Solyco Wealth Model Portfolios Expand Outperformance vs. Benchmarks in 4Q24, 2024
The four model portfolios constructed and managed by Solyco Wealth concluded 2024 with mixed results, correlated with the allocation of equities and fixed income within each model, as relayed in the following table. Whereas the equity-heavy Aggressive Model Portfolio posted a +1.34% total return for 4Q24 (including the impact of our 1.0% annual management fee), the 65% fixed income-weighted Conservative Model Portfolio generated a 0.97% loss for the quarter. Overall for 2024, however, each of our four model portfolios generated attractive after-fee returns, led by Aggressive’s 16.89%. Since inception Aggressive, which only carried an average 80% weighting to equities, generated a compounded average annual return of 10.51%, or a 39.90% total return, after fees. This outdistanced the performance of its benchmark by 26.02% over the same Since Inception time period.
Source: FactSet and Solyco Wealth
Largely the case since the inception of Solyco Wealth on September 8, 2021, securities selection and portfolio diversification led our four model portfolios to outperform their respective benchmarks for across all time periods: 4Q24, 2024, 2023, 2022, 3-Year, and Since Inception. Each of our model portfolios, consistent with the benchmark composition data provided below, carries allocations to cash, fixed income Exchange Traded Funds (ETFs), and individual stocks. Typically, we invest the equity portions of our portfolios in the stocks of 28 to 32 companies with individual position sizes ranging from 1% in our Conservative Model to as high as 3% in our Aggressive Model.
As a result of anticipated increased volatility in 2025 as compared to 4Q24 and 2024, we reduced our equity weightings across the board for our Model Portfolios while modestly increasing our debt allocation and significantly raising our weighting to cash. Within the fixed income weightings of our Models, we tactically scaled duration back to only short-term securities with an average two-to-one preference for investment grade corporate debt versus US government debt.
Conservative benchmark = total returns for 10.0% iShares Russell 3000 ETF (IWV), 65.0% iShares Core US Aggregate Bond ETF (AGG), and 10.0% MSCI ACWI ex-US ETF (ACWX), and 15.0% Charles Schwab Family Federal Debt Securities mutual fund (SWGXX).
Moderate benchmark = total returns for 22.5% iShares Russell 3000 ETF (IWV), 45.0% iShares Core US Aggregate Bond ETF (AGG), and 22.5% MSCI ACWI ex-US ETF (ACWX), and 10.0% Charles Schwab Family Federal Debt Securities mutual fund (SWGXX).
Moderately Aggressive benchmark = total returns for 32.5% iShares Russell 3000 ETF (IWV), 25.0% iShares Core US Aggregate Bond ETF (AGG), and 32.5% MSCI ACWI ex-US ETF (ACWX), and 10.0% Charles Schwab Family Federal Debt Securities mutual fund (SWGXX).
Aggregate benchmark = total returns for 45% iShares Russell 3000 ETF (IWV), 5.0% iShares Core US Aggregate Bond ETF (AGG), 45% MSCI ACWI ex-US ETF (ACWX), and 5.0% Charles Schwab Family Federal Debt Securities mutual fund (SWGXX).
All data is as of 12/31/2024. Since inception includes performance from September 8, 2021.
Source: FactSet and Solyco Wealth
Special Note: Discontinuation of stock quote, company news, and research access from one of our service providers necessitated a change in the prior provider for our price and performance; we transitioned to FactSet from Morningstar Direct. This change forced us to adapt from using index-level information for our benchmark comparisons to utilizing price and performance data from Exchange Traded Funds based on these same indices: iShares Russell 3000 ETF (IWV), iShares Core US Aggregate Bond ETF (AGG), MSCI ACWI ex-US ETF (ACWX). The cash component utilized in our benchmarks, however, remains the same: Charles Schwab Family Federal Debt Securities mutual fund (SWGXX). The fact that these ETFs incur management fees as compared to the absence of such fees for the indices on which they are based defines the only known difference to our knowledge between the components. Notably, this difference translates into misaligned past performance figures vis-à-vis our prior published performance results, notably for 2022 and 2023.
