Honesty about my portfolio’s performance


The whole idea of ​​this column is that skinless investment advice isn’t worth the paper it’s written on (unless the pages are pink, of course). If that requires a level of disclosure that my mom and the divorce attorneys aren’t happy with, so be it.

Full transparency is also crucial in the performance appraisal. I want readers to know which of my calls worked, which didn’t, and for how long. Sure, you can calculate it yourself using the numbers below, but who cares? It’s a damn weekend.

So I promise to do a proper audit of my debauchery and portfolio returns every quarter. They will be slightly different due to the enforced four week delay before I can act on my recommendations. The ongoing transfer of my employee pension to a Sipp is also clouding the water at the moment.

Our first three months are now over. Investors shouldn’t normally think so short-term, but financial advisors of all stripes need to be monitored. It won’t make them any better, but as we Aussies say, it keeps the bastards honest. It also gives you a handy excuse to fire someone.

Whether you want to fire me or not, at least I’m cheap – and more experienced than most. Has the latter helped since November? For example, in my first column on the 18th, I disclosed that my main exposure is to UK equities. I wrote that I was happy to run it, despite a one-third recovery from recent lows.

Everyone was dissing the UK at the time, which I think was a buy signal. And so it turned out. British shares are up about 8 percent since then. Observant readers have noticed that my original all-share fund is now a FTSE 100 fund – how that happened when it was transferred to a Sipp is beyond me.

The two indices have risen in parallel, so not a big problem for now. But they are different animals and we will come back to that in a future column. And I swear I didn’t make the switch just to make it look smart when this newspaper ran the front page headline ‘FTSE 100 hits all-time high’ last weekend.

My next largest holding was a money market fund. Frustratingly, it remains a quarter of my portfolio. Here’s a prime example of how the UK pension industry’s self-serving inflexibility can cost it real money. I wanted to move this money into a Sipp to buy more US stocks (as I wrote on November 25th) and some bonds (December 16th).

Ever since that November column where I explained why higher interest rates aren’t affecting company valuations (another read after this week’s sell-off in global equity markets on concerns the US economy is heating up), the S&P 500 increased by 3 percent.

In the same article, I complained that my pension provider didn’t offer a purely US product, so I had to buy a global fund to get exposure to the world’s second best equity market ever (after Australia). In the end, things got marginally better for me – the BlackRock World ex UK Equity Index is up 4 percent.

And what about the bond swap I recommended a week and a half before Christmas? Again I couldn’t participate, but many readers emailed saying they did. Pretty. Contrary to what I usually preach, it was a consensus view that was well received. Fixed income has had a solid run of 5 to 10 percent.

I also said that I prefer government bonds to corporate bonds. How did that go? They both did well, so honestly it’s splitting hairs. But long-duration government bonds generally outperform corporate bonds, even many of the riskier high-yield corporate bonds, which tend to outperform on any rally.

My two smallest funds when we started were (and remain) Asia-focused: Japanese large-cap and Asian ex-Japan developed stocks. A little more than a tenth of my portfolio is in each one. I owned these mainly on the simple premise that they were cheap, both in absolute terms and compared to other stock markets. They still are.

And both were a gamble that China would have to relax its approach to Covid. Beijing started doing this when I wrote about Asia on December 9th. It turned out to be less a loosening than a swipe with the Longquan sword. Few punters, myself included, imagined the mainland economy reopening so quickly.

The positive effect this will have on global demand should not be underestimated and deserves a separate column in due course. Meanwhile, it has helped Asia ex-Japan and Japanese stocks rise 5 percent since December.

So an OK first quarter. My retirement pot is 6 percent fuller, even though excess cash is dampening returns. Are there lessons that readers can take away? I got lucky with the timing, but it was worth ignoring the naysayers in November. This is usually the case, especially when it comes to stocks.

It’s also tempting to conclude that value matters – that my preference for cheap British, Asian and Japanese companies was a winner. Maybe it helped. But the truth is, value investing can outperform so-called growth strategies for years — like in the recent past.

So we shouldn’t get carried away. And as this adventure is only three months into the future, please keep emailing me your topic ideas and general feedback. The more we work together, the sooner we can all retire.

The author is a former portfolio manager. E-mail: stuart.kirk@ft.com; Twitter: @stuartkirk__

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