Portfolio evaluation
Below you find the performance of the total portfolio and the sub-portfolios. As comparison the corresponding result for the Benchmark (ACWI Index). All return figures are measured in SEK.
The overall result for 2019 is very good in absolute terms, but still lagging the Benchmark with 10,8%. The relative underperformance is due to the fact that the portfolio was almost entirely positioned in cash and bonds during January, when the Benchmark gained 8,6%.
Trending value had a second consecutive bad year, but during autumn the trend seems to have changed and the portfolio has now at least left the negative territory.
There has been no activity in the Opportunities portfolio this year.
Changes 2019
In August a separate follow up of the three different Global momentum portfolios was introduced. It is too early to draw any conclusions already now.
The Long term portfolio was started in the beginning of the year. It currently consists of
seven investment management companies available at the Stockholm stock exchange. The start has been quite promising.
The evaluation table looks quite nice, except for the annual performance goal. One might wonder if the performance goal is realistic, after all there is a focus on downside protection. The short answer is yes, since the sub portfolios all have a better backtest performance history than the benchmark, and they have also performed better than the benchmark since their inceptions. For more details see the year by year table above.
Hours spent
An important strategy goal is to be able to run the portfolio spending only a few hours/week.
As you can see above I spent 2,4 hours/weeks in 2018 and 1,6 in 2019, a nice decrease and way below my limit 5 hours/week. The trend is even better; during second half of 2019 I only spent 0,7 hours/week. I hope and believe the figure for 2020 will be below 1 hour/week.
The purpose of this yearly report is to document the performance, but with focus on goals and strategy evaluation.
Below you find the performance of the total portfolio and the sub-portfolios. As comparison the corresponding result for the Benchmark (ACWI Index). All return figures are measured in SEK.
The overall result for 2019 is very good in absolute terms, but still lagging the Benchmark with 10,8%. The relative underperformance is due to the fact that the portfolio was almost entirely positioned in cash and bonds during January, when the Benchmark gained 8,6%.
Trending value had a second consecutive bad year, but during autumn the trend seems to have changed and the portfolio has now at least left the negative territory.
There has been no activity in the Opportunities portfolio this year.
Changes 2019
In August a separate follow up of the three different Global momentum portfolios was introduced. It is too early to draw any conclusions already now.
The Long term portfolio was started in the beginning of the year. It currently consists of
seven investment management companies available at the Stockholm stock exchange. The start has been quite promising.
Goal evaluation
The overall goals for the Idun Portfolio are:- to perform at least as well as the global stock market
- a better risk adjusted performance than global stock market (measured by comparing Sharpe ratios)
- to do this with less yearly variations than the global stock market ( measured by comparing the volatility and the worst year return for the portfolio with the global stock market)
- to be able to run the portfolio using only a few hours work per week
The evaluation table looks quite nice, except for the annual performance goal. One might wonder if the performance goal is realistic, after all there is a focus on downside protection. The short answer is yes, since the sub portfolios all have a better backtest performance history than the benchmark, and they have also performed better than the benchmark since their inceptions. For more details see the year by year table above.
Hours spent
An important strategy goal is to be able to run the portfolio spending only a few hours/week.
As you can see above I spent 2,4 hours/weeks in 2018 and 1,6 in 2019, a nice decrease and way below my limit 5 hours/week. The trend is even better; during second half of 2019 I only spent 0,7 hours/week. I hope and believe the figure for 2020 will be below 1 hour/week.
Strategy evaluation
First a few words about the fact that I since May 2018, have a written and public investment strategy. The underlying reason is my wish to improve discipline, thus avoiding large strategy changes or impulsive changes in holdings. This has so far worked well. The conclusion is that the documented strategy really has helped me to stay disciplined. I will therefore continue the documentation effort in blog format during 2020.
The approach I have taken, to lean on rules-based or mechanical strategies, suites my temperament well. I will continue with this approach also in the future. Allowing to use a small part of the portfolio for new and other ideas, also works well and will be kept, although
I did not use this option in 2019.
Global momentum
This portfolio started as a Global Equities Momentum (GEM) strategy, switching between US/WorldExUS and aggregate bond. In 2017 the portfolio tranching concept was introduced, effectively meaning (in my case) that a quarter of the portfolio is evaluated weekly. Last year it changed to a different but GEM-similar strategy, holding the top two region ETF's based on the combined 3/6/12 months performance, still keeping the absolute momentum test as specified in GEM. The biggest change 2019 is that each of the 1-18 months loopback periods is considered as a separate portfolio, more info here. The aim is to add process/parameter diversification to the portfolio.
Another change is that I for practical reasons have splitted this portfolio up in three different portfolios, each running in different accounts at Avanza and Degiro. Also this provides some process diversification and also an increased home bias as I have introduced a SE/Global sub-portfolio in the beginning of 2019. Current investment universe is found here.
In order to keep the turnover and transactions down, I have introduced some filters. A holding must be at least 7,5% and a change must at least involve selling off 10%. These figures might be tweaked the coming year, but otherwise I am not considering any changes.
Trending value
This is the second consecutive underperforming year, but in September the value started to trend positive and at least the year end result is positive. In June the one-year holding period was re-introduced and the trailing stop-loss rule removed, with the purpose to reduce the activity and transaction costs. Going forward I am planning to re-balance a quarter of the portfolio four times per year. I have noticed that different industries are trending at different times during a year, and if the entire portfolio is re-balanced in on occasion, it might result a significant overweight in some industries. The diversification is improved by spreading the re-balancing over the year. I am also planning to re-introduce a less re-active version of the stop-loss rule.
I might also start a Swedish value portfolio. It is also worth while to investigate the possibility to profit from the value trend.
