Being honest about my portfolio performance

The whole idea of this column is that investment advice without skin in the game is not worth the paper it’s written on (unless the pages are pink, naturally). If this requires a level of disclosure my mum and divorce lawyers are not happy with, so be it.

Full transparency is crucial when it comes to reviewing performance, too. I want readers to know which of my calls have worked, which haven’t, and over what period. Sure, you can calculate it yourselves given the numbers below, but who can be bothered doing that? It’s a bloody weekend.

So every quarter I promise to do a proper audit of my ramblings and portfolio returns. They will be slightly different due to the enforced four week lag before I can act on my recommendations. The ongoing transfer of my employee pension into a Sipp also muddies the waters at the moment.

Our first three months are up now. Investors shouldn’t usually be so short-termist, but financial advisers of all stripes must be monitored. It won’t make them better but, as we Aussies say, it keeps the bastards honest. It also gives you a handy excuse to fire someone.

Whether you wish to sack me or not, at least I’m cheap — and more experienced than most. Has the latter helped since November, though? In my first column on the 18th, for example, I revealed my largest exposure to be UK equities. I wrote that I was happy to run with it, despite a one-third rally off recent lows.

Everyone was dissing Britain at the time, which I suggested was a buy signal. And so it proved. UK stocks are up about 8 per cent since. Sharp-eyed readers spotted that my original All-Share fund is now a FTSE 100 one — how this happened in the transfer to a Sipp is a mystery to me.

The two indices have risen in line, so no biggie for now. But they are different animals and we will return to this in a future column. And I swear I didn’t make the switch just so it looked clever when this paper ran a “FTSE 100 reaches all-time high” front page headline last weekend.

It paid to ignore the doom-mongers back in November. It usually does, especially when it comes to equities

My next largest holding was a money-market fund. Frustratingly, it remains a quarter of my portfolio. Here is a prime example of how the self-serving inflexibility of the UK pension industry can cost real money. I wanted to move that cash into a Sipp to buy more US equities (as I wrote on November 25) and some bonds (December 16).

Since that November column, in which I explained why higher interest rates do not affect company valuations (worth another read after the sell-off in global equity markets this week on fears that the US economy is running hot), the S&P 500 is up 3 per cent.

In the same piece I bemoaned that my pension provider didn’t offer a US-only product and hence I had to buy a global fund to gain exposure to the world’s second-best performing equity market ever (after Australia). Turned out marginally better for me in the end — the BlackRock World ex UK Equity index is 4 per cent higher.

And what about the move into bonds I recommended a week and half before Christmas? Again I couldn’t join in, but many readers emailed to say they did. Nice. Contrary to what I usually preach, it was a consensus view that came good. Fixed income has had a solid 5 to 10 per cent run.

I also said I preferred government bonds over company ones. How did that go? Both have done well, so it’s splitting proverbial hairs to be honest. But long duration “govvies” are generally outperforming credit, even many of the riskier high-yield corporate bonds that tend to do better in any rebound.

My two smallest funds when we began were (and remain) Asian focused: Japanese large-caps and developed Asian equities ex-Japan. There is a tad over a tenth of my portfolio in each. I owned these mostly on the simple premise they were cheap, both in absolute terms as well as relative to other equity markets. They still are.

And both were a gamble that China would have to loosen its approach to Covid. Beijing was starting to do so when I wrote about Asia on December 9. Turned out to be less of a loosening than a slash of the ropes with the Longquan Sword. Few punters, me included, imagined such a rapid reopening of the mainland economy.

The positive effect this will have on global demand should not be underestimated and deserves a column on its own in due course. In the meantime, it has helped lift Asia ex-Japan equities as well as Japanese stocks by 5 per cent since December.

An OK first quarter then. My pension pot is 6 per cent fuller, despite returns being tempered by too much cash. Are there lessons for readers to take away? I was lucky on timing, but it paid to ignore the doom-mongers back in November. It usually does, especially when it comes to equities.

It’s also tempting to conclude that value matters — that my preference for cheap UK, Asian and Japanese companies was a winner. Maybe it helped. But the truth is that value investing can underperform so-called growth strategies for years — as per the recent past.

Thus, we shouldn’t be carried away. And as it’s only three months into this adventure, please keep emailing me your ideas for topics as well as general feedback. The more we co-operate, the sooner we can all retire.

The author is a former banker. Email: [email protected]; Twitter: @stuartkirk__