I recently offered a peek into my personal portfolio, as of the end of September, 20 18. Since that time, I provided an update as of late-October. I wouldn’t normally offer another update so quickly but November hasn’t been a normal month. So, let’s take a quick look at how my caution continues to pay off.
November – The Selloff Continues
As of today’s close, November 23, the S&P 500 is down 10.2% from its recent high, confirming a correction in this index.
How bad has Q4 been so far? Here are the U.S averages as of today’s close, compared against their closing price on September 30.
Dow: Down 8.21% (From 26,458.31 to 24,285.95)
S&P 500: Down 9.66% (From 2,913.98 to 2,632.56)
Nasdaq: Down 13.76% (From 8,046.34 to 6,938.98)
In my September update, I quite honestly featured the fact that my portfolio had substantially underperformed the market. With a rather meager YTD gain of 3.08%, I trailed the Dow’s 7.04% and the S&P’s 8.99% by a rather substantial margin. And then you had the Nasdaq, up a ridiculous 16.56% on the year at that point.
A large part of the reason for this, however, was that I felt the market had gotten further and further ahead of itself, and had become more cautious as a result. In Q4, this caution has paid off, in spades. I am currently down a mere 3.16% against my 9/30 close.
Diversification and Caution
What has helped me here? Simply put, diversification and caution. As of 9/30, I had slightly raised my cash allocation, to 16.0% from 14.5% at the beginning of the year. I also emphasized the shorter end of the duration spectrum on my bond holdings.
I’d like to talk for just a minute about bonds. This asset class has been getting a truly negative rap so far this year. And it’s true, you need to be very careful in an environment of rising interest rates. During Q4, however, my worst holding, AGG, is down exactly .83%, declining from $105.52 to $104.65. My other two holdings; BSV and BNDX? Essentially flat, and generating dividends. At roughly 26% of my total portfolio, this asset class has provided tremendous stability during a period where the Nasdaq, for example, has basically given back its entire YTD gain in a period of just under two months!
In my October update, I shared specifics as to what I added during that period. You might want to take a look at that article, as, in most cases, the bargains have only gotten better!
In November, I have added to exactly one holding. AAPL.
All the “noise” around this wonderful company has knocked the price down from a recent high in the $230 range to a close of $172.29 this afternoon! Or, put another way, APPL is basically the same price as it was a year ago, in November, 2017. Feel free to watch it if you wish, based on the “don’t try to catch a falling knife” theory. Me? I’ve added two small amounts this month, including one today. And yet, AAPL’s price drop has been so dramatic that it’s overall weighting in my portfolio is still less than it was on October 31. I will probably add a little more once it has clear the price has stabilized. On the other hand, since it is very difficult to precisely call the bottom, I have chosen to add these small chunks simply based on this drastic change in AAPL’s valuation.
As of September 30, my portfolio trailed the S&P 500 index by almost 6%, having only returned 3.08% vs. 8.99% for the S&P. As of today’s close? I’m actually ahead by 1.30%! For the year, I have an overall decline of .24% against the 1.54% decline of the S&P 500 index. How quickly things can change!
How has your portfolio held up through this downturn? Please feel free to share your story in the comments below! Oh yeah, and if you’ve done well? Perhaps book yourself a nice vacation to beautiful Manarola, Italy. What a nice reward that would be!
Take care, and see you next time!