COVID Portfolio

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omeletpants
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COVID Portfolio

Post by omeletpants »

My advisor says Vanguard doesnt have a COVID specific product. Others do and my best friend has returned return on his investment in the last 6 weeks. Going back and forth with my advisor with no good answer. Was Vanguard sleeping on the most compelling event on our lifetimes?
livesoft
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Re: COVID Portfolio

Post by livesoft »

Vanguard sleeps on everything because that's mostly what index funds do.

So I am not sure what you are expecting. I will note that Vanguard Total Stock Market index fund is UP UP UP 41%! since the 3rd week of March. Does that count as sleeping?
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FoolMeOnce
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Re: COVID Portfolio

Post by FoolMeOnce »

How is a brief 30% drop the most compelling event of our lifetime? With a short bottom and a steady recovery? Not much time to suddenly develop a "COVID portfolio."
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dogagility
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Re: COVID Portfolio

Post by dogagility »

Here's a COVID portfolio: 100% cash. No need to involve Vanguard! :twisted:
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1789
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Re: COVID Portfolio

Post by 1789 »

livesoft wrote: Tue Jul 07, 2020 4:02 pm Vanguard sleeps on everything because that's mostly what index funds do.

So I am not sure what you are expecting. I will note that Vanguard Total Stock Market index fund is UP UP UP 41%! since the 3rd week of March. Does that count as sleeping?
Now that was Hilarious!
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nix4me
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Re: COVID Portfolio

Post by nix4me »

What happened? My portfolio is higher now than it was in February.
h82goslw
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Re: COVID Portfolio

Post by h82goslw »

OP....since you just joined the site today, I'm assuming you haven't read the wiki or the approach that most here take on investing. I would suggest you look around a bit and learn what the folks here teach, I guarantee it will be life altering for you.
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Re: COVID Portfolio

Post by Triple digit golfer »

omeletpants wrote: Tue Jul 07, 2020 3:51 pm My advisor says Vanguard doesnt have a COVID specific product. Others do and my best friend has returned return on his investment in the last 6 weeks. Going back and forth with my advisor with no good answer. Was Vanguard sleeping on the most compelling event on our lifetimes?
The U.S. market is about 7% lower than the all-time highs. It dropped significantly and increased significantly in a very short period of time. A speculator may have done things differently, but to an investor, nothing really happened other than a rebalancing opportunity. To an investor, there's no need for a "COVID specific product." What does that mean, anyway?
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ruralavalon
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Re: COVID Portfolio

Post by ruralavalon »

Welcome to the forum :) .

omeletpants wrote: Tue Jul 07, 2020 3:51 pm My advisor says Vanguard doesnt have a COVID specific product. Others do and my best friend has returned return on his investment in the last 6 weeks. Going back and forth with my advisor with no good answer. Was Vanguard sleeping on the most compelling event on our lifetimes?
What for example is a "COVID specific product" that others have and which your advisor recommends? What "COVID specific product" does your friend use?

Personally, we are doing fine with plain vanilla index funds.
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kiddoc
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Re: COVID Portfolio

Post by kiddoc »

COVID portfolio = Probably a collection of investments that do to your financial life what COVID does to the human body. I am not sure I want one.

In your advisor's logic, how often should one have a situation specific portfolio? We didn't have a 2008 portfolio, a 2011 portfolio, a 9/11 portfolio, Trump wins portfolio, Trump loses portfolio, Fed raises rates portfolio, Fed lowers rates portfolio, etc. All these events may look like "fundamental shifts" in financial markets at the time.
Static asset allocation is likely the most sustainable model. If you have the itch, make 5-10% of your allocation "dynamic". Be warned: financial literature states that dynamic asset allocation adds costs, may not help with returns and may increase risk.

I had the itch so I used a CAPE10 based dynamic asset allocation for a few years with 5-10% of my portfolio. The net results are exactly what the financial literature shows. My returns are the same or slightly lower. I am back to my goal portfolio now and not sure if I will continue the dynamic allocation moving forward.
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livesoft
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Re: COVID Portfolio

Post by livesoft »

kiddoc wrote: Tue Jul 07, 2020 5:04 pmIn your advisor's logic, ....
I interpreted the OP's statement that their advisor was Vanguard and that the OP had FOMO since their best friend had bragged about a covid portfolio.
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DesertMan
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Re: COVID Portfolio

Post by DesertMan »

You should invest according to your needs and risk tolerance, not current events.

A COVID portfolio or any other event driven strategy involves security selection risk. That is not a good risk to take because of reversion to the mean. As a general principle yesterday's winners are tomorrow's losers. The stocks that did well during the worst of the pandemic are likely to underperform as the storm passes.
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Re: COVID Portfolio

Post by LadyGeek »

omeletpants, Welcome! Let's put your advisor's portfolio to the test.

