I stopped posting periodic investment diary, as it is not only time-consuming, but also I found my irrational interpretations later.
But I stopped following the market as well.
In order to keep myself disciplined, I realized resuming regular investment check-up and review open to public is necessary. This could be of use, for my investment strategy in the future.
Here is my investment summary, YTD (since April 11th). So far, my investment performance is ~8% (~$1900) in total, from $24,000 initial investment.
- My overweight in European market outperformed S&P 500 by huge margin: I started personal investment, because I expected it was very likely that Macron would win the election based on most of the election survey done in France at the time, unless Melenchon (another french presidential candidate for the election) would support Le Pen, which was relatively unlikely scenario.
I also expected investors were too much worried about left-tail risk of the election. Overall, they experienced “unexpected” Trump win and Brexit. Losing their faith in public survey result, they decided to hedge their position in Europe. I thought differently. Yes, the public survey did fail in the U.S., which I think was due to over-concentration of democrat support in the major cities in the U.S., but the U.S. electorate system is based on geographic electorate, not based on population. The result is over-representation of the rural American region compared to the densely populated cities – which the survey captured correctly. Also, the survey before Brexit was very close; it was almost 50-50. Neither of these were the case for the French election; it did have regional difference in major candidate they supported, but not as extreme as in the U.S., and the survey result was not close enough to say Le Pen would be able to win – after French saw the British people mourning over their Brexit vote.
- Emerging market did well above the developed market: this was surprising, and I could not take the benefits of it. It was right around Yellen’s speech that the rate hike and the Fed balance sheet rebal would be more gradual than investors thought. The result; investors saw emerging market would keep its rally, so long as the Fed is dovish enough for the EM to prepare for its hawkish change. Also, the Emerging Mark was finally signaling real-recovery – driven by the U.S. and European market recovery.
Honestly, this was a very good personal lesson; the power of the Fed in global economy is enormous, and when it is dovish, it is better to increase risk apetite – invest in risky assets, which deliver higher yields. Of course, this is true in a limited sense; only when the economic fundamental remain strong an the volatility is low, just like now.
- Small cap and value seriously underperform; IJR and IWN (small cap growth-ish, small cap value) I realize when it is a bull market, it is better to follow the momentum factor; companies that have shown spectacular performance like FAANG did way better than any other firms, and especially the tech companies in NASDAQ, which I would call “100% growth guys”, did seriously outperform S&P 500 and Dow Jones firms. Whether it is industrial change or just momentum stock rally is something to keep an eye on, but these growth stocks with unreasonable price based on their financials did way better than value stocks. Period.
Yes, it could be because too much energy was wasted right after the election last year; all these small cap firms (and value stocks) overshadowed its peers in large cap, and did slightly better than growth. Hence… we will see when this pattern would reverse… . (based on the trailing 10 year historical return, value and growth stocks show on-par annual return, implying that this difference in return would come back someday.
- I also started investing in individual stocks; these are expected to be my main performance drivers, with much higher risk budget in my portfolio. I gave shots to EA and DATA (Tableau), both are in very fast-growing market (computer game industry and data visualization), with reasonable valuation compared to their growth rate (forward P/E of EA is less than 30, and DATA shows much better prospective than what investors expected). I also respected their business plan – EA offering its old games in subscription-based service and Tableau changing its business model to subscription model as well, which was reported to have grown 175% in Q2.
NEAR is just my cash-equivalent asset, with 2.5~3% annualized return.
Let’s see how this goes, but I am very bullish for all of the assets I am holding; for the next 2~3 years at least.