My Retirement Portfolio: Origins, Progression and Learning to Love Macro-Aware Trend-Following
I – BACKGROUND
I will try to keep this brief, but it’s important to lay the foundation.
My retirement investing journey began in 1998, with a target-date-fund I believe. As time went on, as is my tendency, I wanted to learn more about investing and optimize. I found (somebody’s) book and low-fee/buy-and-hold/broadly-diversify became my approach.
While the Dot-Com-Bubble bursting was not huge for me, living through the Housing-Bubble and Great Recession was more impactful. I was unemployed for an extended period.
In the mid-2000s I decided to start a business, and used retirement funds to sustain myself while doing so. The business was ultimately a failure and I had liquidated all but a tiny portion of my retirement savings. This experience had a significant effect on my later level-of-interest and savings-rate.
My records begin in 2016 and I have evidence of a Roth IRA with a modest balance. I believe that was a roll-over/Roth-conversion of a TIAA-CREF account (that one account I couldn’t access).
In the 2010s, especially the first half, I was a contract worker and had no access to a workplace 401(k). I did, it would appear, make yearly (often maximum) contributions to a Roth IRA.
In 2016 I began working at my current job and was able to contribute to a 401(k) and receive an Employer Match. (Yay!)
In 2020 a lot happened (to put it mildly).
In terms of my retirement portfolio, I saw an overvalued equity market and, over the course of six or so months, I dollar-cost-averaged out my “Three-Fund-Portfolio” into (at the time) rather low-yielding money market. While I missed some of the Pandemic drop, I got hit with some of it, selling some of my portfolio at a loss, in a declining market.
In Retrospect: This was, and still is, my biggest (investing) mistake. But I’ve made it my greatest learning opportunity. For years after 2020 I thought I was smarter than the market. I was right about the markets being over-valued (technically), but massively wrong about 1) what that meant and 2) what was actually going to happen. This experience humbled me, and taught me a great deal.
I emerged from 2020 with my skepticism of a still over-valued equity market intact. A belief that equity valuations had to correct and that when they did, I would be ready. In the interim I would save as much as I could, invest in low-risk fixed income and buy into the dip when it came.
. . . [ a few years later ]
In 2024 I felt I had to get invested. I needed to be in equities, of some sort, to have time-in-the-market (rather than continuing to try and time the market).
I figured I would find equities that had (more) reasonable valuations. Enter US Value (mainly small-cap) and International (overwhelmingly Value). I was mostly re-invested (but still had positions in high-yield corporate [yield] and money market [dry powder]) and I felt pretty good.
Fast-forward to mid-2025 and I just couldn’t believe the valuation-doomers and perma-bears any more. Yes, the CAPE ratio was still too high, the Buffet Indicator was too high, and rising, . . . yada, yada, yada. There were so many academically sound arguments for why equities had to correct soon – but they just didn’t.
In my (significant) research and study, I came across Darius Dale and 42Macro (42m). I began to warm to his approach – he was agnostic on market valuations, his religion was risk management and earning the best return possible. He also had strongly-held views on macro conditions and trends.
It took me a few months, but I eventually subscribed to his service at the entry-level tier (i.e. daily updates and access to the Discretionary Risk Management Overlay, aka Dr. Mo).
Before we get to today, and the portfolio construction decisions I need to finalize, let’s look at some things I’ve learned.
II – [SOME] TRUTHS I’VE COME TO REALIZE (and ACCEPT)
- Fees will always matter, but net expenses, compared against overall return, also matter.
- Understanding the macro environment and how various economic pieces work together is vital if one is going to actively and tactically create and manage a retirement portfolio.
- The possibility of the AI Bubble popping and a “lost decade” in US equities is a real possibility, it’s just incredibly difficult to know when it will happen and when it will start.
- AI might unleash a paradigm change in productivity and efficiency which will make all the doubters seem like small-minded Luddites, or it will continue to struggle with errors and hallucinations and create real social problems with its power and water needs. We probably won’t even begin to know for at least three years.
- Equities can stay over-valued much, much, much longer than one might think.
- Most Retirement Authorities advise managing risk with time. Meaning: hold a diversified portfolio, stay invested during downturns and over time returns will be positive. With less than 10 years until retirement (maybe/hopefully less), and only 4.5 until sequence-of-returns risk becomes acute, I have less and less time to manage risk with.