I recommend posting your portfolio in this thread using the Asking Portfolio Questions format. We'll let you know for sure. You have nothing to lose.

If anything doesn't look right, we'll tell you what's wrong and what you should discuss with your advisor.

If you have any questions, ask them here.
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Re: COVID Portfolio

Post by nisiprius »

omeletpants wrote: Tue Jul 07, 2020 3:51 pm My advisor says Vanguard doesnt have a COVID specific product. Others do and my best friend has returned return on his investment in the last 6 weeks. Going back and forth with my advisor with no good answer. Was Vanguard sleeping on the most compelling event on our lifetimes?
People have the idea that some big thing that's been in the news for weeks--the bitcoin bubble of 2018, legalization of marijuana, COVID-19--creates an obvious "opportunity" for some category of investment and that any reasonable stock in that category is sure to do well.

The real "opportunity" is for investment firms to create products to sell to suckers. "What everybody knows is not worth knowing." Everybody knows that Moderna, say, is developing a vaccine, and the price of their stock reflects that knowledge. There are a hundred companies developing vaccines. There are not going to be a hundred successful vaccines. Not every COVID-related stock is going to be a ten-bagger. It's not trivial to pick IBM instead of Burroughs, Apple instead of Osborne, Amazon instead of Webvan.

No, Vanguard doesn't have a COVID-specific product. The narrowest thing they have are eleven top-level "headline" GICS sectors ETFs:

Vanguard Communication Services ETF
Vanguard Consumer Discretionary ETF
Vanguard Consumer Staples ETF
Vanguard Energy ETF
Vanguard Financials ETF
Vanguard Health Care ETF
Vanguard Industrials ETF
Vanguard Information Technology ETF
Vanguard Materials ETF
Vanguard Real Estate ETF
Vanguard Utilities ETF

To John C. Bogle, "indexing" meant broad index funds that cover the whole market. He considered Vanguard's sector funds as being among his "mistakes." But at any rate, they are there. And the closest thing to a COVID product would probably be the Vanguard Health Care ETF, VHT.

If you really want to invest in individual stocks or in ETFs that are concentrated into current "hot trends," you will have to look to other firms.
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livesoft
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Re: COVID Portfolio

Post by livesoft »

nisiprius wrote: Tue Jul 07, 2020 5:32 pmIf you really want to invest in individual stocks or in ETFs that are concentrated into current "hot trends," you will have to look to other firms.
A nitpick: One can use their Vanguard account to invest in "hot trends", so one doesn't have to look to other firms. A Vanguard advisor, however, is not going to give advice on "hot trends" at all nor encourage one to invest in "hot trends."
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Re: COVID Portfolio

Post by Juice3 »

omeletpants wrote: Tue Jul 07, 2020 3:51 pm My advisor says Vanguard doesnt have a COVID specific product.[...] Was Vanguard sleeping on the most compelling event on our lifetimes?
A better question is what is the COVID SWR? Those in the draw down phase might be ripe to live it up.
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Re: COVID Portfolio

Post by Fallible »

omeletpants wrote: Tue Jul 07, 2020 3:51 pm My advisor says Vanguard doesnt have a COVID specific product. Others do and my best friend has returned return on his investment in the last 6 weeks. Going back and forth with my advisor with no good answer. Was Vanguard sleeping on the most compelling event on our lifetimes?
Welcome to the forum.

The real question I see is whether the advisor has a Covid-specific product of his own to sell you. Whatever, can you say how he/she describes such a product?
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
Topic Author
omeletpants
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Re: COVID Portfolio

Post by omeletpants »

I have been with Vanguard adisor services for 2 years. My returns have been good. My friend is with Northern Trust and they have built a COVID portfolio of 52 stocks, two examples are Clorox and Walmart so not necessarily drug companies.

I think I had a knee jerk reaction with my advisor. The comments here have prodived me with a more balanced perspective
scubadiver
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Re: COVID Portfolio

Post by scubadiver »

omeletpants wrote: Tue Jul 07, 2020 3:51 pm My advisor says Vanguard doesnt have a COVID specific product. Others do and my best friend has returned return on his investment in the last 6 weeks. Going back and forth with my advisor with no good answer. Was Vanguard sleeping on the most compelling event on our lifetimes?
Welcome to the forum.

I don't think Vanguard dropped the ball nor do I think you need to invest in a COVID specific fund.

I will suggest that you read the following three books, if you haven't already:
Common Sense Investing, by John Bogle
The Four Pillars of Investing, by William Bernstein
A Random Walk Down Wall Street, by Burton G. Malkiel

These books will go a long way towards explaining why you don't need a COVID fund.

