With only one more week to go till the end of 2023, I thought it's time to pencil down my thoughts on my portfolio's performance and potential adjustments that I will make in 2024. I have done this previously in 2022 and 2021.
I decided to break this post into two parts. The first part will concentrate on the general performance of the constituents in my portfolio. The second part will provide the absolute figures (in %) and explore the potential adjustments that I will make to the portfolio in 2024.
General Overview
This year has been a fantastic year for my portfolio. I think nobody can complain about a 40% return. This makes up for the rather dismal performance of the portfolio in 2021 and 2022, resulting in 5% CAGR across a 3-year period. This beats the likes of CPF returns.
If I liquidate my portfolio at the end of 2022, I will be staring at a -25% loss in my portfolio. This again goes to show that patience in investing is important. Over a longer term period, the portfolio tends to recover. I once wrote an article on the time period needed to recover from a "bad" investment. I stand by what I preached in this article written in 2021, continue to hold on to my portfolio choices, and benefit from the bull run this year.
In comparison, the S&P 500 has a return of 24% YTD. Barring an extreme black-swan event, I think it is safe to say that my portfolio has beat the index this year. However, I am aware that my portfolio is still lagging the index over a three-year period. Even so, I am still confident that my portfolio stands a chance to beat the index over a 5-year or even 10-year period.
This is also the first year when the returns in my portfolio actually outweighs my own contributions. It is always a good thing to know that your portfolio is growing by itself and relies less on your own regular contributions. For the avid readers, you might have know that the next financial goal I am working towards is Coast FIRE (I wrote an extensive article on FIRE). I am still far from that goal but have taken steps to ensure that my portfolio is hitting the right figures on an annual basis for me to reach Coast FIRE in a 3 to 5 year period. Hopefully, my portfolio continues to outperform in the next few years and this goal could be reached sooner rather than later.
Below are some of my thoughts on my portfolio. For those who are unfamiliar with my portfolio choices, below is a simple pie chart on it.
Stable Constituents
URTH (26%) and BRK.B (16%) are the stable constituents in my portfolio and have a higher weightage than almost every other constituent. Together, they make up 42% of my portfolio. Both constituents have very positive double-digit returns this year. While BRK.B might have a worse return than the S&P 500 index this year, it has a lower market correlation than URTH and proves to provide stable returns in market downturns (just look at 2022).
The standard deviations for these constituents are the least in my portfolio, and hence they carry the least risk. It's my intention to continue to expand on my portfolio allocation to these two constituents as my portfolio grows as I will be looking for more stability in my portfolio as I ages.
Bitcoin
A whopping 160% return in 2023 so far! And the best part is that I am personally convinced that the returns will be even better in 2024. Bouncing back from a -64% return in 2022, Bitcoin returns to a triple-digit return in 2023. While the price of Bitcoin has been on a stable uptrend for most parts of this year, the likely trigger for the price boom comes from the expectations that a Bitcoin Spot ETF will be approved in the very near future. This is certainly something to look forward to in early 2024. 2024 will also be the year of halving for Bitcoin, and we all know what typically happens to the price of Bitcoin soon after the halving. I am expecting the price performance of Bitcoin will be even better in 2024.
Bitcoin currently amounts to 20% of my portfolio, and I am unlikely to further increase my percentage allocation to Bitcoin in the future. While I am absolutely convinced that Bitcoin is here to stay and will be a great investment vehicle, I do not want to take on more risks in my portfolio. I will stick to a 20% allocation and rebalances annually.
China Equities
Nothing but disappointment. 2023 will be the third straight year of losses for MCHI and BABA. After clocking double digit losses (in terms of percentage) in 2021 and 2022, MCHI and BABA continue to have negative returns in 2023. To put things in perspective, your share in BABA is only worth 30% of what it used to be on the first day of 2021. The government crackdown on technology companies over the past years has had long and lasting effects on the equities. It also doesn't help that China's economy is not recovering as fast as expected from the extended lockdowns during the COVID period. It's a very political environment in China with the government having strong control over the companies. This means that the performance of your equities are often not only isolated to the companies' performances. Government influences are insuperable, and a risk for investors to consider seriously. I have limited the allocation to China equities to only 20% in my portfolio, but have since felt that even this is too high a percentage for China equities in my portfolio. YTD, BABA has a -18% return while MCHI has a -20% return.
Tech ETFs and Energy Stock
The remaining 3 equities (ARKK, ARKG, and SHEL) make up 18% of my portfolio. The inclusion of ARKK was to ensure my portfolio benefits from the tech boom in this decade. ARKG was included as I do not want to miss the accelerating growth in the genetics scene (I am of the opinion the genetics industry is the industry to focus on in the next 5-10 years). Both of these ARK ETFs have a more than 50% decline in share price in 2022, following a dismal 2021. Tides change in 2023, with ARKK achieving a 74% return YTD (outperforming NASDAQ) and ARKG achieving a 18% YTD. While I am not fully convinced by the way Cathie Wood manages the ETFs, I am still positive about the future returns in these ETFs.
SHEL is the only energy-related equity in my portfolio. During the early stages of my portfolio, the shares of Shell are being dumped relentlessly in the wake of COVID pandemic. The stock proves to be a worthy addition as it has a double-digit return in 2021 and 2022. Barring large changes, it should also provide a double-digit return in 2023. I am not so positive that the stock will continue such price performances in the next few years, and am pondering over the necessary adjustments which I need to make to its allocation in 2024.
Part 2 to be released in early Jan 2024.
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