Merry Xmas to all FH Readers!
It’s that time of the year again.
Don’t know about you, but 2023 seems to have zoomed by in a jiffy.
As is tradition, I like to take the opportunity at the end of each year to survey the year’s investment performance.
Quite a few have also asked for my investment returns this year, so I figured I would share some details.
What was my investment return this year? As a Singapore Investor in 2023?
As at time of writing, my portfolio return in 2023 is between 20% – 30%.
This is for the diversified risk portfolio that I run, which includes REITs, equities, commodities, technology, crypto etc.
It is spread across 3 main jurisdictions – the biggest being Singapore (close to 40% allocation), followed by US then China.
And it is inclusive of dividends.
- S&P500 is up 24% year to date (including dividends)
- STI ETF is up 1% year to date (including dividends)
- All World Index (IWDA) is up 17% year to date
FH Premium subscribers have access to my full portfolio, so do sign up if you are keen.
Was I pleased with my investment performance this year?
All things considered, portfolio performance looks very close to that of the S&P500.
However given that I run about 40% exposure to Singapore stocks (given that I live in Singapore and my spending needs are in Singapore), and the STI is only up 1% year to date, I suppose performance is acceptable.
But there’s nothing more this horse hates than a nice pat on the back.
So the point of this article is not to blow my trumpet.
It is to discuss what I did wrong this year.
My 3 Biggest Investing Mistakes in 2023?
Mistake 1 – Selling NVIDIA too early
Boy… this might just go down as one of the biggest investment mistakes I’ve ever made, full stop.
Some time in Q2 2023, I decided to take profit in my NVIDIA position.
It was sitting in the 300s, up almost 150% from the 2022 lows.
I had a not small position in NVIDIA, so I figured I would sell and lock in some profits.
Boy… what a terrible decision.
After I sold, NVIDIA reported blowup revenue that were up 100% year on year due to the AI revolution.
And the stock promptly shot higher, where it sits in the high 400s today.
That’s about 50% higher than where I sold.
What was my investment mistake?
In selling NVIDIA too early, I violated one of the most basic investing maxims.
Let your winners run.
In hindsight, it was obvious that from the chart and the fundamentals, that AI is a structural revolution that would play out over years.
To lock in profits too early was an unforgivable mistake.
I suppose the next mistake was not buying NVIDIA back in the high 300s/low 400s after I was proven wrong.
But having sold in the low 300s, I couldn’t bring myself to buy the stock back, which was probably mistake number two.
So many lessons here:
- Let your winners run
- Don’t sell if the charts tell you there may be further upside
- Structural revolutions like AI/IT play out over years
What was the saving grace?
The saving grace I suppose, is that AMD is one of my largest positions in my portfolio.
Riding on the AI/NVIDIA coat tails, AMD performed very well in 2023.
Up almost 130% from 2022 lows.
So I benefitted a lot from the AMD run.
But had I held onto NVIDIA, I probably would have been sitting on even bigger profits.
Mistake 2 – Holding onto commodities for too long
My 3 largest sector allocations today are real estate, Tech and commodities.
Unfortunately, commodities have had a 2023 to forget.
Here’s the chart for oil, it hasn’t really gone anywhere in all of 2023.
What was my investment mistake?
Here’s the chart for Exxon Mobil.
Much like oil, it has been trading rangebound for most of 2023.
Frankly I could have sold some commodities in early 2023, and rotated the cash into other sectors for higher returns.
Not doing so, for at least a portion of my commodities, was the mistake here.
What was the saving grace?
Funnily enough, despite all the fears over a recession, oil demand in 2023 actually held up very well.
The reason for the poor performance in oil wasn’t actually lower demand.
It was higher supply – from US Shale, Russia, OPEC+ generally.
Had I sold oil in early 2023, I would have sold because I was worried about recession fears in 2023 impacting oil demand and consequently prices.
So I would have been right, but for the wrong reasons.
So maybe this mistake was not as bad as Mistake No. 1.
In investing you want to focus on getting the process right – to deliver consistent returns over time.
The other saving grace, was that while oil didn’t do so well, my uranium positions did very well.
Up almost 50% in 2023.