Cheers,
Scubadiver
Last edited by scubadiver on Tue Jul 07, 2020 9:59 pm, edited 1 time in total.
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celia
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Re: COVID Portfolio

Post by celia »

The bigger question is why would you want a "COVID Portfolio"? That doesn't sound very diversified to me.
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omeletpants
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Re: COVID Portfolio

Post by omeletpants »

celia wrote: Tue Jul 07, 2020 9:59 pm The bigger question is why would you want a "COVID Portfolio"? That doesn't sound very diversified to me.
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VaR
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Re: COVID Portfolio

Post by VaR »

Interesting. I wonder if "COVID Portfolio" stocks are stocks that performed less badly during the February to March dive because they were in sectors that were less impacted? Presumably like the ones mentioned by @omeletpants. I wonder a lot of active investment is swinging with this momentum, which itself is creating more momentum? This could be what created the short-term alpha over the subsequent three months. OTOH, it could be that the positive alpha in the group is due to the fact that the economic impact in the U.S. seems to be going on longer than "everyone" expected back in April.

So really, these "COVID Portfolios" are a directional bet on the course of the pandemic itself rather than stock selection in the classic sense.

@nisiprius mentioned the Vanguard sector ETFs. Here are the ones that have positive YTD return in 2020:
Communications Services +2.95%
Consumer Discretionary +9.38% (counterintuitive, but it's because Amazon, Home Depot, Lowes, Tesla are in this sector)
Health Care +2.86
Information Technology +15.97%

I mean, if you want to chase the winners, I think you could do just fine using these sector plays.

OTOH, as an advisor you could do equally well figuring out which of your clients are contrarian/value biased and play them the beaten down energy, financial, real estate, industrial, and utilities sectors.

Hey, so we now have two possible COVID portfolios that we could hawk to our "clients"!

Heck, we could have a third COVID portfolio if we just look retrospectively at the performance of the Vanguard Large Cap Growth ETF at +14.59% YTD or the Vanguard Mega Cap Growth ETF at 16.23% YTD.

Perhaps the best COVID portfolio that Vanguard doesn't have is the FAANG portfolio. At +44.20% YTD, it should be our best seller, especially when we consider that we can probably sell it as a non-COVID selection as well.

But as I said earlier, you won't find many of us here trying to sell you on the strategy of chasing the winners.
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Re: COVID Portfolio

Post by Elsebet »

OP, do you mean a mutual fund of industries that would be open and potentially prosper during a respiratory disease pandemic?

If so that is kind of a fun mental exercise. Based on this one I'd guess:

Domestic PPE manufacturing companies for industry
Domestic PPE manufacturing for normal citizens (masks, sanitizer, etc)
Domestic pharmaceutical companies
Supermarkets
Yeast/flour producers
Auto service
Any company where the majority of people can work from home (not just tech, insurance)
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omeletpants
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Re: COVID Portfolio

Post by omeletpants »

Elsebet wrote: Wed Jul 08, 2020 9:35 am OP, do you mean a mutual fund of industries that would be open and potentially prosper during a respiratory disease pandemic?

If so that is kind of a fun mental exercise. Based on this one I'd guess:

Domestic PPE manufacturing companies for industry
Domestic PPE manufacturing for normal citizens (masks, sanitizer, etc)
Domestic pharmaceutical companies
Supermarkets
Yeast/flour producers
Auto service
Any company where the majority of people can work from home (not just tech, insurance)
Yes, that is what I mean
livesoft
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Re: COVID Portfolio

Post by livesoft »

omeletpants wrote: Wed Jul 08, 2020 11:01 am Yes, that is what I mean
The reality is that if these companies have publicly-traded stock, then investors like you in the Vanguard Total US Stock Market Index fund already have them in their portfolio. That is, they already have a piece of their portfolio in a COVID-19 portfolio. That's one reason the Total US Stock Market index fund is now up more than 42% since March 23.
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Shael_AT
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Re: COVID Portfolio

Post by Shael_AT »

If you time horizon is long and large, i.e. 10-40 years, then the best thing to do is nothing except invest and buy more equities in a balanced, diversified, consistent and tax optimized portfolio early & often, without missing a beat.

Active trading is stressful. I dollar cost averaged in through the entire 'Covid Economic Crisis', and have more than recovered all of my losses.

Sounds like every other stock market fluctuation I've ever lived through. Every recession or depression is different. If you are fortunate to have income and good personal finance in place, then it makes sense to be annoyingly boring. Pays of in the long term.
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Re: COVID Portfolio

Post by whereskyle »

scubadiver wrote: Tue Jul 07, 2020 9:50 pm
omeletpants wrote: Tue Jul 07, 2020 3:51 pm My advisor says Vanguard doesnt have a COVID specific product. Others do and my best friend has returned return on his investment in the last 6 weeks. Going back and forth with my advisor with no good answer. Was Vanguard sleeping on the most compelling event on our lifetimes?
Welcome to the forum.