- No fiscal (/political) or monetary institution wants to be remembered as the one that said the hard things, did the hard things – they will always do everything possible to forestall the underlying problems and push the reckoning out into the future. (And equity markets will feast on the largesse this cowardice creates.)
- There will come a time – perhaps quickly, perhaps over a period-of-time – when there are no more levers to pull, no more knobs to turn (in terms of fiscal and monetary policy).
- Lately, and likely going forward, given fiscal (especially tax) and monetary policy, the only real path to wealth generation is through equities (and perhaps, on-the-margins, other investable assets).
- Fiscal Dominance, and it’s little brother, Financial Repression are real (look ’em up!).
III- CURRENTLY
Enter 42Macro
So, now. Where am I at now? I am a 42m subscriber.
Some things that Darius has said have had a real impact [some of these are paraphrases, but accurate in terms of intent/effect]:
- “When manna [broad equity market beta] is falling from the heavens, hold out your basket and collect it, when it’s not, pull your basket back and wait.”
- “With the S&P 500 as it is, taking factor risk is foolish.”
- “42Macro clients, with K.I.S.S. and Dr. Mo, can be confident in knowing they can minimize downside risk and maximize upside capture.”
42m’s basic recommendation for retail investors is to subscribe to the tier that includes their K.I.S.S. portfolio (60% Equities, 30% Gold, 10% Bitcoin) guidance and just follow the K.I.S.S portfolio guidance signals.
They also say that one can create their own custom K.I.S.S. portfolio using equities, fixed income and real assets.
That’s what I’ve done: create my own custom version of K.I.S.S..
I’m on-board with the 60% equities. It’s the other 30%/10% that I’m stuck on.
I’ve always been anti-gold, and since it’s emergence, anti-crypto. Both are (in my view) non-productive assets that are just as belief dependent as the dollar/fiat-currencies.
BUT, I do, kinda, see the case for gold – and to be fair, it does have a track record.
The Importance (and difficulty) of Managing Emotions
Recently, even with a framework forming, I made (what turned out to be) an impulsive purchase ($XLRE) (real estate sector fund) that didn’t fit my (ultimate) plan. Why? Because I wanted something to fill the 10% hard assets sleeve, but couldn’t commit to gold yet. Three days after purchase it was down 4% and I was questioning everything again. That’s when I realized: the framework matters less than the discipline to stick with it.
It was this purchase that made ask the fundamental question: to what extent do I agree with 42m’s long-term macro thesis?
The answer: mostly (but not completely (I’m still a No on crypto)). Leaving me with the question: how do I create My K.I.S.S. Portfolio?
IV – QUICK SIDEBAR
Not to ‘toot my own horn,’ but it’s important to realize (or for me to remember) that I’ve come a long way from that that 36-year-old who emptied his retirement accounts circa 2006.
I found ways to super-size my savings rate and made, overall, pretty decent asset allocation decisions. And, rather importantly, I saw the benefit of Roth saving and now my Roth-share is 57% of my portfolio. With (my) new money being all Roth, I am well prepared for RMDs and potential future tax-rate-increases.
Numbers wise, I could stop saving now and reasonable growth would get me to (a very basic version of) My Number by age 65. If I keep saving as I am, I should be able to retire on-time and comfortably [fingers-crossed].
So, as confused as I may seem on a couple small aspects of my asset allocation, I am: 1) pretty savvy and experienced and 2) in really good shape overall. (And: 3) sufficiently humbled.)
V – GOING FORWARD
What questions am I facing now? What decisions do I need to make?
Well, let’s say I have made-my-peace with gold ($GLDM) and willing to allocate 15% of my portfolio to the shiny yellow metal.
Mini-Side-Bar on Gold: I had been resistant to gold in general, and lately because of its huge run-up in the last year or so. But if one is going to get in, now is the time. There’s been a slight pull-back (to $4,013, from $4,398) and the consensus end-of-2026 price target is ~$5,000 (longer term, people speak of $7,000 – $10,000 – so, as Tom Brady would say: LFG!).
Let’s also say, at least until Age 60 (April 2030), I am comfortable managing equity risk with Dr. Mo and a 60% allocation to equities (albeit with an increasing chunk in global equities, ex US ($VXUS or $FTIHX)).