AS ALWAYS, WE ARE HAPPY TO DISCUSS PORTFOLIO AND PERFORMANCE SPECIFICS WITH INVESTORS AND POTENTIAL INVESTORS: PLEASE CONTACT US IF YOU WOULD LIKE TO DO SO.
Below, the left-hand graph illustrates the degree to which consistent outperformance versus our benchmarks drives cumulative performance over longer time periods. While only in existence for slightly more than three years, we remain focused on long-term performance with an over-arching goal to remain consistent across all time periods in generating this expected long-term outperformance. The right-hand line graph, which offers a comparison of Model Portfolio performance vis-à-vis that of the S&P 500, illustrates the degree to which equity exposure through up and down environments contributed to our outperformance (or the lack thereof in the case of our more fixed income-oriented portfolios). In 2022, for instance, each of our four model portfolios benefited significantly not only from strong stock selections, by also from active asset allocation to equities versus bonds.
To a lesser extent asset allocation in 2024 also aided Model Portfolio performances versus their respective benchmarks. For instance, the average 20% allocation to Cash and Fixed Income for our Aggressive Model Portfolio generated a +4.0% return, 270 basis points better than the 1.3% return generated by the benchmark Bloomberg US Aggregate Bond Index (AGG). We remain highly cognizant of the fact, however, that this relatively modest higher return from the bond portion of our most aggressive portfolio paled in comparison to the much higher, MAG-7 driven 25.03% return offered by the S&P 500. The power with which Technology stocks commenced last year combined with the highly concentrated nature of this move higher left us playing catch-up for the entirety of the year. Entering 2024 we not only owned very few of these high-flying names, but we also exited these positions more often than not well before they achieved their highs for the year. Alas, missing moves of that magnitude marks the primary tradeoff for those of us in the investing realm that remain beholden to “valuation discipline.”
Aggressive Model Portfolio
The Solyco Wealth Aggressive Model Portfolio generated an after-fee, 16.89% total return for 2024 with 4Q24 amounting to 1.34% of this full-year figure. These returns, while significantly outdistancing those of Aggressive’s benchmark, lagged those of the 100% equity-weighted S&P 500 by 8.1% and 1.1%, respectively, for the 2024 and 4Q24 periods.
The above table reflects a 1% annual management fee, equivalent to 0.25% for 4Q24 and 3.1% since the 9/8/21 inception of Solyco Wealth’s model portfolios.
Actual client investment performance likely will differ from respective model portfolio performance due to several factors including: 1) Timing of securities purchases and sales, 2) Dividend reinvestment choices, 3) Securities held outside the model portfolio, 4) Weighting differentials for certain securities relating to whole versus partial share accounting, 5) Timing and pricing of rebalancing actions, and other minor factors.
Aggregate benchmark = total returns for 45% iShares Russell 3000 ETF (IWV), 5.0% iShares Core US Aggregate Bond ETF (AGG), 45% MSCI ACWI ex-US ETF (ACWX), and 5.0% Charles Schwab Family Federal Debt Securities mutual fund (SWGXX).
Chart Industries (GTLS), which we entered 2024 with a “double-weight,” 6% position, defined the largest upside contributor for Aggressive as it generated a 77.5% return for the portfolio. Other significant contributors to 2024’s Aggressive Model Portfolio performance include:
- Broadcom (AVGO), a networking semiconductor and software provider,
- Solar panel manufacturer First Solar (FLSR), and
- Vistra (VST), an independent electric power producer.
Notably, none of these four companies remained in the Aggressive Model entering 2025 as each stock, ultimately, significantly exceeded our valuation target.
To the downside Aggressive suffered from poor performances from two semiconductor companies, ST Microelectronics (STM) and Advanced Micro Devices (AMD), which remains in the portfolio with recent respective estimated upside of 28.8% to the $150 level. Other downside movers held by Aggressive last year were APA Corp. (APA), an oil-and-gas producer, YETI (YETI), the beverage container and consumer products company, and payments technology company DLocal (DLO).