I don't think Vanguard dropped the ball nor do I think you need to invest in a COVID specific fund.

I will suggest that you read the following three books, if you haven't already:
Common Sense Investing, by John Bogle
The Four Pillars of Investing, by William Bernstein
A Random Walk Down Wall Street, by Burton G. Malkiel

These books will go a long way towards explaining why you don't need a COVID fund.

Cheers,
Scubadiver
I second the recommendation to read these three books. They all will point out that just owning stocks that are currently "good" will not necessarily provide the best long-term returns. In fact many believe the exact opposite is true. Why risk being wrong when you can own currently good and currently bad stocks at all times?
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
VaR
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Re: COVID Portfolio

Post by VaR »

Speaking of sector ETFs:
"Will Vanguard step on the SPDR? This technology ETF just dethroned the industry leader"
https://www.marketwatch.com/story/will- ... 2020-07-08

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omeletpants
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Re: COVID Portfolio

Post by omeletpants »

Talked with my vanguard advisor today and my YTD return is 9.1%. My buddy with the COVID seeded portfolio is 6.% So, I have to admit that my initial reaction was knee jerk
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Re: COVID Portfolio

Post by LadyGeek »

That's good to hear! Here's an important point -

Question: What is the YTD return that you actually receive?

You are paying an advisor for your services. Your return is not only what the funds do, but what remains after the advisor has taken his cut.

Ask this same question to your buddy, who hopefully knows how much of a cut the advisor is taking (a.k.a. Assets Under Management fee).

If you don't know the answer, that's fine. Just let us know and we'll help you walk through it.
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CyclingDuo
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Re: COVID Portfolio

Post by CyclingDuo »

VaR wrote: Wed Jul 08, 2020 3:53 pm Speaking of sector ETFs:
"Will Vanguard step on the SPDR? This technology ETF just dethroned the industry leader"
https://www.marketwatch.com/story/will- ... 2020-07-08

Image
Makes sense with the run technology is having. Although, since Vanguard Total Stock Market Index currently already has 25.20% invested in technology. If one also bought the Vanguard ETF VGT highlighted above, beware of the sector concentration. :shock:

CyclingDuo
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omeletpants
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Re: COVID Portfolio

Post by omeletpants »

LadyGeek wrote: Thu Jul 09, 2020 11:37 am That's good to hear! Here's an important point -

Question: What is the YTD return that you actually receive?

You are paying an advisor for your services. Your return is not only what the funds do, but what remains after the advisor has taken his cut.

Ask this same question to your buddy, who hopefully knows how much of a cut the advisor is taking (a.k.a. Assets Under Management fee).

If you don't know the answer, that's fine. Just let us know and we'll help you walk through it.
Thanks!!! TBH knowing the YTD return before expenses was my primary concern. My buddy has crazy money and access to proprietary investments that I don't have so anytime I can compete with him or beat his return I feel I'm doing well.

In fact, my advisor and I rebalanced my portfolio at the start of the year. I asked him to add a couple of funds that werent on their normal portfolio. Both have returned 28% and he is saying my 9.1 return is #1 on the list of his clients
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Re: COVID Portfolio

Post by scubadiver »

omeletpants wrote: Thu Jul 09, 2020 11:51 am Thanks!!! TBH knowing the YTD return before expenses was my primary concern. My buddy has crazy money and access to proprietary investments that I don't have so anytime I can compete with him or beat his return I feel I'm doing well.
This mindset is detrimental to your financial well-being. It's not a competition. It's about reaching your financial goals.
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Re: COVID Portfolio

Post by nisiprius »

livesoft wrote: Tue Jul 07, 2020 5:42 pm
nisiprius wrote: Tue Jul 07, 2020 5:32 pmIf you really want to invest in individual stocks or in ETFs that are concentrated into current "hot trends," you will have to look to other firms.
A nitpick: One can use their Vanguard account to invest in "hot trends", so one doesn't have to look to other firms. A Vanguard advisor, however, is not going to give advice on "hot trends" at all nor encourage one to invest in "hot trends."
Just to be clear. I do not expect Vanguard to create Vanguard mutual funds or ETFs that are designed to facilitate speculating in narrow, focussed, hot categories that are making financial headlines. Of course, if you have a brokerage account at Vanguard, you can buy zany, madcap products from other fun-loving firms and hold them in your Vanguard brokerage account. But the ticker symbols won't begin with V.
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