end rather than pay taxes at the rear end when they are higher. While one does not know what will happen to the tax structure, the probability is that taxes will be higher in the future so pay taxes now and invest those taxed dollars in a Roth IRA.
If you happen to work in a profession where you are eligible for a Public Employment Retirement System (PERS), max out that opportunity. Never leave money on the table.
Copernicus Portfolio
The Copernicus currently holds 165 shares of ESGV and 5 shares of VTI. Both are U.S. Equities. The philosophy behind the Copernicus is to save as much as possible and when cash is available, invest in either ESGV or VTI. For environmental and social responsible investing purposes, I prefer ESGV. Long-term, ESGV has a slight performance edge on the older VTI Exchange Traded Fund (ETF).
If the Copernicus were managed using the LRPC model, we would be out of equities and into TIPs (SCHP). However, with the Copernicus we only invest in U.S. Equities and don’t plan to sell. This portfolio will ride the market up and down. The young investor will continue to plow money into this portfolio and purchase shares when cash is available, as is currently the case.
Copernicus Performance Data
The Copernicus was launched in mid-January of 2022 or just the time when U.S. Equities began to slide downward. Check the screenshot below and readers can see how different benchmarks declined. Due to dollar cost averaging, the Copernicus is doing quite well relative to any of the benchmarks.
With 16.6% in cash, I’ll set limit orders to purchase more shares of ESGV after the market opens this morning.
Copernicus Risk Ratios
We are just beginning to fill out the Risk Ratio table. Pay attention to the left side of the table or months January through August. I copied August data through the remainder of the year.
Of the different values, the Jensen is the most informative as it is superior when it comes to integrating portfolio risk into the calculation. Currently, a Jensen Alpha of 17.3 is extremely high and cannot be expected to remain at this level. A positive Jensen value is considered excellent. By the end of January we will have a better idea as to how well this investing model is working. This is a 40- to 50-year investing model so even one year of data is far too short a period to come to any conclusions.
After limit orders to purchase more shares of ESGV are set the Copernicus will go into “neglect” mode for another 33 calendar days.
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