Damien’s Portfolio update: Still outperforming in the market-sell off

I last updated my portfolio in mid-August which coincidentally was days before the stock market crashed over 10%. You may recall that at the time I was beating 87% of fund managers.

At that time my original £50,000 was worth £50,410. The table below shows how much worse off I would have been if I'd invested in the equivalent managed fund at that time. I also give the performance of a FTSE 100 tracker for reference. Don't forget my portfolio includes all fees deducted while the other two don't include platform fees so their portfolio value is in fact lower than the value stated below:

 

Portfolio	Return	How far behind my portfolio
Damien's 50K portfolio	£50,410	n/a
Average managed fund 40-85%	£49,927	-£483
FTSE 100	£49,393	-£1,017

 

How I outperformed during the market sell-off

Of course if the market suffers a major correction as it did (of more than 10%) then my portfolio wouldn't be immune because around 70-80% of its assets are invested in equities. The chart below shows what happened to my portfolio versus the average fund manager (red line) and the market (black line). The blue dots on the blue line (my portfolio) signify when I made fund switches. Click on the image to enlarge it.

 

 

So what that translates to in actual pounds and pence is shown in the table below:

 

Portfolio	Current portfolio value	How far behind my portfolio
Damien's 50K portfolio	£48,244	n/a
Average managed fund 40-85%	£47,359	-£885
FTSE 100	£44,880	-£3,364

 

So you can see the level of outperformance against the average fund manager with 40-85% exposure to equities has doubled! Plus the out performance versus the FTSE 100 has trebled. In fact I am now beating 90% of fund managers running equivalent portfolios.

Or in other words my portfolio outperformed even during the worst market sell-off since 2011, when the eurozone almost imploded.

What now?

You may be thinking that I'd be pretty happy with that outcome, which of course I am. But let me show you the chart below of the 80-20 Investor Best of the Best Selection (green line) versus my portfolio (blue line).

 

 

The first thing you will notice is that my portfolio has largely tracked the 80-20 Best of the Best Selection's performance, which was my intention. However you will recall that at the start of September there was a substantial reduction in the level of risk being taken by the Best of the Best Selection. At the time I said of the changes:

The noticeable feature is that a number of absolute return funds which use alternative strategies have entered the selection. It is the first time that so many absolute return funds have made the grade. There is certainly a reduction in risk when you look at the Best of the Best Selection this month, emphasised by the fact that there are only 6 high risk funds (usually there are up to 10).

In September's monthly newsletter I even warned 80-20 Investor members:

If you look at the analysis of this month's Heatmap and the Best of the Best Selection both are suggesting that now is a good time to reduce your level of risk in your portfolio and head for relatively safer waters.

Yet having only updated my portfolio just 2 weeks prior to the 1st September I chose to wait until this month before making any more changes. Of course looking at the chart above I now wish I had updated my portfolio to reflect September's Best of the Best Selection.

The reason I am pointing this out is to show you that you won't get every decision right but if you follow a process it won't matter in the long run. My portfolio has now been running 7 months and I am pleased with the relative performance versus fund managers with their army of analysts. However I am still looking at the long term so I'm not going to pat myself on the back too much or scold myself at this stage.

As I've just published October's Best of the Best Selection I have decided to overhaul every fund in my portfolio and replace them with funds from this month's shortlist. The exact switches are listed below.

The key things to note is that like the 80-20 Investor Best of the Best Selection:

• I have exited Japanese equities completely
• I have reduced my US equity exposure
• I now have a significant exposure to (steady) property
• I now have some exposure to cash and 'alternative' strategies

To sum up the portfolio is now taking less risk and will have an overall reduced beta value (see my article on How to make your portfolio immune to market volatility. Hopefully if the current market volatility continues then my portfolio should be in better shape in order to fare better.

Fund switches

 

Fund switched from	Fund switched to
Axa Framlington American Growth	Aberdeen Property Trust
Aberdeen European High Yield Bond	Legal & General Dynamic Bond
FP Argonaut European Enhanced Income	Jupiter European
JPM Cautious Managed	Premier Multi-Asset Conservative Growth
M&G Japan	Fundsmith Equity
Old Mutual UK Mid Cap	JPM UK Smaller Companies
Unicorn UK Income	CF Miton UK Value Opportunities

 

My portfolio now looks like this:

 

Fund	% of portfolio
Aberdeen Property Trust	10
Legal & General Dynamic Bond	18
Jupiter European	17
Premier Multi-Asset Conservative Growth	18
Fundsmith Equity	10
JPM UK Smaller Companies	16
CF Miton UK Value Opportunities	11

 

Which means my portfolio now has an asset allocation breakdown as shown below. The numbers in brackets represent the figures before the above switches were actioned:

• UK Equities 30% (28%)
• European Equities 18% (18%)
• Property 8% (0%)
• Alternative strategies 6% (0%)
• UK Fixed interest 18% (11%)
• Cash 6% (0%)
• US Equities 5% (13%)
• Other international equities 9% (0%)
• Japan Equities 0% (11%)
• Global Fixed interest 0% (19%)

 

 

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