The FRF Fund is clearly running behind equity-wise. This is for two very legitimate reasons that I will take the time to explain in this post.
First, the US market has further accentuated its sideways behavior. US equities have indeed stagnated for the most part since November 2014 while at the same time hiding a large degradation in overall market breadth. However, starting in January 2016, this absence of available upside has further been combined with tremendously higher volatility. This has caused the SP500 index to experience drawdowns in excess of -10% followed by violent recoveries on the back of major short-squeezes. The bottom line is that 99% of my trading so far in 2016 has been concentrated on managing risk rather than maximizing returns. I have a side algorithm which I am using to allocate my cash every month and, logically, no new contributions were warranted to complement the FRF Fund so far this year. No matter how much I would like the FRF Fund to grow in terms of equity size, I cannot be dogmatic in the use that I make of my cash contributions.
This leads me to the second point. As you may have noticed from a recent post, I received a new, major signal to enter precious metals (and gold in particular) in the beginning of 2016. Therefore, most of my contributions went to build a physical and allocated fund in gold and silver in late 2015 and early 2016. The timing proved pretty accurate. Taken altogether along with the FRF Fund, I am WELL past the equity target set for May. This impromptu investment actually proved to be THE investment to be made this year looking at all the other asset classes. With this precious metals fund now being fully constituted, I am expecting my new cash contributions to either be parked in short-term Treasuries or to be finally diverted to the FRF Fund again, if warranted.
As it stands, the US equity market remains trapped within a range with lots of volatility to weather. At this point, this is a poor risk-reward proposal that does not call for “adding good money after bad”. Rest assured that I am remaining more committed than ever to reaching my goals on the FRF Fund. Just remember, that at any point in time, there is always a place that is worth parking your new cash into. The large commitment made to precious metals was an indirect but very strong position that underlines that very fact that “money never sleeps” and that one cannot stayed wed to an investment schedule as markets evolve.