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Welcome to this part of the series on building and managing an investment portfolio. For those of you who are here for the first time, a quick recap of what is done so far:
This series began on 14th Feb 2023. Part 1: Defined a basic framework for the investment portfolio, Part 2 to 10: evaluated 35 stocks from US Megacaps, Engineering & Automation, Semiconductors, Automotive stocks and Financials. Part 6 was an evaluation of Govt. Bonds. So far, I have added 7 equities and 1 Govt. Bond to the portfolio.
Today, we evaluate the portfolio. Date range: 14th Feb 2023 to 9th March 2023 (Yesterday).
Portfolio performance:
The portfolio is up + 0.1% while the benchmark is down - 4.6%
Since we are just one month into this series and portfolio additions have been gradual, I think we can assign this portfolio out-performance to beginners luck rather than any particular skill.
While the portfolio is currently outperforming the index, it will not beat inflation at the current pace (which is one of the objectives defined for the portfolio).
Equities have contributed the most to the performance, while fixed income has detracted from it.
Asset Class & Regional Allocations:
The portfolio has a conservative asset allocation currently with 24% in Equities, 35% in Bonds and 41% in cash.
Regional allocation: largely in Developed US and Europe (Incl UK) and a 1% allocation to Asia.
One of the benefits of the current allocation and holding UK Gilts in the portfolio is that it is less sensitive to currency fluctuations. The positive contribution by the USD to the returns are nearly balanced by the negative contribution of the GBP.
Portfolio details:
Alphabet and Infineon have generated the most returns in this period.
Financial stocks have come under selling pressure this week as markets price in higher interest rates for longer than previously expected.
I will look to diversify more into Asia, if I see relative value in future evaluations.
Portfolio Risks & Evaluations in the weeks ahead:
The ECB is scheduled to announce its interest rate decision next week and in the following week, all eyes and ears are likely to be on the Fed Chair in the FOMC press conference. The BoE is expected to announce its interest rate decision on March 23rd 2023.
Macro Economic data to be watched (Inflation, Manufacturing, Retail Sales)
While it looks likely the US may avoid a recession, could I skip defensive sectors such as healthcare and consumer staples and move to Industrials, Real estate and even Metals / Mining stocks?
Should I look at possibilities to hedge the equity exposure in the portfolio?
These are some of the considerations for future posts.
Thanks for your time!
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