2021 Overall Portfolio Performance
By elmads
Table of Contents
INTRODUCTION
“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.”
-Robert Kiyosaki
Investing is never about who has the best investment returns, because returns are relative to an individual’s needs. Investing is a personal endeavour, in which we focus our money to work for us and aid us into achieving our own financial goals.
For instance, a consistent 7% annual rate return on a specific monetary monthly contribution for 30 years can be more than enough for a person based on his/her current to future needs and lifestyle. On the flip side, it can also be true that a consistent 10% return may be sufficient enough for another individual who can invest consistently for only 20 years.
What dictates our goals, investment needs, the capital needed to be allocated and how much we’ll need for those goals are all dependent on us. Our lifestyle, personality, and the time and effort we are willing to exert on this financial independence journey.
Don’t waste your time comparing yourself from others. Only focus on yourself, your family and your own growth and success.
-Me
I discussed this deeper in one of my blogs about retirement planning. Retirement is and will always be one of the financial goal aspects of our lives most especially to the younger generations and who are currently in the workforce, the Millennials and the Zoomers. You could check my blogs on the links provided below.
- Retirement Planning for Millennial and Gen Zs
- The rule of 300
- Part 1 – The Inflation Adjusted Retirement Calculator
- Part 2 – The Inflation Adjusted Retirement Calculator
Moving forward, I’ll now present to you the combined performance of my 3 brokerage portfolios namely, Col Financial, Vanguard and Freetrade. Also, I included here my Cryptocurrency holdings.
MY TOTAL PORTFOLIO BREAKDOWN
My 2013-2017 Portfolio is also the percentage performance of my 2013-2017 Col Financial broker account. This is because I started investing in my Philippine broker account first before I was able to open an international broker account. The problem I encountered while doing this blog is the reporting of my returns based on the currency I’ll be using. I tried to make it uniform by converting it from PHP to GBP exchange rates, as I am using GBP on all of my expenses and investments. To my surprise, my total returns after converting it from PHP to GBP went higher than what it should be due to their yearly respective exchange rates. I’ll be showing to you later in this blog the difference of my portfolio returns depending on the currency, both in PHP and GBP.
As of the moment, we’ll start first with my Portfolio breakdown by broker account and asset class.
- My individual stocks are my bread and butter. This is where I practice the value investing principles, by investing into companies where I understand how they make money, have a strong edge compared to their competitors or will be able to withstand competition for a very long time, with continuous profitability, good or strong margins, healthy balance sheet, great management team, and most of all it must be priced below or within its intrinsic value before I’ll be able to purchase it. That’s gist of the things that I am doing when looking for a wonderful equity investment.
- My Equity Index Mutual Funds are my chillax investments, where I just do the cost averaging method. I disregard the stock price and buy it at whatever price point. I purchase it every salary pay day, consistently and religiously. Overtime (Decades) general market prices go up, but at time to time it stumbles and even falls of the cliff. That is just absolutely fine if our time horizon is more than 10 years. My goal for this fund is to supplement my savings to purchase one of my family’s goals in life. My estimated time of hitting that financial amount is within this year of 2022.
- My cryptocurrency. Most value investors do not look at cryptocurrencies, because there is no specific value that can be calculated from it. What I mean by value here, is the amount of cash flow that this investment can generate to its investors in the future. Cash flow in the sense of Rental Income (Property), Dividends (Stocks), Coupon Payments (Bonds). Cryptocurrency prices are fuelled by supply and demand, and it is not backed by any cash flow, that’s where it becomes a speculation, which somehow I do agree of. Cryptocurrencies are not valued, it is only priced.
Nevertheless, crpytocurrencies will forevery stay with us, it won’t go anywhere that’s why I am riding this boat. Sure, there maybe a lot of uncertainties in this space because there is no global adoption and utility yet. But, what I do know is that I can relate and understand the idea, technology, vision and the reasons of its creation. That for me is enought to believe on this emerging asset class.
Let me give you an example of one of the reasons why Bitcoin is important. I will introduce to you Wences Caseras (Founder & Chairman of Xapo Bank, a Bitcoin wallet startup). “Caseras is widely known as “Patient Zero” in the bitcoin community, Quartz reported that Casares was the entrepreneur to convince Bill Gates, Reid Hoffman, and other tech veterans in Silicon Valley to invest in bitcoin.”; source taken from Wikipedia.
I will quote what he had said, during the time when he introduced Bitcoin to Silicon Valley back in 2014.
