I have made a change in my investment portfolio that I contribute to regularly, by combining two portfolios into one, readjusting allocations, and changing the rate that I contribute new funds to the portfolio. I highlight the details in this article.

1. Combining the portfolios:

If you’ve been following, I had two portfolios I was contributing to every month, which I’ve named the “10-year portfolio” and the “futuristic portfolio”. 

I’ve combined both portfolios into one for a couple of reasons, the first being the convenience of having everything in one place, and the second is that I’ve increased my investment horizon to 15 years instead of 10.

The actual holdings haven’t changed, since they are still long-term investments, but this won’t change the way I look at the fundamentals.

2- Readjusting allocations:

With the previous 2 portfolios, I allocated 2/3 to the 10-year portfolio and 1/3 to the futuristic portfolio. The reason for such allocation was the level of risk involved in each of these.

The 10-year portfolio holdings were relatively safer than the holdings of the futuristic portfolio, which consisted of more volatile investments.

Since I’ve increased my investment horizon to 15 years, I’ve change the allocations to have all the holdings have almost equal weightings.

Generally speaking, the longer the investment time horizon, the more risk one can take, so, this should change over time, and, probably, in 5 years, the allocations might be moving back to what they were when holdings were divided into the two portfolios.

How this could affect the final outcome might be significant. According to historic performance and future projections, the initial combination of putting more weight towards the less volatile investments had a target of around 24% yearly growth. Giving everything equal weights is now giving an overall target of over 28% per year. This additional yearly 4%, when compounded, makes a rather significant difference in the final goal for the portfolio.

3- Changing rate of regular contributions:

Previously, I was contributing monthly into the portfolios, paying into them once at the end of every month. As with everything else, this rate had its pros and cons.

A major pro to contributing monthly was that I didn’t have to think much for a whole month before transferring money into the investment account. Another pro was that the contribution was large enough to distribute over the two portfolios. The third, and maybe the most important pro for me personally, was that end of month was when I got paid, so the money was available to contribute.

One disadvantage of contributing monthly, especially in markets that are volatile, or when some of the holdings in the portfolios are making significant gains or losses, is that I had to think about rebalancing the portfolios more often than I liked. This meant that I had to spend more time following portfolio values, how each holding is performing, etc., which defied the whole idea of passive investing!

Now that I’ve combined both portfolios into one, and my monthly income is a bit more stable, I’ve changed the contribution intervals and how they’re deployed.

First, I now contribute to the account once a week instead of once a month. The total yearly contributions are more or less the same, but just divided into weekly rather than monthly payments.

The second change I’ve made was how the money each week is deployed. Instead of buying each holding in equal percentages, the money buys holdings with the target balance in mind. So, instead of rebalancing the portfolio and then buying, it automatically contributes more to the ones that are losing ground to try and catch up with those that have already rallied more than others. (For more details about rebalancing, please refer to the article in this link)

Deploying the funds with this “self balancing” method doesn’t necessarily lead to an accurate balanced portfolio, but it should always be making use of the differences in weights due to price movements in the individual holdings. I would then do a proper rebalancing every month or every quarter, according to where the portfolio value is from where I want it to be.

This also means that, by reducing the number of times I do a whole rebalancing, I avoid paying more trading commissions, since every time I buy and sell, trading commissions are taken out. Please note that, even when your broker says that they are “commission free”, you are still paying a commission, which is the difference between the buying and selling prices you get quoted.

Doing the above is made easy by having these options available through my account, so I actually don’t have to make the calculations myself, and I just click a button that does it for me. But, if your account doesn’t give you such convenient options, you can check my past article “Portfolio Entries, Exits, & Rebalancing” to understand more about how you can make these calculations yourself.

Changes to the “our portfolios” page and links now reflect the above changes.

As always, I’m happy to answer any questions and respond to any comments you may have.

Happy investing and trading!

(Written by Hassan Afifi)

To view our portfolios: click here

Please note that we do not provide any financial or investment advice. All the material shown here is for educational purposes only, and we only mention the author’s own personal opinion and approach for such educational purposes. If you would like to invest or trade, we urge you to do your own research and to seek professional advice from qualified investment advisors.

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