Huygens Asset Allocation Portfolio Review: 23 August 2024

Episcopal Chapel in Grand Tetons

Huygens is the Asset Allocation portfolio up for review this morning.  While the Huygens is rounding into shape or the various assets are moving toward the recommended balance positions, major price changes, as we have seen over the last week, makes it difficult to keep the asset classes in balance.  Later in this blog I’ll explain how I am handling this problem.

In portfolios where new money is added each month keeping the asset classes in balance is easier vs what I call a “steady state” portfolio as is the case with the Huygens.

Huygens Asset Allocation Holdings

Below is the current Huygens portfolio.  Over in the far right-hand column readers can see which asset classes are out of balance and by what percentage.  Initially the goal was to to keep each asset class within + or – 0.5%.  That may be a tall order, particularly in a volatile market.  I may need to relax the uncertainty limits and increase it to 1% or even higher.

Regardless the uncertainty limit, I will focus in bringing asset classes most out of balance on the low side into balance.  The four asset classes or ETFs that need special attention are:  TLT, VB, VNQ, and VNQI.

Huygens Manual Risk Adjustments

Limit orders are in place to add more shares to TLT, VB, VEA, and VNQ.  If cash is a limiting factor I plan to first bring equity asset classes into balance.  Bonds and treasuries can wait.

I’ve yet to set any boundaries on the upside or when to sell shares should an asset class get ahead of itself.  Selling a few shares of VOO makes sense as the asset class is currently 6.7% above the recommended percentage.  While I’ve not set a sell order for VOO, setting a limit order to part with sufficient shares to bring VOO down to no more than 5% out of balance would make sense.  My preference is to not sell any shares, particularly in taxable accounts as it creates a taxable event.

Huygens Performance Data

When the Huygens was moved to the Asset Allocation model I also switched benchmarks.  This style portfolio will use AOR as the benchmark vs. SPY as the focus of the portfolio is no longer equity driven.  There are numerous bond and treasury asset classes within the Huygens.

Huygens Risk Ratios

By switching the benchmark all five risk ratios are now in positive territory for the Huygens.

We need at least one year of “risk” data before we will have a reference point for the AA investing model.

Returning To Investing Roots: 5 August 2024

Huygens Asset Allocation Portfolio Review: 10 April 2024