“Let me explain to you why I own bitcoin, I understand why you wouldn’t understand it because you live in America. You have a rule of law, an orderly government and most times relatively low inflation and a prosperous economy. I’m from Argentina and my family has been there for 150 years. We’ve been wiped out 4 separate times by the Argentinian government by seizing our assets, nationalizing the banks, inflating us out with hyperinflation. Bitcoin cannot be touched by the government, it’s a peer-to-peer decentralized independent network of global network.”
-Wences Caseras
If you live and have been living in a prosperous country, most likely that you’ll find it hard to understand why Bitcoin is so important for others who have lived on an unstable economy. Basically, it is an insurance policy against the government. For others, bitcoin is a means of making a lot of money, but for these people it is hope, that they’re accumulated savings through decades of labour will be preserved and not be taken away.
NOTE: I got this Caseras’ statement from Bill Miller’s interview with Wealthtrack just early this year, I’ll post the link for this interview down below.
By the way, I am only invested in one cryptocurrency, the one that I mostly understand and willing to hold for a long time. If you ask me why I don’t want to try to understand and learn others? The fact that I do not know what will happen on the other coins in the future is already a red flag for me. Does that mean the coin that I’ve invested will be surviving for a long time? I don’t know too, no one knows, but just like what I’ve said. I do understand its use case and the reason why it was made. That’s where my conviction is and the fact that there are a lot of nodes and miners coming each day to strength its blockchain, is a bullish sign already that each day there are a lot of people trusting this decentralized system. In my own opinion, cryptocurrency is a financial revolution.
NOTE: The property sector is a specific company investment. It is not the real property asset class.
This is the Sector breakdown of my holdings. Consumer Cyclical and Cash are not shown on the doughnut graph because it is only a small portion of the overall portfolio, with only 0.64% and 0.04% respectively.
This is the breakdown for each country and region of my total portfolio.
As shown from the above bar graph, my investment allocation is dominated by the Asian market. This is not purely because I am optimistic about the fast growth of Asia, most specifically South East Asia. But because at the time in 2021, it was the region where I can find great companies that are growing, and are trading at either fair or undervalued prices. Plus, the companies that I am invested are the companies that I understand. No one wants to hold a bag full of stuff for decades without knowing what’s inside isn’t it? That’s why knowing our investments or the assets that we are planning to invest is very important.
HISTORICAL PORTFOLIO PERFORMANCE
My historical Portfolio performance is also my main net worth. Since the inception of my investment journey in 2013, I’ve been able to make an average of 13.23%. I’m proud of it because I’ve been able to hit more than 10% average gains and able to outperform inflation.
Nevertheless, my portfolio returns are substantially lagging behind the most followed and benchmarked index of this generation, the S&P 500 index. It consists of the 500 largest market capitalized publicly listed companies in the US. Below is the comparison of my yearly returns by percentage to the S&P 500 and I also included the FTSE All World Index.
To put the above photograph into context. Let’s say that what If we’ve invested $100,000 in my portfolio, the S&P 500 index and FTSE All World index in 2013? what will be its current amount today?
It is without doubt that the S&P 500 won this sample scenario by a wide margin. The almost 4% difference (17.17% of S&P 500 minus My Portfolio’s 13.23%) is a substantial game changer. Every percent increase or decrease in a portfolio return is very important, even if it is just less than 1%.
This just shows that index mutual fund investing is a good investment strategy for everyone in this world, most especially for individuals who doesn’t want to study and do research about stocks, and who only wants for their money to work for them without the extra effort.
That being said, it wouldn’t be always rainbow and unicorns in investing because as prices can go up, it can also go down in massive way. The key into doing index mutual fund investing is to do cost averaging. Purchasing it regardless of the market price, either up, flat or down. Overtime market prices go up, the key here is investing on it for a long period of time too, with consistency and discipline.
For individuals like myself who loves finding great businesses to invest and leveraging the miscalculation of the market pricing. Look for a strategy that best suits you, because there are tons in the investment world, and not all of them will be applicable to your personality, time, and preferences. Finding the best strategy just for you, is key.
PORTFOLIO OVERALL PERFORMANCE ADJUSTED TO CURRENCY EXCHANGE
It’s nice to have a portfolio consisting of global equities, as this can give us an opportunity to capture the growth of other companies in various countries and region. But, there is a risk in doing a global portfolio, and that is the foreign exchange risk. A portfolio’s performance can massively change due to the exchange rate volatility of the currency being used. My portfolio is a testament to this.
Currently, I’m living in the United Kingdom and I am utilizing GBP for my day to day living. At the same time, I am still directly investing money in the Philippine markets, that means that the GBP amount of money I allocate and send into my Col Financial broker account will be converted to the PHP currency.