For 2025, we harbor particularly positive expectations from Aggressive’s holdings of Yum China (YUMC), the China-based operator of Kentucky Fried Chicken, Pizza Hut, and other restaurants, NICE (NICE), which is a Salesforce (CRM) look-alike focused on customer relationship management software and platforms for mid-size enterprises, DLO, and come-back stories Dollar General (DG) and Comcast (CMCSA).
Moderately Aggressive Model Portfolio
Solyco Wealth’s Moderately Aggressive Model Portfolio offered participants a +14.27% total return in 2024, 417 basis points (bps) better than its benchmark for the year. Over the past three years ModAgg generated a cumulative total return of 23.43%, 590 bps short of the S&P 500 but 1,456 bps ahead of the benchmark. As a reminder, ModAgg is composed of 65% equities, 25% fixed income, and 10% cash.
The above table reflects a 1% annual management fee, equivalent to 0.25% for 4Q24 and 3.1% since the 9/8/21 inception of Solyco Wealth’s model portfolios.
Actual client investment performance likely will differ from respective model portfolio performance due to several factors including: 1) Timing of securities purchases and sales, 2) Dividend reinvestment choices, 3) Securities held outside the model portfolio, 4) Weighting differentials for certain securities relating to whole versus partial share accounting, 5) Timing and pricing of rebalancing actions, and other minor factors.
Moderately Aggressive benchmark = total returns for 32.5% iShares Russell 3000 ETF (IWV), 25.0% iShares Core US Aggregate Bond ETF (AGG), and 32.5% MSCI ACWI ex-US ETF (ACWX), and 10.0% Charles Schwab Family Federal Debt Securities mutual fund (SWGXX).
Albeit at a significantly smaller weighting, GTLS also led ModAgg’s top-performers for 2024 with its 77.5% upside contribution for the portfolio. We also allocated weightings of VST and AVGO to the Moderately Aggressive Model Portfolio, which benefitted from their respective 65.4% and 52.0% contributions. A recovery in AliBaba’s share price, which we booked prior to an end-of-year turn lower, offered a 40.0% return while Financials Citizens Financial Group (CFG), which we held twice over the course of the year for a total +44.8% contribution, and PayPal [+33.0%, (PYPL)], also defined leading positive contributors for ModAgg. Notably, ModAgg also enjoyed a 4.8% positive contribution via active management of its fixed income ETF holdings, particularly a timely entry and exit of the iShares 20+ Year Treasury Bond ETF (TLT) for a +5.74% contribution.
As with Aggressive, painful downside moves from the following stocks significantly hampered ModAgg’s performance last year:
- ST Microelectronics, which lost 44.3%,
- APA, down 32.9%, and
- Advanced Micro Devices, –24.2%.
Long-term holding Nike (NKE) also offered headwinds, but an early 2025 price recovery for computer and data center storage chip manufacturer Micron (MU) offset much of that company’s 22.4% 2H24 loss for the portfolio as it continued to be held in the Model.
Moderate Model Portfolio
Consistent with its much lighter allocation to equities than our more aggressive models, the Solyco Wealth Moderate Model Portfolio generated a lower, 8.07% total return for 2024. This raised that Model’s cumulative total return since its 9/8/21 inception to 16.02%, after deducting 3.3% of total management fees for the 3+ year period. While Moderate’s 2024 outperformance versus its benchmark only amounted to 0.6% last year, it remains cumulatively 1,115 bps ahead of its benchmark since inception.
Moderate carries a 45% fixed income weighting. Equities also make up 45% of the Model with a 10% cash allocation balancing the portfolio’s strategic allocations.
The above table reflects a 1% annual management fee, equivalent to 0.25% for 4Q24 and 3.1% since the 9/8/21 inception of Solyco Wealth’s model portfolios.
Actual client investment performance likely will differ from respective model portfolio performance due to several factors including: 1) Timing of securities purchases and sales, 2) Dividend reinvestment choices, 3) Securities held outside the model portfolio, 4) Weighting differentials for certain securities relating to whole versus partial share accounting, 5) Timing and pricing of rebalancing actions, and other minor factors.