Opportunities
The approach I have taken, to lean on rules-based or mechanical strategies, suites my temperament well. I will continue with this approach also in the future. Allowing to use a small part of the portfolio for new and other ideas, also works well and will be kept, although
I did not use this option in 2019.
Global momentum
This portfolio started as a Global Equities Momentum (GEM) strategy, switching between US/WorldExUS and aggregate bond. In 2017 the portfolio tranching concept was introduced, effectively meaning (in my case) that a quarter of the portfolio is evaluated weekly. Last year it changed to a different but GEM-similar strategy, holding the top two region ETF's based on the combined 3/6/12 months performance, still keeping the absolute momentum test as specified in GEM. The biggest change 2019 is that each of the 1-18 months loopback periods is considered as a separate portfolio, more info here. The aim is to add process/parameter diversification to the portfolio.
Another change is that I for practical reasons have splitted this portfolio up in three different portfolios, each running in different accounts at Avanza and Degiro. Also this provides some process diversification and also an increased home bias as I have introduced a SE/Global sub-portfolio in the beginning of 2019. Current investment universe is found here.
In order to keep the turnover and transactions down, I have introduced some filters. A holding must be at least 7,5% and a change must at least involve selling off 10%. These figures might be tweaked the coming year, but otherwise I am not considering any changes.
Trending value
This is the second consecutive underperforming year, but in September the value started to trend positive and at least the year end result is positive. In June the one-year holding period was re-introduced and the trailing stop-loss rule removed, with the purpose to reduce the activity and transaction costs. Going forward I am planning to re-balance a quarter of the portfolio four times per year. I have noticed that different industries are trending at different times during a year, and if the entire portfolio is re-balanced in on occasion, it might result a significant overweight in some industries. The diversification is improved by spreading the re-balancing over the year. I am also planning to re-introduce a less re-active version of the stop-loss rule.
I might also start a Swedish value portfolio. It is also worth while to investigate the possibility to profit from the value trend.
Opportunities
There has been no activity in this portfolio in 2019. For the time being I am not looking for new opportunities and expect no activity 2020 either, unless I stumble upon something very promising. Strategy-wise there is nothing to report and there are no anticipated changes ahead, except perhaps that the portfolio max weight will be reduced.
Long term
Last year I mentioned that I was contemplating an increase of the SE-part of the portfolio.
This has resulted in a Long term portfolio consisting of Swedish investment management companies bought at discount compared to the market value of their assets. This has started out quite well and I will continue with the same approach during 2020.
Risks
There is of course a risk that momentum and/or value investing cease to work. If this happens the performance is however likely to be close to the benchmark.
The Global Momentum portfolio relies heavily on the spreadsheet and the Googlefinance function when calculating the 1-18 months performance. If Googlefinance or Google spreadsheet ceases to work it is not realistic to calculate by hand, instead a migration to another vendor should be considered. Another option is to get back closer to the original GEM specification.
The main risk is however related to the fact that the Idun portfolio is run by me alone, it's a one-man show. Should I e.g. get sick and unable to work with the portfolio it would lead to a number of consequences:
- The performance figures shown in the spreadsheet will slowly be more incorrect. In itself this does not affect the actual portfolio performance.
- Global Momentum requires weekly checks and possibly trading. The strategy is however fairly robust and the result is not seriously hampered in the short run, you just get back on track by re-start the weekly checks when possible. Should the interruption be longer than a few (4-6) months an alternative and simpler strategy should be utilized.
- Trending value is more robust and only if the interruption is longer than 1-2 years a simpler strategy should be utilized.
- Long term is even more robust and an alternative should be considered only if the interruption is likely to be permanent.
As I don't want to involve other people in running my portfolio, a simple alternative fallback strategy is needed, e.g. buy and hold a global index fund.
Another conclusion is that it would be a good idea to investigate the possibilities to migrate to another spreadsheet vendor.
Last year I mentioned that I was contemplating an increase of the SE-part of the portfolio.
This has resulted in a Long term portfolio consisting of Swedish investment management companies bought at discount compared to the market value of their assets. This has started out quite well and I will continue with the same approach during 2020.
Leverage
I have without luck been looking for a rules-based leverage plan. So far I have learned that modest leverage, as expected, can boost the result also after all costs, but frequent changes in leverage level increases turnover and transaction costs. Risks
There is of course a risk that momentum and/or value investing cease to work. If this happens the performance is however likely to be close to the benchmark.
The Global Momentum portfolio relies heavily on the spreadsheet and the Googlefinance function when calculating the 1-18 months performance. If Googlefinance or Google spreadsheet ceases to work it is not realistic to calculate by hand, instead a migration to another vendor should be considered. Another option is to get back closer to the original GEM specification.
The main risk is however related to the fact that the Idun portfolio is run by me alone, it's a one-man show. Should I e.g. get sick and unable to work with the portfolio it would lead to a number of consequences:
- The performance figures shown in the spreadsheet will slowly be more incorrect. In itself this does not affect the actual portfolio performance.
- Global Momentum requires weekly checks and possibly trading. The strategy is however fairly robust and the result is not seriously hampered in the short run, you just get back on track by re-start the weekly checks when possible. Should the interruption be longer than a few (4-6) months an alternative and simpler strategy should be utilized.
- Trending value is more robust and only if the interruption is longer than 1-2 years a simpler strategy should be utilized.
- Long term is even more robust and an alternative should be considered only if the interruption is likely to be permanent.
As I don't want to involve other people in running my portfolio, a simple alternative fallback strategy is needed, e.g. buy and hold a global index fund.
Another conclusion is that it would be a good idea to investigate the possibilities to migrate to another spreadsheet vendor.
Year end holdings
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