Overview

The name “Poor Man’s investment journey“ is derived from S&P’s P and also because I have had a deep fear of losing money since I was a kid and I also suffer from severe anxiety issues which limits my appetite for market risk. Growing up in a poor household teaches you to be prudent with your savings and to ensure you keep building it up for rainy days. I have realized that (albeit very late) piling up money in a savings/checking account is the worst decision anyone can ever make, my reasoning behind that is same as others: Value of money decreases by the rate of inflation. Even if you know it or not you are slowly losing the purchasing power of your savings every day.

Why not just S&P?

One big question would be why not just put all your savings in S & P and forget about it, which I agree would be a much easier and simpler decision. As every human being is different in their appetite for risk and behaviors mine too are different. I mentally cannot go through a 10-20% down market for months, this would simply destroy my mental health even though I know the market will eventually recover. I know there are people out there like me who simply never invest or if they do they always choose the most conservative allocation i.e. I-bond, T-Bill, Muni Bonds e.t.c because they too cannot go through the mentally excruciating periods of down markets. For people out there who can, you have my utmost respect, I wish I could borrow even 1% of your mental strength.

Goal

The initial short term goal of my portfolio is to outperform S&P 0-3 month treasury index, and as I build my portfolio I will switch the benchmark over to moderate allocation index. Over the period of any fiscal year I would like my portfolio to always do better than or equivalent to the S&P 0-3 month index, regardless of how bad the market gets; which is to say that the portfolio should be an absolute positive return one with the minimum target return for the portfolio tied to 0-3 month treasury yield in a year. Although it is hard to predict the future or to claim that I will be able to achieve this said target I would like the portfolio to track the running deficit from any year where the target was not matched and to fill the gap with inflation adjusted return in subsequent years by readjusting the portfolio for short or long term.

All target goals are post tax deduction, for estimates of tax I will take 30-35% rate just to encourage myself a bit better while still being reasonable.

For any portfolio I think it is good to have some allocation rules which shall guide the investment strategy. Mine is going to be no different. In the initial phase I will not introduce too much Greek symbol complexity to the rule book even though the rules are derived from them and financial literature, talks by experienced investment strategists, and other  well known public financial advisers. The core philosophy of the portfolio are following:

1. Accept you are not an investment geek, buy well managed funds with proven track records.
2. Avoid direct purchase of large bonds or stocks but rather get exposure via funds
3. No large purchase orders rather stagger them throughout opportune times
4. Research all fund’s underlying assets, holding, distribution rate, commentary
5. Understand that an investment can have bad days/months and good days/months, if there is no contrary evidence to pivot, stick with it.
6. Don’t be greedy, be disciplined, have a long term horizon.
7. Don’t take decisions by gut feelings but rather data, information and research.

The current allocation target has been amended with a longer time horizon, below are the allocation targets for the full financial year of 2024

1. 50-70% exposure to 0-3 month T-Bill in ladder
2. 10-15% exposure to Muni Bond exempt from federal and/or state taxes
3. 5-8% exposure to Corporate Bonds
4. 10-15% of equities via hedge funds
5. 10-15% exposure to equities via alternative funds
6. < 1 % combined exposure of any individual stock or bond CUSIP (except T Bill) across all the investments
7. Keep 15-20% of additional funds for black swan or market down events to average down position cost basis

The allocation target is inline with Moderate allocation for the portfolio.

Leverage and hedging can provide better returns for any investment, however for my portfolio currently I will not be using these strategies but rather invest in well known funds who have been using it consistently with decent returns. A less than <0.5% value is set aside for the whole year for condors and spreads as and when mental capacity allows me to handle such positions.

Below are the list of published reports about the portfolio’s performance

Date	Fund flow	% Gain	YTD	1 Year
EOM October 2024	0%	-0.19	5.21%	6.12%
EOM September 2024	0%	0.95	5.4%	6.76%
EOM August 2024	4.3%	0.86	4.45%	6.26%
EOM July 2024	3%	0.81	3.59%	5.83%
EOM June 2024	0%	0.67	2.78%	5.47%
EOM May 2024	9.5%	0.68	2.11%	5.14%
April-May 2024	7.5%	0.78	2.03%	5.25%