$1.39 mil Daedalus Income Portfolio Update – July 2024.

Here is the update for my Daedalus portfolio for the month of July 2024.

If you have not read this post, you will likely not understand much of what I discussed below. It tries to explain why I designed and crafted the portfolio this way.

I will try to provide an update of the Daedalus portfolio where possible if work is not too busy.

All my personal planning notes such as income planning, insurance planning, investment & portfolio construction will be under my personal notes section of this blog.

Portfolio Change Since Last Update

The portfolio was valued at $1.396 million at the end of June and is currently at $1.386 million (3rd Aug). If we strictly value it at the end of July, the portfolio value is $1.442 mil.

We reported a portfolio change of $46,000 for July 2024.

You may be able to detect what happened. The portfolio gained 3.2% but dropped 3.9% within the last three days. I feel quite deflated after doing so well for the money of July only to see us give back more than what we gained in the last month.

I understood that if we buy and hold a portfolio of diversified equities and fixed income, we are going to see this ebbs and flow very often. But I still feel that psychologically, the swift change was tough to adjust to.

The US Federal Reserve meeting happened to be at the end of the month, and the committee decided to let the rate remain unchanged. Immediately after that, the market let the Fed know that they may have made a mistake with the interest rate dropping, fixed income prices rising, and the US dollar falling.

The Federal Reserve Committee is data-dependent, but the market is also a constant data processing machine, and they are seeing that the economy is slowing down much more than the Fed thinks.

There is also the potential unwinding of the Yen carry trade that may be a secular problem. A common trade is to borrow in Yen and invest in other more attractive securities around the world. One off the areas is US equities and fixed income. The Yen has been depreciating against the US dollar (and other currencies) for a period of time. That changed recently and when the Yen is not going down, that creates uncertainty in the investor’s leverage return-risk structure. The safe thing is to sell off the securities and pay back the loan.

What happens when investors do it enmass? Stampede.

Lastly, per Cem Karsan of Kai Volatility Advisers, the market enters a period of weakness after the VIX Expiration mid-July. There is an absence of strong Vanna and Charm flows and the demand for put option protection is low. All this is conducive for the markets to drop like a stone.

Here are the major security holding returns for the month-to-date and year-to-date:

Returns of Dimensional funds in SGD with the rest in USD. I have also listed out major index ETF performance for comparisons.

Between June and July, the big difference is the performance of the top two funds. Equal-weight, Mid-Cap and Small-Cap all spiked, taking over the market leadership from the cap-weighted large-cap.

So USSC and JPGL went up 11% and 4% respectively.

My portfolio basically suck when large-companies do well and do better when they don’t do so well.

The portfolio lost 1.11% to the strengthening of the SGD against the USD.

Role of Portfolio

The goal of the portfolio is to provide consistent, inflation-adjusted income for my essential and basic spending. The portfolio is sized based on a conservative 2-2.5% Initial Safe Withdrawal Rate (SWR) so that the income can last even considering challenging historical sequences such as Great Depression, external war and 30-years of high inflation averaging 5.5-6% p.a.

Timeframe that the income stream to be planned for: 60-years to Perpetual

I am currently not drawing down the portfolio.

For further reading on:

1. My notes regarding my essential spending.
2. My notes regarding my basic spending.
3. My elaboration of the Safe Withdrawal Rate: Article | YouTube Video

Based on the current portfolio of $1.396 million, the projected starting income is:

The lower the SWR, the more capital needed, but the more resilient is the income.

Nature of the Income I Planned for

Suppose when I start drawing the income, the previous year inflation goes in this sequence and here is the corresponding income to be drawn out:

The income strategy is constructed to withstand this high inflation

Investment Strategy & Philosophy

After trying my best to learn how to invest for a while, the portfolio expresses my thoughts about investing at this point.

The portfolio is run in a

1. Strategic: allocation doesn’t change by short-term events.
2. Systematic: rules/decision-tree-based implemented either myself or an external manager.
3. Low-cost: investment implementation cost is kept reasonably low both on the fund level but also custodian level.
4. Passive: I spend relatively little effort mentally considering investments and also action-wise.

You can read more in this note article: Deconstructing Daedalus My Passive Income Investment Portfolio for My Essential & Basic Spending.

Portfolio Change Since Last Update (Usually Last Month)

I put the last $1,000 of my SRS money in:

1. Dimensional Global Targeted Value SGD Accumulating.

Current Holdings

The following table is grouped based on general strategy, whether they are:

1. Fixed Income / Cash to reduce volatility.
2. Systematic Passive, which tries to capture the market risk in a systematic manner.
3. Systematic Active, which tries to capture various, proven risk premiums such as value, momentum, quality, high profitability, size in a systematic manner.
4. Long-term sectorial positions.

Portfolio by Account Location

Portfolio by Region of Securities

Portfolio by Fund, Cash or Individual Security

Portfolio by Strategy.

Main Custodians

The current custodians are:

1. Cash: Interactive Brokers LLC (not SG)
2. SRS: iFAST Financial

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If you want to trade these stocks I mentioned, you can open an account with Interactive Brokers. Interactive Brokers is the leading low-cost and efficient broker I use and trust to invest & trade my holdings in Singapore, the United States, London Stock Exchange and Hong Kong Stock Exchange. They allow you to trade stocks, ETFs, options, futures, forex, bonds and funds worldwide from a single integrated account.

You can read more about my thoughts about Interactive Brokers in this Interactive Brokers Deep Dive Series, starting with how to create & fund your Interactive Brokers account easily.