Here's an update on the portfolio's performance.
Passive Portfolio: +0.69%
Vanguard 500 Index: +23.04%
(Source: Portfolio Visualizer)
When I thought September is bad, I wasn't really expecting that a worse month awaits in the remaining months of 2021. By all measures, November is a worse month for my portfolio this year as compared to September. All the constituents in my portfolio are in the red this month- which is a rare occurrence given the backtesting results of my portfolio since 2015.
The exposure to the Chinese market has continued to hurt my portfolio badly this year. Alibaba has experienced double digits drop in terms of percentage every month since July this year with the exception of October. In November alone, Alibaba dropped a whopping ~23%. Such drops in the Chinese market are certainly unexpected despite the usual high volatility seen/associated with Chinese markets. I don't think there is a worse period for the Chinese market than what we are experiencing so far.
The emergence of a new virus variant coupled with FED tapering has also plummet many of the growth stocks or ETFs which focused on them into double digits losses in November. ARK ETFs like ARKK and ARKG experience drops of ~13% and ~16% respectively in this month which is again by far the worst month in this year.
(Source: Portfolio Visualizer)
Without accounting for December yet, November is the worst month for my portfolio with a drop of -7.43%. December is starting on shaky grounds now so I won't be surprised if December is a worse month than November. In comparison, the Vanguard 500 Index drop is a lot lesser at -0.7%.
So what to expect in the months ahead?
Short term wise, I expect the situation to get worse before it gets better. The sentiment in the market has turned bearish and things are not looking pretty recently. The beta of my portfolio is also higher than 1 which means that it has a higher volatility than the market. That works like a double edged sword. When the market is down, my portfolio will experience worse drops. When the market is up, my portfolio will experience higher gains too. So far, the returns of my portfolio this year haven't been great given the events that unfold. I'm not too bothered about it as the first year of the inception of any portfolio always yields results which could easily look like a coin toss (refer to my article here). My investment horizon is at least 5 years so I'm keeping my eyes set on 2025 and beyond.
While I'm not too surprised with the less than optimal returns from growth stocks this year due to the sequence of returns risk- growth stocks had a phenomenal year last year, the tumbling of the Chinese market is definitely beyond my expectations. I could have expected the Chinese market to experience big swings but continuous drops on a daily basis without any breathing room isn't exactly what I could have expected.
I will do a breakdown of my portfolio in my portfolio update when December closes and share some of the tweaks I will be making to my portfolio in the year ahead. I won't be changing out any constituents of my portfolio but I will be adjusting the percentage allocation to each of them. I only aim to rebalance my portfolio once a year. Given that it's close to one year now, I'm aiming to rebalance my portfolio in January.
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