After the big moves in January and February, I thought it would be a good time to look at my portfolio and how it performed. This seems to be a good practice to me. It comes down to the question of risk tolerance. Is my portfolio in line with what my stomach can support?
Looking back at the start of the year, There was actually little drawdown in my portfolio.Compared to the general market dropping up to 10 pct, my drawdown was less.
What could explain this?
A first reason is that I look only once at my portfolio. and I look the first day of the month. The max drawdown of the market in January was on Jan 20 and Feb 11. 2 days that I have no formal record of my portfolio value.
A second reason is to be found in my asset allocation. Lets have a close detailed look.
The graph tells me the following
- Roughly 37pct (the brownish) is invested in assets that do not care about market moves. A market move of 10 pct will give me only 6,3 pct drawdown. This is good. On the downside, a market uptake of 10 pct will only increase my portfolio with 6,3 pct. Off course, this is the goal of these elements in my portfolio.
- The core part of my portfolio is also not 100 pct in stocks. These are my mutual funds that I hold for their power to survive market crashes. Or at least, so they did in 2008/2009.
So, to make a summary, for the time being, I am in a 50/50 pct portfolio.
With a portfolio like this, I have less volatility than the market. This is a two edged sword. There is less downside swing. Less upward swing also. This means it is more difficult for my portfolio to have a long term return that will bring FIRE closer.
With the current plan in place, all my contributions will go my lazy index portfolio. As such, my exposure to higher risk asset will increase. If the past is a good indication for the future, this should result in a higher expected return as well.
How did your portfolio do during the first 2 months of the year?