Portfolio Updates – March 2019Posted: April 22, 2019
- Major rebound since the last quarter
- Overall, now exceeding the benchmark again
- Passive income still doing well
Monthly Performance Summary
Like many investors in the market, there was a major correction following the dismal performance of Q4 in 2018. Overall the general trend has bee upwards, as illustrated in the monthly performance graph below: every single portfolio posted positive gains, even the margin portfolio which typically has negative gains due to the GE options.
This is a great story to tell as it reinforces the notion that when the waters get choppy, one must stick to their principles and ride out the storm. Also, it puts timelines into perspective: if I panicked—and did not remember that I have a very long (10+ year) time horizon, I may have pulled out of the market in December when everything was dropping and missed out on some great gains. It is also nice to see that, except for March, I beat my own benchmarks in January and February; in March we technically “did” beat at an 1.8% return vs the benchmark 1.7%.
From a trailing twelve-month perspective, things are looking positive as well. The total fund line (solid black) is now trending above the benchmark line (dotted black). The biggest TTM performer is the Certificated portfolio, but I attribute that to the large bump in November 2018 which is bringing up the TTM overall for that one portfolio; from the December 2018 update:
The portfolio that lead the way in Q4 was the Certificated Portfolio, and the huge spike in November can be attributed to Emera which gained 10% in November – and since that holding is the largest in the Certificated portfolio—at 24%—that 10% increase pulled the rest of the portfolio up with it. Another big winner was CAE which jumped quite nicely, spiking from a 12% gain in October to a 31% gain in November. Even after the December crash, the certificated portfolio managed to break even, with only a $1.00 variance between Q3 and Q4. Regrettably, the Certificated portfolio only accounts for 3% of the total fund, so even with its stellar performance it wasn’t enough to pull the rest of the holdings up.
Income continues to be strong quarter over quarter. As expected, there was a “loss” in January when measured against the benchmark, but this is nothing new: since the benchmark is composed of ETFs which typically pay quarterly, there are large payouts only four times a year. This compares to my actual portfolio which is made up of various quarterly and monthly dividend payers, which are staggered throughout the year yielding a smoother distribution of income.
The better view is the TTM which smooths out the bumpiness of the benchmark income:
Sadly, the overall trend has been flat/decreasing. This warrants some additional investigation—which I hope to get to in the following weeks—as I have made little change to the composition of the portfolio. However, there are a handful of ETFs which are not necessarily always non-decreasing (i.e. flat or increasing), which may be dragging the TTM numbers down. That said, overall, we are still beating the benchmark which is the ultimate goal.
A new graph I am viewing is the overall distribution of passive income between taxable, tax deferred, and tax-free accounts:
The green bar (green is good!) is passive income which will never be taxed, and it is that bar that I wish to grow over time. The trend has been increasing, and soon I hope to have 20% (if not 25%) of total passive income be tax free within the next 12 months.
Sadly, due to competing priorities, I have been unable to invest much new cash into any of the portfolios, so the asset mix is at the whim of the wider markets. Real estate and fixed income are still lagging considerably, and I expect to see that trend maintain itself for at least another 12 months until I can infuse a large amount of capital back into the fund.
Overall the quarter did well, simply by staying invested and not worrying about the hem and haw of the wider markets (e.g. forum commentary!). That said, I do expect a drop in passive income in the coming months as I had to liquidate some of the portfolio to pay off 2018 income taxes.
Onwards and upwards!