So all in commodities had a decent enough year, although not as great as the other parts of the portfolio.
Mistake 3 – Not betting bigger on falling interest rates
After spending the whole of 1H 2023 talking about how interest rates need to go higher (which it did).
I spent the whole of 2H 2023 talking about how interest rates need to go lower (which it also did):
I bought REITs and call options on Treasury ETFs as a way to bet on falling interest rates, and both have since paid off.
What was my investing mistake?
The mistake I suppose, was not sizing the bets properly.
In plain English – I could have increased the amount I put on both REITs and Treasury call options.
And that would have increased my investment returns even further.
This is in some ways the same mistake as No. 1.
In Mistake No. 1, I was too risk adverse and too quick to take profits.
In this mistake, I was also too cautious, and failed to size the trade much bigger.
This was a play that I had high conviction on (that interest rates are going down), and I should have put more money where my mouth was.
It was the fear of being wrong that held me back from putting on a bigger size.
But given the valuations some of the REITs were trading at, and the structure of using call options on TLT to limit downside risk if I were wrong, I should have recognised that this was an asymmetric bet (I stand to make much more if I am right, than what I lose if I am wrong).
And sized the bets even bigger.
What I did well in 2023?
On a brighter note, I also wanted to touch on 3 areas where I thought I did well in 2023.
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Letting Semiconductor / Tech positions Run
The first was letting my remaining semiconductor and tech positions run.
I have big exposure to semiconductors such as AMD, Intel, Micron etc and they did very well in 2023.
After the fiasco of NVIDIA, I was more than happy to let these positions run, and run they did:
Betting on falling interest rates
Betting on falling interest rates via REITs and Treasury call options was a very lucrative play in 2023 that paid off in the final 2 months of the year.
Yes, the mistake was not increasing the size of this trade.
But the fact that I had this trade on at all, paid off decently well for me.
I had high conviction on this play because of declining inflation expectations, and asymmetric risk-reward.
Only regret was not sizing the bet bigger.
Taking profit on Bank Stocks
Full disclosure that I actually took profit in most of my bank stocks in 2023, and rotated the cash into REITs.
That has paid off well.
The bank stocks (like commodities) have had a 2023 to forget, trading flat/down from where they started the year.
Yes, I know that DBS pays a juicy 6% dividend, but when you pull up the price chart it’s really gone nowhere all year:
This lacklustre performance is actually a big reason for the poor performance of the STI, given that the index is made up 50% of banks.
So I don’t regret selling my bank stocks in 2023, but now that the macro climate has changed again after the Fed “Pivot”, I suppose the question is when should I be looking to buy them back.
Looking forward to 2024 – Policy Easing into an election year?
But in any case, 2023 is almost over now.
2024 is a new year, and all the returns are squared again.
As shared in last week’s macro update – it certainly looks like the Fed “Pivot” is here.
Over the past 2 months, both the US Treasury (Janet Yellen) and US Federal Reserve (Jerome Powell) has signalled a willingness to ease policy into an election year.
The way this economy is set up – if you easy monetary policy this early, before inflation is fully tamed.
You might have a pretty explosive 2024.
Which squares up nicely for Biden’s re-election in Nov.
Controlling monetary policy to engineer an economic boom in time for your re-election, and using courts to bar your political opponents from running for office.
If I didn’t know better I would think this was a Latin American country and not the world’s premier superpower and bastion of democracy.
Closing Thoughts: Invest in the world as it is, not how you wish it to be
Jokes aside – I invest in the world as it is, not as how I wish it to be.
The pivot from Yellen and Powell the past 2 months, is notable as a signal for how 2024 might play out.
As shared with FH Premium subscribers, I’ve made changes to my portfolio based on what I’ve seen the past 2 months, and I will continue to make adjustments going forward.
Do sign up for FH Premium for a full breakdown on my current portfolio, and how I am positioned for 2024 (including the stocks / REITs I am keen to pick up).
Whatever the case, I look forward to writing this same article a year from now, with all the fresh mistakes to come in 2024!
This article was written on 22 Dec 2023 and will not be updated going forward.
For my latest up to date views on markets, my personal REIT and Stock Watchlist, and my personal portfolio positioning, do subscribe for FH Premium.
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