“Surely you can’t be serious!”
“I am serious! And don’t call me Shirley!”
If you understand that reference, we can be friends.
It’s been 3 months since my first post about this market correction due to COVID-19, so I thought it’s a good time to give a portfolio performance update.
Now keep in mind that 3 months is entire too short of a time to assess the viability of any long-term investment strategy so the current behavior of my portfolio should not be used as evidence that my strategy is working or not.
However, I felt that it will show everybody what a portfolio of somebody significantly invested in the stock market could look like during a time of massive uncertainty and volatility. It should give you an idea of the kind of mental fortitude required when you wish to be invested in equities – the kind of portfolio drops that you’ll have to be OK with and not panic.
So let’s dive into what has happened since my 29 February 2020 post.
Since the 29th of February, I’ve bought into the market 10 times – with differing amounts. Here’s the list of dates, tickers and what price they were at the time – with some commentary.
|2-Mar-20||IWDA||USD 57.22||After 10% correction|
|6-Mar-20||IWDA||USD 57.49||Same as above|
|12-Mar-20||IWDA||USD 50.50||Another 12% drop|
|16-Mar-20||IWDA||USD 45.80||Another 10% drop|
|18-Mar-20||IWDA||USD 45.49||Same as above|
|18-Mar-20||ES3.SI||SGD 2.489||Normal RSP|
|15-Apr-20||IWDA||USD 53.16||Monthly Top-up|
|20-Apr-20||ES3.SI||SGD 2.627||Normal RSP|
|15-May-20||IWDA||USD 53.67||Monthly Top-up|
|18-May-20||ES3.SI||SGD 2.572||Normal RSP|
As you can see, I attempted to time the market in March (not a good idea) and since I was receiving my annual bonus, I was jumping into the market whenever a large movement was happening.
I knew that the crisis was just starting but wasn’t sure how far and how long the drop would be – so I decided that it would be best to split my bonus up and buy in using a portion every time a large movement happen. The initial plan was to do this buy in monthly regardless of the market movement, but as you can see, I couldn’t resist.
This caused me to buy in when IWDA was around $57 twice, which was about a 10% drop from All Time High. Of course a week or so later, it went down to $50 – where I decided that it was also another great opportunity to get in.
Then the market promptly drops another 5 dollars less than a week later… where I bought in twice at $45 – which turns out to be near the lowest point of $43 on the 23rd of March. I got really lucky – this was definitely not skill.
After that, I just continued to add to my position monthly whenever my salary came in – but by mid April and mid May, the market has recovered significantly all the way up to $53.
So how has the portfolio been doing?
After all of the investments I’ve added to the portfolio during this price movement, you must wonder how the portfolio is doing.
In my last portfolio update in March I showed you this chart of my portfolio Gain/Loss amount:
At the time – same as now – I had no clue where the market would go even though it recovered a little bit such that I was almost back to break even.
Now two months later, here’s what my portfolio value over time chart looks like:
There was definitely a huge dip due to the COVID-19 pull-back but because I’ve been adding to my portfolio during this time and the market has recovered – extremely surprisingly – that my portfolio is now already above the February high.
However, how much of this is the market recovering and how much was just me pumping in new money? Well let’s take a look at the most up to date Gain/Loss chart again:
So I definitely haven’t returned to the gains I had during the all time high of February, but I’m back to the absolute dollar gains that I had in December 2019, not too shabby!
Of course, since I added more funds but my gains are only the same as December, my percentage gain is still lower than what it was in December:
In terms of percentage gain, I’m back to about the October level of 13.5%.
As for annualised returns, it also happens to be at the October level of 9% per annum.
Here’s the combined percentage returns chart that I normally show – updated to the current day (you can get my portfolio tracking template to create similar charts here):
So what does this mean? Is the crash canceled?
Oh wow, that would be amazing wouldn’t it? But no, sadly it probably isn’t.
Although my portfolio is doing extremely well considering the circumstances, it was purely luck that I managed to buy in while the market has been moving down and almost exactly managed to catch the bottom. However nobody could have predicted that the market would have recovered this quickly and this substantially – what with all the unlimited QE and all.
The fundamentals of the market still looks bleak, U.S. unemployment is still exploding, businesses are still shut down, there are riots in the streets due to police brutality, and COVID-19 is still not contained in most of the world. Although, I never claim I can predict the future, my gut tells me that the market has yet to see the worst day of this crisis yet.
However, my gut feeling could also be wrong. A part of me is optimistic. Believing in humanity’s innovativeness and ingenuity, and with hundreds and thousands of smart people all around the world working together on possible vaccines and solutions, this could end soon!
There’s really no way to tell really… but with the way I’m investing, I don’t have to be able to.
I just have to believe that humanity will overcome this crisis – like we always have – and any other crisis that faces us in the future. If we believe this then having our money invested in the engines of the world economy will ultimately pay off in the long run. If this turns out to be wrong, then god help us all – we’d probably end up living in a hole in the ground somewhere and no money is safe.
The only lesson I want to leave you with after reading this is that you have to think long term. In this investment journey, and being invested in equities, we will face this type of turmoil and market volatility often – and we must be mentally ready for them.
Expect them to happen and ensure that you DO. NOT. PANIC. Under no circumstances should you sell your position unless absolutely necessary.
This is also why the advice is always to invest only money that you will not need within the next 5 years. This could mean a lot of different things to different people.
In my case, most of my cash is invested and I barely have any cash lying around – except a 6 months emergency fund. Why?
Because I know if I have a large purchase coming up in 6 or 12 months, I am fortunate enough to be able to stop investing immediately and start storing the cash for that purchase. If you are not able to do this then you must predict what you will need and keep that cash available in lower risk assets like CD or Fixed Deposits.
You do not want to be in a desperate need for money that you must sell out of your position during a market crash.
If you look at my Gain/Loss chart above, my portfolio basically “lost” about S$110,000 in one month… but then within the next 2 months it “made back” more than S$85,000. In the next 6 months, who’s to say that it won’t lose another S$100,000 or worse? However, I know I can weather this and so I will keep buying as and when I can.
That’s the kind of volatility that you’ll need to be able to weather through and stick with it. Remember to stay the course!
Until next time!