Since we’re closing in on the end of the insane year that’s been, I thought I’d give you all a look into how my portfolio is tracking now, and how it’s progressed throughout 2020.
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My Investing Strategy
First things first, I should explain my current strategy. So, at the moment I’m following what’s called a ‘core’ and satellite’ approach. Ideally, the core portion is made up of low-cost index-tracking ETFs and should make up the vast majority of my portfolio.
On the contrary, the satellite portfolio is made up of high conviction ideas I have. The kinds of companies I invest in are either the long term compounders like CSL or BBN, or companies that I believe are severely underpriced in the short term.
Because I’m continuously learning the ropes of fundamental company analysis, I’m trying to keep the satellite part of the portfolio below 20% of assets to reduce my risk. For good or bad, things haven’t gone exactly to plan. Let me explain.
Here’s a pie chart showing all of my current holdings (including cash) and their allocations in my portfolio.
2020, The Year That Was.
As I’m sure you’ll notice, I’m heavily overweight Baby Bunting. This is mainly because I made a pretty substantial investment (for my money at least) when their share price took a dive in March. Since then, BBN has recovered well, but it’s meant that they’re still taking up nearly a quarter of assets.
To reduce my downside exposure to BBN without selling down my position (I believe there’s still plenty of room for growth with BBN) I invest the same amount into my 3 core ETFs (NDQ, VGS & VAE) on a rolling 3-month cycle. So for instance, on month one, I’ll invest into NDQ, month two it’s VGS, month three is VAE, and on the fourth month, the cycle starts all over again.
In terms of performance, the portfolio is up roughly 30% for the year, which is mainly thanks to the 112% return BBN has generated for me since March.
Core And Satellite Portfolio Returns
Splitting that return into core and satellite, the satellite portfolio has certainly done its job of giving the portfolio an added boost and delivered an incredible 49% return. While the core portfolio (VGS, VAE, IHVV & NDQ) returned a solid 10.33%.
30% is a pretty incredible return that I wouldn’t have believed had someone had told me that at the beginning of the year. I’m fully expecting 2021 to be a far more normal year simply because it’s unlikely we’ll see another flash crash followed by unprecedented recovery for a while yet.
Why My Cash Position Is High.
I do like to keep some cash on the sidelines (currently about 14% of assets) for any short term pullbacks in companies I like, or in the market overall. With that said, I’m always on the lookout for new ideas to put that cash to work with, so the cash position can fluctuate from month to month.
Portfolio Goals For 2021.
Heading into 2021, the plan is to continue dollar-cost averaging into my core ETF portfolio, while also keeping an eye out for any exciting opportunities for the satellite portfolio.
I’d also like to consolidate certain holdings, namely IHVV (S&P 500) and VGE (Emerging Markets). While these two have done well for me, I’d like to roll all or part of those holdings into VGS and VAE given there’s a huge overlap with the underlying investments.
From a quantitative perspective, my portfolio goals for 2021 are as follows:
- Achieve a 15% compounded rate of return (Excluding dividends). This is certainly going to be a stretch to achieve, but I’m confident next year will be a good one for markets overall given the low-interest rate environment we’re in and the expected continuation of government stimulus. I’m also confident that my satellite investments will give the portfolio a boost of an extra few % points as it’s designed to do.
- I’m also planning to increase my monthly investment amount by about 10%. I was lucky enough to get a small pay rise this month, so the additional income I receive will be allocated to my investment account.
Anyways there’s a quick snapshot of where the portfolio is at, and where I’m planning on taking it!
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