My 2022 Overall Investment Portfolio Performance
by elmads
Introduction
“An asset allocation plan is based on your personal circumstances, goals, time-horizon, and need and willingness to take risk.”
– Michael LeBoeuf
I mainly break down my portfolio based on my brokerage investment accounts. Some investors prefer to only use one account to manage their holdings efficiently and easily.
Honestly, I would also like to only have one investment account, but because I have my own financial goals—four to be exact for the intermediate and long-term horizons—I needed to open these four accounts.
Just like what I’ve written on my 2022 Year End Portfolio blog.
Money is a tool that can be used to better our lives. “As money managers of our own lives, we must strategically make our money our own employees. Let it work for us, and give each and every dime of it its job description based on our financial goals.”
Overall Investment Portfolio Breakdown
The two pie charts above are my asset allocation.
In this blog, I’ll be focusing on the right pie chart. Why? Because it is the investment portfolio where I have complete control over the allocation and its cash flow (NEST Pension is not an account I control as it is a private pension scheme). Also, my LEGO and LW investments are not marketable securities—financial instruments that can be liquidated easily and converted to cash at a reasonable price. Lastly, my cash and savings accounts are not for investment purposes.
I’ve discussed why I opened Vanguard, Freetrade and Col-Financial investment accounts, what they’re for, and the comprehensive holdings of each portfolio in my previous 2022 performance blogs.
- ELMads 2022 Investment Portfolio Performance
- 2022 Portfolio Performance ”Into the Global Investment World”
To summarise for TL-DR readers, My Freetrade and Col Financial accounts are for my value investing endeavours. It is my main investment strategy, in which I research and analyse a company’s profitability, looking for long-term competitive advantage, good management, good liquidity, manageable debt, and trading below its intrinsic value. To know more about what I do, see the following blog links down below.
- The School of Value Investing
- A Short History of Value Investing
- How to Understand & Research a Public Company from Scratch
- Understanding a Public Company from Scratch – MD&A & Financials
- My Simple Investment Checklist
- My Simple Investment Checklist with Greggs PLC
On the other hand, my Vanguard account is for my Chillax investment, where I utilise the cost-averaging method. It is an investment approach that disregards the price of an asset, where investors regularly and consistently purchase shares of a business or the net asset value of a fund for long periods of time. My goal for this fund is to supplement my savings to purchase one of my family’s life goals.
The low-cost index fund investing “no brainer investment method” is one of the most advised investment approaches, if not the most advised, by the world’s most successful and renowned investors of today, such as Warren Buffet, Ray Dalio, Peter Lynch, and the late Jack Bogle.
My Cryptocurrency Investment Allocation
Most value investors do not like cryptocurrencies, as they have no intrinsic value and don’t generate any cash flow. Cash flow in the sense of rental income (from property), dividends (from stocks), and coupon payments (from bonds).
In a value investor’s point of view, intrinsic value stems from the FREE CASH FLOW that a business can generate for the owners of the company. I do agree with this. This is the reason why cryptocurrency only comprises 6% of my total investment portfolio.
To be honest, this is not for value investing endeavours because cryptocurrencies cannot be valued; they can only be priced. That is, people simply give it away for whatever amount they are willing to exchange it for; it is the same as currency exchange rates. The rates fluctuate and don’t have an approximate intrinsic value, and they will not give you any cash flow. It is driven by supply and demand and the sentiments and underlying economy of the country where the currency is primarily used.
“Why do you still invest in it if it doesn’t even jive with your own investment approach?”
It’s because of its underlying technology. You see, I don’t invest in a cryptocurrency for the potential money it’ll generate in the future. Instead, I see it as a potential new industry or the likely disruption of industries in the future via the blockchain. In short, I’m in it for the technology.
Nevertheless, I am aware that I might be wrong with this, and I could lose my allocated money for it. Always remember to only risk an amount of money that you are willing to lose.
In my case, I don’t just talk and not walk; I always place my hard-earned money where my conviction is. Personally, I see blockchain technology as being on par with previous generations’ life-changing innovations. Having the potential to disrupt our lives.
The wheel revolutionized transportation and allowed the development of carts and chariots. This in turn substantially improved trade and commerce.
The printing press enabled mass production of books, which greatly increased access to knowledge and education.
The steam engine (which revolutionized industries and transportation by providing a reliable source of power, the electric motor); the electric motor, the internet, smartphones, social media, and a lot more
It will be interesting to see where blockchain is after a decade or so. Will it reach its full potential for utility purposes? or wither as time passes by?
Investment by Sector Including ETF/Funds
Index funds consisting a third of my investment portfolio, dominates my equity per sector holdings.
Nonetheless, my percentage allocation for index funds will slowly decline in the future because I will start to focus on allocating my capital for my value investing endeavour. The reason behind this is that I’ve achieved the financial goal I’d placed on my Vanguard index fund portfolio. Therefore, I don’t need to add a significant portion of my salary to it anymore.
By Country & Region Breakdown
Chinese equities have the largest allocation in my portfolio. I’ve overweighted my allocation in this country since 2021, which has dragged down my portfolio returns since then.
This will change at the end of fiscal year 2023 if valuations of assets come down due to global economic contractions and headwinds. Then I will heavily deploy my cash for investment purposes; it currently sits at 9% of my overall portfolio.
