Thursday, July 21, 2016

Performance Evaluation - July 20, 2016

As expected, Bond and Gold markets are taking a breather and so is the portfolio. As you know nothing goes up in a straight line. Although one can time the market on a shorter term time frame, it results in heavy tax implications. And therefore, the balance between long-term investing and market timing/tactical allocation, is a delicate line.

Furthermore, markets are supposed to be treated as a place where one can grow their wealth by investing in other people's ideas and innovation, so that the global wealth grows, lives improve and you reap the benefits. It is not supposed to be a stressful environment. Therefore, long-term investing demands patient, persistence and following longer-term stories to ride the waves.

Over the past 2 weeks, the waves of Gold and Bonds are declining, while wave of the stock market is gaining momentum. In fact, our proprietary model just triggered a buy signal in the stock market, which has prompted a shift in asset allocation.

We believe that over time, portfolio will come back in a very sharp manner. At the moment, portfolio is up ~22% YTD, while SP is up ~7.5% YTD with a Beta of 0.04. This suggests that the portfolio is generating totally uncorrelated gains and is not dependent on whether the stocks rise or fall.

At this time, there is a lot of confusion in the markets. Many pundits are ignoring the rally, while others are stating this as a bull-trap. There is a huge cash pile on the sidelines because fund managers have believed that a major recession is about to hit the US. Therefore, under these confusing times, it is best to stay with a time-tested model and prepare for the next leg-up in the assets held in the model portfolio by the grace of Almighty.

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