Moderate benchmark = total returns for 22.5% iShares Russell 3000 ETF (IWV), 45.0% iShares Core US Aggregate Bond ETF (AGG), and 22.5% MSCI ACWI ex-US ETF (ACWX), and 10.0% Charles Schwab Family Federal Debt Securities mutual fund (SWGXX).
Payment processing and financial technology significantly aided Moderate’s 2024 returns as it enjoyed a 33.0% move higher from its PYPL allocation as well as similar 32.3% appreciation from FiServ (FI). Technology infrastructure player Corning (GLW), BABA, and VST, also provided outsized upward moves for the Model. In terms of weighted contribution, TLT, the 20+ year US Treasury ETF, ranked as the 2nd-largest contributor to Moderates total return as we had a 10% allocation for much of the year that generated an unweighted return of 12.1%.
Downside culprits for Moderate were the same stocks as for our ModAgg and Aggressive Model Portfolios:
- STM,
- APA,
- NKE,
- AMD, and
- MU.
Reflective of our conservative stance entering 2025, we tactically allocate our Moderate Model Portfolio in the flowing manner: 20% cash, 30% fixed income, and 50% stock. Harboring concerns about how long-term interest rates will react to economic conditions amidst significant probable policy disruption, Moderate carries a 20% weighting to the Vanguard Short-Term Corporate Bond ETF (VCSH) and a 10% weighting to its companion US Treasury ETF, Vanguard Short-Term Treasury ETF (VGSH). Should clarity arise concerning economic policy implications and/or significantly attractive buying opportunities for high-quality equities, we stand ready and willing to aggressively pull down this 20% cash position in favor of increasing Moderate’s 1.67% allocation to each of the 30 stocks that compose its equity holdings. For much of 2024, for instance, Moderate carried a 60% equity weighting.
Conservative Model Portfolio
With a 65% fixed income weighting, in 2024 the Solyco Wealth Conservative Model Portfolio returned 6.89% after our 1% management fee. Effective duration exposure, particularly from its TLT weighting, primarily drove Conservative’s performance much higher for the year than the AGG’s 1.31% total return. For the year Conservative’s relatively modest 25% equity weighting generated approximately one-third of its total return, indicative of the readily apparent fact that even value-tilted equities like those primarily held in our Conservative Model still significantly outperformed bonds in 2024.
The above table reflects a 1% annual management fee, equivalent to 0.25% for 4Q24 and 3.1% since the 9/8/21 inception of Solyco Wealth’s model portfolios.
Actual client investment performance likely will differ from respective model portfolio performance due to several factors including: 1) Timing of securities purchases and sales, 2) Dividend reinvestment choices, 3) Securities held outside the model portfolio, 4) Weighting differentials for certain securities relating to whole versus partial share accounting, 5) Timing and pricing of rebalancing actions, and other minor factors.
Conservative benchmark = total returns for 10.0% iShares Russell 3000 ETF (IWV), 65.0% iShares Core US Aggregate Bond ETF (AGG), and 10.0% MSCI ACWI ex-US ETF (ACWX), and 15.0% Charles Schwab Family Federal Debt Securities mutual fund (SWGXX).
Returns from clothing and accessories maker Tapestry (TPR), parent company of Coach, digital payment processor Block (SQ), and chicken producer Tyson (TSN), joined TLT, VST, BABA, and FI, to drive upside realizations for Conservative. Complementarily, VCSH and VGSH also generated positive performances at significantly heavier weightings for the Model.
Downside headwinds came from the same stocks as for our riskier portfolios: STM, APA, NKE, AMD, and MU. Entering 2025, however, the Conservative Model Portfolio only retained allocations to AMD and MU, with Micron recovering much of its later-2024 loss early in 2025. We expect returns for our Conservative Model Portfolio in 2025 to largely depend on its short-term debt and cash allocations with capital preservation defining its primary reason for participation.