By Market Economy
In most developed markets, it is difficult to find mispriced stocks of wonderful companies, but it is also difficult to invest in cheap wonderful companies in emerging markets.
Developed markets are where the majority of global capital is invested. This also means that there are a lot of investors studying, researching, and analysing companies in the said market, which further decreases the chance of finding bargains or mispriced assets relative to the company’s intrinsic value. To put it simply, you’ll find it hard to find deals in a market where there are a lot of individuals looking for the same deals as you. If a price reduction occurs, it usually only takes a couple of hours for it to become available because many people will quickly take advantage of it.
In the emerging market space, deals are usually more common than their developed market counterparts. Isn’t it wonderful? but, most of the time, it stays a deal for a longer time. This is because the amount of capital flowing into emerging markets is insufficient to boost the market of a developing country.
Most developed countries and their markets have more regulations and government support and are more stable economically and politically than developing countries and their emerging markets.
I have a larger allocation for emerging markets, which I understand. I will continue to invest in the said market, especially in the Philippines. Personally, I just see it as an opportunity to ride the economic growth in Asia.
Historical Capital Gains, Dividend Gains & Total Money Invested
Historical Performance
My overall portfolio has had a compounded annual growth rate of 12.47% since its inception. This includes the aggregate returns of my Vanguard, Freetrade, Col Financial Brokerage accounts, including my cryptocurrency holdings.
The second image shows how much a £100,000 investment in My Portfolio and a fund that tracks the three indices—namely, the Philippines Stock Exchange Index (the Philippines’ major index), the S&P 500 (the US’ major index), and the FTSE All-World Index—would be worth today (based on CAGR).
NOTE: My returns seem to rival the S&P 500’s returns, but this is just due to the foreign exchange rates.
This is what I meant when I said foreign exchange rates. Because I invest in the Philippine market using the Philippine Peso, I must account for year-end exchange rates in my portfolio’s performance.
Foreign exchange rates substantially impact our investment return, either for the better or for the worse.
As an example, see the images below.
These are only a few of many possible scenarios. This is the complex part of investing in other countries using their own currency, as we always have to consider the possible impacts of the forex rates on our returns. Though I don’t specifically put on a substantial amount of weight and focus on it, I still have to be mindful about it.
In the case of my overall portfolio performance, the impacts of the GBP/PHP foreign exchange rates have boosted my returns in GBP terms. Why did I choose GBP over PHP? It’s due to the fact that I utilise GBP for my day-to-day expenses, I live in the UK, and I would most likely use my investment’s future proceeds in GBP.
Nonetheless, if it is the other way around and I’ll be using it in PHP, then I would need to readjust my portfolio performance to PHP, which would substantially lessen my returns.
If you’re wondering what my returns would be in PHP, see the images below.
A massive difference! My GBP returns were 12.47% CAGR, but in PHP terms, they were only 9.51% CAGR. Indeed, foreign exchange rates had a substantial impact on my returns.
In GBP portfolio return terms, I can keep up with the S&P 500, but when I convert all of my returns to PHP, I significantly underperform the S&P 500.
In the scenario above, a £100,000 investment in my overall portfolio in PHP terms would only have generated you £248,139, whereas it would have been £323,935 and £324,355 for my GBP terms portfolio and S&P 500, respectively.
My reports will not be complete without my real returns on investments—returns adjusted for inflation.
My Investment Goals Checklist (Overall Portfolio):
Fiscal Year 2022
- Beat my chosen benchmark index (S&P 500) = My Portfolio -7.39%; S&P 500 -18.11% 👍
- Minimum 10% Annual Return = -7.39% 👎
- Beat inflation = My Portfolio -7.39%, UK inflation 9.07%. 👎
😁 Goal Partially Met! 😁
Bonus Content – Investment Rate
Maybe some of you are wondering where I got all of the aggregate capital I’ve invested since 2013. I got all of it purely from employment since I entered the workforce, which was in 2012.
I’ve always been a saver, so it was easy for me to learn to become an investor. I’ve been allocating a portion of my salary for investing purposes. I didn’t receive any external money from someone else.
You see, I’m a nerd/geek in terms of money management and investments, and this geekiness of mine has different levels, one example is tracking everything that is monetary-related in my life. Like what? like my investment rate—the percentage amount of my net income that I’ve invested since I’ve worked. Yep, that’s since 2012! 😂😁 See the chart below.
The investment rate is identical to the savings rate, where you divide the total amount of money you’ve saved within a year by your total net income for that same year. The only difference is, the money you have saved is specifically for investment purposes.
For example, if your total net income for fiscal year 2022 is worth PHP 360,000, then you’ve invested a total of PHP 57,600 taken from your total net income in the same year.
- Investment rate = PHP 57,600/PHP 360,000
Your investment rate in 2022 would have been 16%. This means that you’ve invested 16% of your PHP 360,000 net income for fiscal year 2022.
For us to be able to accurately record our investment rate, we need to document our total income yearly and the amount of money we have invested.
To Sum It Up
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.
Investing and managing money is not a way to get rich, but a way to live life on our own terms.
I don’t mind working, as long as the work feeds my mind, heart, and soul and also helps and serves others.
Such things do exist, and two of the most basic ways to find them are to first meet our basic needs, then delve deeper into areas where we tend to overlook. Our inner selves, our own internal domain
It’s by then that you could find an endeavour that feels like play to you but is extreme work for others.
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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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