Sure, I may not use the money I’ve invested in my accounts for a long time, but when it comes to reporting and documenting my year end returns and performance, I need to factor in the exchange rates. Below is the performance of my portfolio with exchange rates included.
From 2013-2017, I’ve been investing via the PHP currency. What I did is, I’ve converted them into GBP to make it uniform. Also, I made a purely PHP return column as well to see the difference in returns when exchange rates are considered.
As you can see above, I have two columns named as “My Portfolio”, the 1st column starting from the left is my GBP currency adjusted returns, while the 2nd column is the PHP currency adjusted returns. By the way, If you’re wondering what specific exchange rates I used to convert my GBP and PHP returns. I used the total average exchange rates within a specific year, for instance the 2013 whole year’s average exchange rate for GBP/PHP was 1 GBP = 66.446813 PHP.
In terms of its performance, I’ll use again my usual scenario. What will be my today’s returns If I’ve invested 100,000 on each portfolio namely; GBP portfolio , PHP portfolio, S&P500 and FTSE All World.
My GBP returns have definitely crushed my PHP portfolio returns. This just shows how significant exchange rates could impact a global portfolio, and how it can change significantly the numbers in a financial report. Nevertheless, even if I use my GBP portfolio return, I still couldn’t outperform the S&P 500. haha!
If you ask me what I consider my real portfolio returns? I will chose the lower numbers, I always chose the least and worst case scenario, even for my valuations. This is not because I am a pessimist, it is just my way of doing risk management through margin of safety and asymmetric returns, which I also practice in personal finance.
So, my personal actual portfolio annual average performance since its inception in 2013, is 13.21%.
BONUS PART (PERSONAL FINANCE RELATED)
CAPITAL USED FOR THIS PORTFOLIO
Some of you might be wondering where I get the capital to invest in the markets, and my answer is through my salary. I allocate every month a portion of my wage for investments. Budgeting is the core skill in personal finance, without it, a person’s income will always be all over the place and be allocated into different aspects of his/her life. I’ve discussed these deeper in my blogs titled “Budgeting & Prioritization”, “Budgeting Strategies for Everyone” and “Financial Planning Part 1”. I started investing even when I still had a miniscule amount of my salary before. I’ve shared and talked about my investing journey in my solo podcast episode, you can check it out on the link I’ll be providing here. “The start of a journey podcast”
Moving forward, below is the bar graph and a line graph of the money I invested per year and its percentage increase/decrease.
The amount of money in the 2017 bar is my accumulated amount of money from 2013-2017. It was so insignificant when compared to its succeeding years that I just added all of it together and placed it in year 2017.
Moreover, the line graph shows the year-on-year increase/decrease in the amount of money I added for investments. The exponential growth happened during 2019 and 2020, where I was able to put a higher percentage allocation for investments. This was after I completed my required emergency fund.
I project that my percentage increase/decrease of the amount of money I can invest per year will go to and plateau at 0%. What I mean here is that the money I’ll be investing will be the same amount year on year, because my salary is capped and doesn’t increase yearly, this in turn will also limit the amount of money I can invest.
For example purpose only. Let’s say you have $10 salary yearly, then you can only invest a max of $4 annually as per your budgeting. You couldn’t increase it to more than $4 because you have other expenses and priorities with your salary. This means that the ceiling for your investment allocation will be capped at $4, not unless your salary increases to $11 or more. This is into consideration of having your salary as your only source of income.
So, that’s $4 from year one, two, three, four, five and so on and so forth. The increase/decrease percentage will be 0% because It’ll just be stagnant at $4 investment amount per year.
One of my next goals is to be able to punch a hole on my salary cap, its resistance level. It won’t happen anytime soon that for sure, but I don’t mind to wait for a long time. Patiently accumulating and farming information, skills and mindset of the money game.
To sum it up
I don’t invest to get rich, I invest so that I can attain my ultimate goal of financial freedom. A life with financial stability and the ability to work on things where my heart is at. I don’t actually mind working forever, as long as I am truly happy with what I’m doing and not because badly need the money. That is, in my own opinion, the best description of financial independence.
I always say this and will forever repeat it, you don’t need a lot of money and a high IQ to invest, what you need is the proper temperament and the willingness to learn on how to make your money work for you.
I hope you’ve learned something out of my very simple annual report via a 4 part blog series. I’ll be doing this as a yearly tradition.
Don’t forget guys, Let’s go INVEST!!!!woot woot!!
Knowledge is my sword, and patience is my shield
elmads
This blog is for informational purposes only and not a Financial Recommendation. Not all information will be accurate. Consult an independent financial professional before making any major financial decisions.
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