Brief Annual Portfolio performance review and important lesson learned from market in year 2023
Merry Christmas and happy holiday season to everyone
As the year is drawing to a close, it’s time to conduct an internal performance review and reflect on the vital lesson learnt in market to become a better investor and trader in the year ahead.
This articles entry will be split into the following sections
Section 1:Brief preliminary portfolio performance annual review
Section 2: Brief review of lesson learn
Section 3: Brief outline of future action plan
Section 1 :Brief preliminary Portfolio annual performance review
There are 2 portfolios for myself, saving and income portfolio. Latest 2023 YTD portfolio time weighted return as of Dec 22 market close will be posted, ( time weighted returns : independent of funds deposit/withdrawal ). , I will post a final figure after Dec 29th market close.
Portfolio return as of Dec 22, 2023.
Savings portfolio : ~157%
Income portfolio : ~244%
Return figure without any Semiconductor stock, Crypto Asset ( would have been more if I bought those )
Portfolio largest drawdown ( May 4th 2023)
Savings portfolio : Closed to -20%
Income portfolio : NA
Return as of Oct 26th, 2023 ( 1 day before Oct 27th Market bottom )
Savings portfolio : about -3.2%
Income portfolio : about +16.8%
Section 2 :Brief review of lesson learn
2023 US Equity market can be characterized as both Tough and “Easy”.
Let us go through & examine why the market is Tough
Tough Reason no.1 : Constant bombardment of bad news
The toughest part was the constant bombardment of negative news in media, fear sells and there’s manipulation from institutional analyst & CEO/talking head to confuse and scare you out of your positions.
Remedy : trendline over headline ( lookup the charts instead of watching the news )
Tough reason no.2 : Market technical and fundamental drivers has changed
Navigating market Cycle is tough if you do not have up-to-date framework, relevant market assessment tool & data, which makes it difficult to position your portfolio to capture the trend changes. Even the conduct of monetary policy in easing / tightening financial conditions has changed. ( hint : it’s no longer solely about FED interest rate or QE/QT, these are all antiquated concepts)
Remedy : Possess insatiable thirst to equip yourself with knowledge about every aspect of market. Honing your skills in technical analysis ( price, trend, Momentum, breadth, Flow, sentiment ) is absolutely required to excel in the money management. The playing field between retail and institution has levelled significantly in terms of access to information and toolkits, so this is extremely doable.
Alternatively, one can consider to subscribe to specialist who could provide good guidance. ( hint they are not dime a dozen )
Tough reason no.3 : Investors biases (projection of economic theory and how market would respond to it )
Investors biases are making their life harder by using wrong things to assess/predict market.
All the following economic theory/event has been put forth to suggest market will crash.
· recession ( yield curve inversion & subsequent un-inversion causing recession) ,
· stagflation,
· inflation stickiness ,
· Fed tightening till inflation reach 2 %,
· oil price spike,
· geopolitical tension/deglobalization causing decoupling/supply chain issue/onshoring => inflation, US debt issue or deficit spending
· Resumption of student loan repayment
Remedy : To paraphrase the famous money manager Stanley Druckenmiller, stock market is the best economist I have ever known. Financial market leads economy by several months ( 2-3 quarters). So pls do yourself a favour, only use market-generated-info to assess the market, do not ever use economy to assess the stock market.
Tough reason no.4 : Difficulty in adjusting to Market tempo
The first half of 2023 was tough for me personally ( this phases should be relatively easier for other investors ). Because of my added responsibility as new born parents, I had difficulty in adjusting to market in the Q1 , Q2 of 2023 and was constantly getting yanked like a ragdoll by the whip saw in the market.
Remedy : stand aside / cut down on trading, and establish positions in in laggard sectors/stocks ( discretionary ) after technologies/communications led market out of bottom .
The “Easy” part
Well the “easy” part is not easy, it’s only relatively easier than the above listed “tough part” provided you can execute everything precisely and diligently.
“Easy” reason no.1 : Establish a daily market assessment/review routine
List down and save the charts in the easiest accessible manner, this will help in drilling down the habit of assessing market. ( and stay as far away from all financial media as possible)
“Easy” reason no. 2 : Scenario planning in adverse market conditions
Plan for various , and list down all the accompanying technical conditions, it will help in pulling the trigger when the moment arrive.
Section 3: Brief outline of future action plan
1)List down technical parameter and reference point
Listing down technical parameters of market ( Fib retracement/Extension, MA, VWAP, support/resistance zone, trendline break etc… ) for better easier reference in making capital allocation decision.
2)Develop new way of scaling in/increasing exposure in market reversal rally
Good news is I was able to position my portfolio to time the reversal rally, bad news is I was not able to scale in / further to increase exposure in the Oct 27 Market bottom reversal rally. But in the future, It’s possible that one could miss the reversal, therefore it’s good idea to develop a progressive plan based on several technical parameters to ramp-up exposure.
3)Better align personal, work and investment management
Manage my time schedule to fit in all the market assessments, learning/development phase, household and work commitment. In short a better and more efficient human being.
Disclaimer : The information presented here are for research and education purpose only, and does not constitute investment advice, trading recommendation, author shall not liable for any action taken by any individual/company with regards to the information presented here or any part of the website - https://marketcycleedge.substack.com/