Portfolio Review: July 2018

My portfolio has finally resumed its advance over the last quarter, though the performance has not quite been spectacular. I’ve slowed down my portfolio turnover over the last quarter and am hoping that this small shift in strategy is going to suit the current market volatility a bit better. 

For ease of reference, here is a link to my portfolio so you can see what’s in it at the moment. It’s a fantasy portfolio set up on Stockopedia to track my actual portfolio. The overall value is different but I try to keep the proportions of each holding as accurate as possible so it can track my actual performance. The fantasy portfolio excludes dividends and tends to buy at slightly worse prices than I can get from my broker, so it somewhat underestimates the performance of my actual portfolio.

Performance

Benchmarks

The performance of my portfolio (QSS) is shown against its benchmarks in the table below (all the figures below exclude dividends). I’m having some technical issues with my ‘buy and hold’ benchmark portfolio at the moment so am unable to report on it this time round. Hopefully I’ll have it sorted for the next quarterly review. For now this leaves my benchmarks as the FTSE 100 and a portfolio of the top decile of UK shares according to their Stockranks.

july18

I don’t have a great deal to comment about this. My performance has been good over the last quarter, though not a great deal above the overall market. I’m up 5.3% over the past six months, which is decent but far from spectacular. Temporary relative underperformance is to be expected in investing as there is a lot of luck involved, so I’m fairly relaxed about this. Over the longer term I’m still a long way ahead of my benchmarks.

Trading stats

The table below shows my trading statistics. The key things to note are the win/loss ratio, which shows the proportion of profitable trades, and the gain/pain ratio which shows the size of an average win relative to an average loss. What I am aiming for in my momentum based strategy is to have a win loss ratio above 40% but to ensure the gain/pain ratio is as high as possible. I do this by cutting losers before they are more than 10% down and by holding and adding to winners.

july 18 trade

My trading stats have continued to deteriorate since the last review. The ‘gain pain’ ratio in particular has deteriorated as I’ve closed out a lot of positions for small profits as momentum ‘turned’ in the face of market volatility. However, I’m fairly relaxed about these stats. They are backwards-looking, as they only reflect trades I have already closed and go back to trades made some time ago. For example, the last 50 trades go back as far as September 2017. They still reflect the issue I highlighted in my previous review i.e. that I was overtrading given the market volatility. I feel confident that I am addressing this issue satisfactorily now. The positions in my current portfolio are all in profit, so I am reasonably confident that these stats should start to improve from here.

Strategy review

I haven’t made much in the way of adjustments to my strategy in addition to the points raised in my previous review. The only thing to highlight is that I have become more relaxed in my approach to anticipating and dealing with market crashes. As set out in my last post, constantly worrying the next market crash and raising cash on every wobble is a largely unnecessary and expensive preoccupation. I don’t think the underlying economic conditions suggest a crash is likely in the near term, so I’m trying to be more relaxed about holding my positions through market volatility. However, given we may be in the latter stages of the economic cycle, one thing I am starting to do is to be a bit more wary about valuations and cyclicality in deciding what to buy.

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