Damien’s portfolio update: Steady as she goes

Two months have passed since I did something that, as far as I am aware, no other investment commentator or analyst has done, that is to invest £50,000 of their own money in the public domain.

The reason I did it was so 80-20 Investor subscribers can learn how to run their own money and get the best out of 80-20 Investor.

So how am I doing?

Last month you will recall that I had made more than enough profit to pay for a 2 year subscription to 80-20 Investor. In fact I was up 1.8% with a profit of almost £1,000 after a month. I was very happy with that as you can imagine, especially as I invested at the top of the market.

However, at the beginning of April I made a couple of tweaks to the portfolio namely:

• To get rid of my UK equity fund as I was concerned over how the UK stock market would do before, during and after the General Election.
• Took some profits from my technology fund and invested in China

So did I do the right thing? As of today the portfolio is sitting on a profit of £815. Yet dig beneath that number and things become interesting.

The chart below shows the performance of my £50k portfolio (the green line) against the average managed fund (the blue line) and the FTSE 100 (the black line).

Now if we had been having this conversation just 2 days ago I'd be talking about how my portfolio had made a 4% profit to date! Yet markets sold off in the last few days over anxiety surrounding the weakening US economy. That is the problem with snapshots a lot of commentators manipulate the timeframes to make themselves appear in a better light. As you'd expect I have no interest in doing any such thing. This is a warts and all exercise.

One right - one wrong

So what drove the outperformance during the period? Well the small green dot on the line (in the chart above) representing my portfolio is the point at which the above changes were made.

A significant reason for my outperformance was my switch into Chinese equities. The chart below shows the differing fortunes of the fund I part-switched out of and the China fund I switched into. The point I switched is the exact time the green line shoots up. At one point the fund was up 15%.

My China fund finished up 7% over the month versus -2% for the Technology fund.

 

What pleases me most about the chart above is that it shows something that successful investors have the ability to do - Admit that they were wrong! If you go back to the original article when I launched my £50k portfolio I avoided investing in China because history suggests that Chinese equities tend to do better in the second half of the year. Last month I admitted I was wrong and changed tact and profited as a result. How long Chinese equities can continue their rally is covered in my article Chinese equity funds - bubble or buy?

So what about my other fund switch? At the moment it looks like I may have got that one wrong. The chart below shows the performance of the UK fund (the red line) I switched out of versus that of the Global fund I went into (the green line). While I expected the UK stock market to perform badly because of concerns surrounding the outcome of the General Election it has in fact done rather well! A UK fund has even crept into the 80-20 Investor Best of the Best selection this month. However, I plan to wait until after the General Election to decide whether I was wrong. At this stage I think it's a too early to be sure either way.

 

So what changes am I planning on making this month?

The short answer is none as I am pretty happy with the way things are going. It's early days and to be currently sitting on a profit is no mean feat. That may change if we get a market crash but I will deal with that then. Some of my funds have slipped out of the Best of the Best selection (although they remain in the Best by Sector tables) yet I am comfortable with that as their sectors remain in the Best of the Best selection and I want to avoid unnecessary trading.

Some of you may wonder why I didn't sell out of the Henderson China Opportunities fund when a stop loss was triggered earlier in the week. The reason I didn’t was because I felt that the Chinese stock market would steady again, plus the other Chinese equity fund that was in the 80-20 Best of the Best list was still performing well. Remember I am investing for the long term and not to make a quick buck. A stop loss is not an instruction to sell yet I will keep an eye on them.