What a year for the market.
Wall street ends 2022 with the biggest annual drop since 2008.
It's a tough year for my portfolio too. Here's an overview .
My Portfolio: -26.96%
Vanguard 500 Index: -18.23%
Performance since inception (Jan 2021)
My Portfolio: -25.57%
Vanguard 500 Index: +5.08%
(Absolute figures are arbitrary)
Certainly not the best results.
For the uninitiated, this passive portfolio was created with the intention of only doing annual rebalancing and I pretty much hands-off it with only a review done annually. You may check out the review for 2021 here. The purpose of the portfolio is to achieve at least 10% return on an annual basis and beat the Vanguard 500 index. It's certainly challenging right now. My targeted time horizon for this portfolio is at least 5 years, hence I am not super bothered with the results right now especially given the dismal performance of the overall market this year. However, I must admit that the chances of beating the Vanguard 500 Index is becoming slimmer now.
Here's the breakdown of the constituents of the portfolio.
(Source: Portfolio Visualizer)
Let's look at the performance (for the year 2022) of each of these constituents in detail.
URTH (iShares MSCI World ETF)
Price Growth in 2022: -17.96%
No surprise here. This return of URTH mimics that of the U.S. market. When Wall Street has an absolutely bad year, you will expect the same for URTH. The initial portfolio allocation for URTH is 20% in 2021, and I have increased my allocation for this constituent to 26% in 2022. I stand by my choice and will continue with this allocation.
BRK.B (Berkshire Hathaway)
Price Growth in 2022: +3.31%
BRK.B is one of the few constituents in my portfolio that has a positive return in 2022. After a very bad 2020, BRK.B continues to outperform the index for 2 years straight. It beat the Vanguard 500 index last year and continues to outperform this year. The initial portfolio allocation for BRK.B is 15% in 2021, and I have increased my allocation for this constituent to 16% in 2022. I am deliberating if I should be increasing my allocation to BRK.B in 2023, but decided to keep it to 16% for now.
ARK.K (ARK Innovation ETF)
Price Growth in 2022: -66.87%
Just really bad. It returns -23.38% in 2021 and -66.87% in 2022. Negative returns in 10 out of 12 months in 2022. The current economic climate of high interest rates is absolutely kryptonite to ARK ETFs. I must say that I do not agree with many of the choices Cathie Wood has made for her ETF over the past 1-2 years, especially on her initial comments that we are in a deflationary environment in the initial months this year. It's likely going to continue to face headwinds in 2023, but I won't discount the fact that this ETF has a lot of room to grow once we are out of the high inflation environment. I have already reduced the allocation to this constituent from 10% in 2021 to 7% in 2022. I will not be reducing the allocation any further for now.
ARK.G (ARK Genomic Revolution ETF)
Price Growth in 2022: -53.9%
Pretty much the same as ARK.K. I'm just keeping a very small allocation of 5% for this constituent in view of the potential rise of genomics in the future.
Price Growth in 2022: -25.84%
BABA drops a good -48.96% in 2021 and continues to drop another -25.84% in 2022. The whole China situation has been super frustrating for investors in the past 2-3 years. Many start to question if it even makes sense to invest in the China market. I am bothered with the restrictions imposed by the authorities and have also already reduced my allocation to BABA from 10% in 2021 to 6% in 2022. I still believe in the enormous moat which BABA has. The fact that it's super undervalued now and the government has already start to do away with COVID restrictions might signify the light at the end of the tunnel. I'm actually confident that BABA will do well in 2023. Still, I will keep the allocation to just 6%.
MCHI (iShares MSCI China ETF)
Price Growth in 2022: -22.76%
Same as the above. My current allocation to MCHI is 14% and I will stick to it for 2023. I'm expecting the China market to put forth a strong recovery in 2023.
SHEL (Shell PLC)
Price Growth in 2022: +36.03%
When I say 2021 is a phenomenal year for Shell, I didn't expect that 2022 would be an even better year! It returns +36.03% for 2022 which is slightly better than +34.35%. I expected good performance to continue in 2022, but I just didn't expect such phenomenal results again. I'm still keeping my portfolio allocation to just 6% as I don't expect such outperformance to continue in 2023 again.
Price Growth in 2022: -64.31%
This is actually the most exciting loss to me. Let me explain why.
When I did the last annual review for my portfolio, I decided to increase my allocation of Bitcoin in my portfolio to 20% from just 5% in 2021. When I increased my allocation, I was in full knowledge and anticipation that 2022 is likely going to be a bad year for 2022. True enough, we have seen so many negative events in 2022 which cause disastrous price impacts to Bitcoin. I still remember that it dropped a whopping 40% in just a single month- April this year. Still, this is all very exciting to me despite the loss. Unlike the other constituents in my portfolio where I only do an annual rebalancing, Bitcoin is the sole constituent in my portfolio that I adopt a DCA approach instead. Hence, I have and will continue to DCA my funds into Bitcoin to reach its target allocation of 20% in my portfolio. There's a good chance that 2023 continues to be a year of winter for Bitcoin and continues to affect the performance of my portfolio but I'm not bothered with that at all. I will continue to invest in Bitcoin. If you have been following my blog, I have written multiple articles on why I am so bullish on Bitcoin. For those who really want to understand why Bitcoin, do check out this book called The Bitcoin Standard. You will not regret reading it.
So what am I going to do in 2023?
You might have noticed that I am not changing any allocation to the constituents in my portfolio for 2023. Everything remains to be the same as in 2022. I will just do an annual rebalancing for all the constituents in my portfolio every year, with the exception of regular DCA into Bitcoin. The whole purpose of this passive portfolio is to allow time for the results to run its course and there's very little reason why I should be tinkering with the portfolio choice every year.
Of course, I'm aware that the performance of this portfolio hasn't been the most optimal and it's not looking super good to be beating the index right now. Hence, I am also beginning to invest in the index (S&P 500). The only reason why it's not included in this portfolio is because I'm investing in the S&P 500 via my SRS funds and not my cash. My cash goes into this portfolio while my SRS funds go into S&P 500. I have previously written an article about how I am allocating my SRS funds and you can check it out here.
Moving forward, I will not be posting monthly updates on this portfolio like what I used to do as I think there are very few things to write about the portfolio on a monthly basis. Instead, I will likely write about it on a quarterly basis just to give some updates.
Here's hoping for a successful 2023 for all of the investors here!
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