What do I do with that last 25%!?
I could ignore 42m’s long-term macro guidance and drop it in Core Bond ($AGG) – safe, diversified fixed income that will likely beat inflation by 50-75 bps.
Maybe some other moderate-risk, lower-volatility fixed income sector, maybe Senior Loans ($SRLN)?
Perhaps some investment-grade bonds, all corporate as a nod to 42m?
Managed Futures?
Or, Managed Futures; either $DBMF or $CTA or $KMLM, or some combination thereof.
What are managed futures (MFs) you may ask?
According to Investopedia:
“Managed futures refers to an investment where a portfolio of futures contracts is actively managed by professionals. . . . Managed futures can have various weights in stocks and derivative investments. A diversified managed futures account will generally have exposure to a number of markets such as commodities, energy, agriculture, and currency. Most managed futures accounts will have a stated trading program that describes its market approach. Two common approaches are the market-neutral strategy and the trend-following strategy.”
MFs are available to retail investors via Exchange Traded Funds (ETFs). I would use MFs to invest in something non-correlated with both equities and US Treasuries (and as a full alternative to Bitcoin).
NOTE: I am splitting my MFs sleeve between $DBMF and $CTA because of how they implement MFs differently ($DBMF: large CTA emulation; $CTA: systematic, with flexibility). Suffice it to say, it’s diversification-of-approach in MFs.
My Yield-Gremlin is Chirping
I do have a soft spot for yield and income. I know that equities usually return more over time, but I love to see those monthly dividend payments.
And, let’s be real, I’m no Spring Chicken anymore – some boring IG yield is a good thing in the second-half of one’s 50s.
To that end, I am allocating 10% to Investment-Grade Intermediate Corporate Bonds ($LQD).
Maybe I’m sacrificing some long-term return, but: 1) I am staying true to 42m’s long-term thesis by avoiding US Treasuries and 2) I’m going investment-grade, not high-yield, or senior loans, which are both rather tempting.
Next Steps
Next steps are 1) finalize asset allocation, 2) determine target position sizes and 3) buy the assets.
Then I sit back and let 42m do its thing. Each day I check my Inbox for 42Macro’s missive on what’s happening macro-wise and any Dr. Mo signal updates. For me, the Dr. Mo signals would be: $SPY, $ACWX, $GLDM and $LQD.
MFs are a buy-and-hold position, reviewed quarterly.
My Asset Allocation [w/ Dr. Mo. signal funds]
40% – $FXAIX [$SPY]
20% – $VXUS [$ACWX]
15% – $GLDM [$GLDM]
10% – $LQD [$LQD]
7.5% – $DBMF
7.5% – $CTA
Expectation Overview
What do I expect from each sleeve? (BTW: all return figures are nominal, unless otherwise indicated; my average inflation estimate is 3%.)
EQUITIES: 60% – This is the growth sleeve. Given my willingness to expose myself to broad equity risk (managed by Dr. Mo.’s signals), I expect 7% CAGR from this sleeve (and that’s being conservative… 9-10% CAGR would not surprise me (please me: yes; surprise me: no).
GOLD: 15% – This is the monetary-debasement-protection sleeve; strategic ballast if you will. Expected CAGR here is 4-5%. If all it does is slightly out-pace inflation I’ll be pleased.
MANAGED FUTURES: 15% – This is the zag-when-equities-zig sleeve (a sort of enhanced ballast). My understanding is that MFs can be volatile at times, and flat at times, I accept that, given their non-correlation to equities (and bonds).
CORPORATE BONDS: 10% – Yield baby, yield. $LQD’s full back-test (23.26 years) is a CAGR of 4.59% and post-FFR-normalization (since 9/1/23) back-test CAGR of 7.36%. 6% a year is a reasonable expectation.
OVERALL – I see this portfolio returning 7% nominal, 4% real, over time (quite possibly 9/6). More importantly, it gets me out of, what Darius Dale has described as, the melting ice cube that is the US Treasuries market.
The All-Important Accountability Bit
I’m committing to exit my $XLRE position by November 30th and implement this allocation by mid-November. I’ll revisit this in six months to report on how it’s actually working – how (/whether) I stuck with the plan, how the positions performed and what I learned from living with this framework instead of just theorizing about it.”