Linked below are the latest Morningstar® Investment Detail Reports for the Portfolio Shield™ family.
Portfolio Shield™ began hedging the equity allocation this month. It reduced its allocation to the S&P 500 (SPY) and the Nasdaq-100 (QQQ) by 17% to add long-term U.S. Treasury bonds (TLT) to the equity allocation across all models.
For the next several months, Portfolio Shield™ is likely to remain hedged which it does by reducing the equity allocation to add long-term Treasury bonds to the allocation. Historically, a 17% hedge to the equity allocation is rather mild and more of a precautionary move by the algorithm.
From a return perspective, if equities continue to outperform bonds, hedging will have a slight negative impact on returns. However, if stocks peak and bonds continue to rally, then hedging can enhance the return potential.
From a risk mitigation standpoint, having the strategy slightly hedged should be considered a positive change, especially after a strong run-up in stock prices since March 2020.
As a reminder, all strategies are rebalanced on the first trading day of each month and at that time, any new monies are invested according to the model strategy you are in.
For those who want to change between strategies, changes will occur at the next rebalance on the first trading day of each month.
Due to the increase in smaller balance accounts, lower-priced ETFs have been added to the models to substitute the primary Exchange-Traded Fund (ETF) for those who don’t have a large enough account balance to hold the full model of ETFs. Small balance accounts may not have every position in the strategy due to price limitations of the securities in the allocation since ETFs are only traded in full share increments.
There is only a 0.3% allocation to cash in each model. Due to a misreporting between Morningstar® and the ETF providers, the Asset Allocation box on the fact sheets may show a higher cash position than is actually in the model.
If you have any questions or would like to change which Portfolio Shield™ strategy you are invested in, please let me know.
Steven Van Metre, CFP®