Saturday, January 25, 2020

i reset my m1 finance account, here's why ...

i had this great idea for my m1 account that worked less well than i had hoped. the idea was that i force my self to budget rent money by investing 1/20 of a rent payment each week-day in m1. then at the end of the month, just take the contributions, pay the rent and pocket the investment on the rent money. this is a great idea but unfortunately i ran into difficulties with a small account. what i didn't understand is that M1 is not a checking account. the glitch that i hit is that there is a 6 business-day holding period on contributions. this means the cycle time on a contribution/withdrawal is typically 8 days; 9 days if there's a long weekend involved. mind-you this is not an M1 policy but a federally mandated rule to foil money-laundering. this caused me to be late on a rent payment last fall. as a consequence, i took the balance of my account down to $28 on 23sep2019, which is why the account graph has some jaggies in it:

but the jaggies are not the same as investing returns that you can expect from following this same strategy, it's just an artifact of my fund flows. since the reset i have continued contributing $10/week to these two pies and i am very encouraged by the results. the value line model portfolio 1 has returned 19% since 20jun2019 when i originated the account 7 months ago. this is a money-weighted return, which, means the reported percentage is adjusted to account for fund flows - the same standard that professional money managers use. annualizing this return projects a full-year return of 32% on the value line pie. taking both safety and stocks into consideration, a 1 year projected return on the account anniversary is 18.49% (10.79% times 12/7.)

in october i modified the split between safety and stocks from 70% safety / 30% stocks to 30% safety / 70% stocks - there is a ton of statistics that say the best time to be in stocks is from november through april. after i made this risk-on change i just let new contributions gradually bring me up to the new target allocations. but, i could have just told m1 to execute trades to rebalance according to this risk-on split. better to miss out a little on early season gains then get spanked by an early season sell-off. i didn't reallocate then but i might do that in late spring when it is time to go into a risk-off mode - better to miss out on some late-season gains then get spanked by a late-season sell-off.

in any case a 3 month return in this risk-on configuration looks like this:

annualizing that 5.49% return gives a projected 1 year return of 22% - i'll take it!

if you want to take it too then here's the link to my account's shared pie. btw if you use that link to fund a new account by 31jan2020 then you will receive a $20 reward, or just click my affiliate link. i have a ton of other pie's i want to share in the near future, so stay tuned...

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