Summary I’m sharing my personal portfolio moves with investors. Over the last few days, I picked up a huge position in CYS Investments and funded it by liquidating my position in VNQI. I left my position in Renesola to grab the tax loss. Aside from buying CYS Investments, my investments were very late in September when I kept sending in new cash to buy up equity ETFs. I’m holding some cash outside the portfolio. If prices fall again, I’ll buy equity. If they don’t, I’ll pay down the mortgage. October has been a fairly easy month for generating positive returns. If an investor’s portfolio isn’t up relative to the start of the month, they should really be contemplating their investment strategy. With about a week left in the month, I thought it would be a good time to go over the changes I recently made in my portfolio. Most Recent Acquisition: CYS Investments (NYSE: CYS ) The most recent purchase for my portfolio was a large chunk of CYS Investments. This is a great mREIT and I’ve been looking for it to go on sale. I wish I had picked these shares up even earlier, but it took me quite a while to build the model I was using to establish movements in book value. If the model had been completed by the end of September, I think I would have tossed more cash into my portfolio and started grabbing up the shares. Avoiding Hindsight Bias Of course, it is easy to establish a hindsight bias and think we would have bought when the market was bottoming out. I try to watch for that kind of bias as I evaluate my own choices. When it came to buying with the market down, I transferred new cash in multiple times to buy up shares of some ETFs in late September. My major acquisitions late in September were the Schwab U.S. Dividend Equity ETF (NYSEARCA: SCHD ) and the Schwab International Small-Cap Equity ETF (NYSEARCA: SCHC ). When prices were falling hard and speculation about another recession was getting stronger, these were the ETFs I felt confident tossing more capital into. My Other mREIT The other mREIT in my portfolio is Dynex Capital (NYSE: DX ). Prior to their latest dividend, the low price on shares was about $6.41. On one day I put the floor in for the market with an order at $6.42. That order came back only partially filled, but the shares I got were a great bargain. I didn’t have the capital available to support the price again when it dipped down to $6.41. It did fall below $6.40 following the dividend, but it had just paid out a $.24 dividend so I still see the $6.41 and $6.42 opportunities as the best buys. Since I had the conviction to double down on my bet there, I feel confident I would have been able to pull the trigger on CYS Investments if I had the data available. Selling the Vanguard Global ex-U.S. Real Estate ETF (NASDAQ: VNQI ) This isn’t a bad fund. It offers a fairly unique exposure with a low expense ratio compared to other international equity REIT funds. Unfortunately it has a fairly high correlation with other international equity investments so I didn’t feel compelled to keep it. When I bring my international exposure back up, I’ll probably do it with acquisitions of SCHC and the Schwab International Equity ETF (NYSEARCA: SCHF ). I’m already long both of those securities and expect to buy more during the next 12 months. I am not remotely bearish on VNQI, but when I completed the analysis on CYS there was no way to make a big move without liquidating an existing position. I looked at my existing positions and decided which one I was most willing to sacrifice so I could make the play on CYS. VNQI came up as the top choice for me. It was a large enough position to give me the kind of capital I wanted for the trade and I had no problem with using SCHC and SCHF to get my international exposure back. If I had enough cash on hand to establish my position without selling VNQI, I would have kept the shares. Selling Renesola (NYSE: SOL ) Renesola is the crowning achievement in wealth destruction for my personal investments. It was a remarkably effective tool for destroying net worth and generating a tax loss shield. There is one thing about this investment that I absolutely love: It was in a taxable account. Most of my investing is done through tax advantaged accounts. When I started buying up more investments, I made it a priority to learn what account types would be available to me. Personal financial planners would be giddy at seeing the volume of options I was able to access. It isn’t just IRA accounts. I’ve added a solo 401K for myself and my wife was able to get a 401A, 403B, and 457B. I held onto the position in Renesola for years because I recognized that the value of the tax loss was more important than the value of the individual shares. That’s a pretty nasty gut punch huh? Since the value of the position was in the tax loss, I wanted to ensure that I could time the loss for a year when the benefits would be optimized. I’ll be reaping this tax loss for a while. Increased Cash I sold the VNQI and spent it all on CYS, but I’ve also got some dividend income in my accounts. That money is currently sitting idle. I’ll need to put that money to work. Since each account has a fairly small amount of cash the most likely way to invest it will be using the ETFs that are free to trade. Since my income substantially exceeds my expenses, I’ve also got more cash on hand outside of my investment accounts. I’m planning to use that cash to pay down the mortgage, but I’m hesitating for a bit because I want to maintain flexibility. If shares go back on sale like they were in late September, I’d feel compelled to put that cash into my investments accounts and buy up more ETFs. In addition to SCHC and SCHF, I’d look to buy up more SCHD if it went under $35 again or buy up some Schwab U.S. REIT ETF (NYSEARCA: SCHH ) if it was dipping back down around $37 again. Even though I already own positions in each of those ETFs, I’m happy to increase the positions if the values are highly compelling. My cash position in the investment portfolio is still fairly small, but it was only slightly above 0% at the end of September so it didn’t take much to increase it. I generally don’t consider cash in a “checking” or “savings” account as part of the portfolio. Interest Rate Expectations Some investors don’t like equity REITs in the current market because they know an increase in interest rates would push prices on equity REITs down. I agree with half of that assessment. A substantial increase in interest rates would probably push equity REIT prices down. However, I don’t foresee that happening. I don’t believe the Federal Reserve has the power it pretends to hold. Yes, they can push up short term rates and I think there could be a temporary increase in long term rates, but I’d be buying hard on the price drop. Europe has already seen quite a bit of negative interest rates. I don’t know if we are going there or not, but I do think the Federal Reserve will be completely unable to follow their target path for raising rates. Since I’m not buying into the increasing of rates, I’m happy to hold a heavy allocation to equity REITs and happy to buy more if the Federal Reserve attempts to raise rates. For the same rationale, I love the mREITs that are holding high quality assets that are substantially less susceptible to prepayments. That means either a portfolio of Agency RMBS with lower coupons (that is CYS) or AAA rated CMBS like Dynex Capital. Conclusion My best pickup of the last 30 days or so was shares of SCHD at $34.60. Those shares are now $39.30. When I pulled the trigger on putting in that limit order, I certainly felt some stress. I’m not big on selling shares in any investment unless I believe it is materially over-valued, so selling off the VNQI was a little painful but I wasn’t willing to miss out on the opportunity in CYS. Now you know which securities I’ve been buying and selling. What have you picked up over the last month?