My second quarter 2019 portfolio review is posted

I have completed and posted my Q2 2019 portfolio review. We’re up 9.8% so far and things are looking good notwithstanding some possibly growing headwinds.

Read my full review here.

Author: Michael

staff@money4retirement.ca

2 thoughts on “My second quarter 2019 portfolio review is posted”

  1. Michael,

    Glad that you feel that things are looking good in the market. If you recall i predicted this at the beginning of the year. Third year presidential terms are almost always good statistically.

    As a comparison to yours, my portfolio started deviating below my benchmark, and i am now underperforming at the end of the second quarter. The portfolio is returning 16% as of june 30th. My underperformance stems mostly from some sector imbalance but mostly due to differences in returns from my international holdings as well as canadian holdings that have simply not kept up with the sp500. In the end, this return is still market like, however i normally enjoy a few percent above the sp500 so it is dissapointing. It is however interesting that there is a 6 point difference in my favour between our portfolios where yours is doing very well and mine is not. In what financial world can these both be true? Yet they are.

    My only comment regarding your review is that your target of 4% is not realistic, or better said based on reality. You would have to be a pretty bad investor to not be able to hit that target in the long run. To me, targets should be what you measure against in order to determine success. This allows you to better understand how you are doing against the market. You could drop your target to 2% and pretty much guarantee success every year, but is that truly the right way to look at it? Your couch potato comparison is a better approach. Performance indicators need to be relative to what the market can provide. So if the market is down 10% but you are down 5% you did really well. Your fixed target of 4% on the other hand would not be achieved. The reality is that from a performance measurement approach the former best reflects the outcome, while the latter does not. In the first instance, you would not change a thing in your portfolio since you are a champion but in the second instance you would have to adjust the portfolio due to underperformance, as you are a loser. Do you see why its important to have relative benchmarks.

    I think what you maybe trying to do is establish a minimum longterm return where your retirement lifestyle is safe. That would be a great indicator to measure safety, but not so good for performance. I think you need both.

    Again, thanks for providing your returns. I learn much as i watch both portfolio styles play out. Its particularly interesting to see how the portfolios perform in different market situations from last years negative market to this years positive market.

    Raven

    1. Hi Raven,

      My main response to the comment about targets is that I really am not that interested in performance vs. required return to the degree you are. My required return is what I need and therefore I don’t see much point in taking on more risk than necessary to achieve it. I do look at relative benchmarks as another data point but it is by far #2 after required return at #1. For me it’s not about a competition against a benchmark; it is about having the financial resources to finance the lifestyle I want/need to have.

      Today I am trimming some equity holdings – selling into market strength. I am pruning winners and pulling out some losers. More on that later but the way I see it, I can lock in some profits and dump a couple of “duds,” reduce equity exposure in a frothy market, and take my time to find some other opportunities to invest the cash in. Equities in our portfolio have risen by nearly 20% so far this year, making us more than 5% overweight in equities. We are currently sitting at a 12% return overall year to date with equities, bonds and bullion all up. Compared to 4% it’s a stellar year. Time to park a bit of cash as a bit of a hedge and get things into better balance.

      Cheers, Michael

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