Jan 2022 – The long overdue correction

My worst month ever, at least since I have tracked things rigorously and monthly, was March 2020. That was the month that the covid-19 penny dropped, with lockdowns starting across Europe. My portfolio dropped 13% that month, after a 6% drop the month before – making my biggest drawdown -19%.

Once-a-century pandemics aside, my worst month in 9 years saw drops of about 6%. 2018 Q4 saw two separate months (October and December) that my portfolio dropped 6%. Aside from these 6%-drop months, I haven’t seen any my portfolio drop more than 4% in a month since I started tracking, 9 years ago.

So I was somewhat tense at points in January to see my dial dropping at times by 10% on the month earlier. The month rallied towards the end, leaving me down 7% on the month. Leverage was definitely my enemy , as equity markets fell everywhere.

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2021 review, via seven questions

This, my annual review for 2021, somehow was overlooked in January. But better late than never, let’s ensure 2021 is not forgotten – it was a rather extraordinary year.

2021 was the 9th year that I’ve been tracking my portfolio (reasonably) rigorously, every month.

Following the format I used last year, I’m setting out here to tackle seven generic questions that I think all prudent investors should ask themselves at least annually.

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The market’s in freefall: what should I do?

Last week was the worst week since, well, a very nasty week quite a long time ago. And this week has started even worse. We are now officially into S&P correction territory.

Jeremy Grantham types (thank you @Monevator for the link) will tell you this wolf has been lurking just around the corner and we had it coming.

Typical, really. Just after I have leveraged up. And published a piece about ‘feeling rich’. Maybe I caused the global stock market drop, through sheer hubris? Just to compound the sense of nemesis , I am about 3% overweight on USA equities going into this correction.

When is a fall a fall?

Mind you, the fall has barely started. Jeremy Grantham describes how these corrections start with the riskiest stuff. Maybe that is why, until today, FTSE hadn’t moved yet.

In fact my portfolio – and its graveyard – are full of surprises.

I have a few ‘spec tech’ holdings that are down over 30% – e.g. HUBS, DOCU, ESTC. So is Homeserve, though Homeserve’s decline pre-dates the recent woes by several months.

And my big tech is down materially – Amazon down to $2800, MSFT, GOOG and so on down 12-15%. Not nearly as big a drop as the ‘spec tech’ but more impactful to my portfolio due to my substantial holdings in a couple of these.

Key indices, and a sample ‘spec tech’ stock, performance year to date

But, reflecting FTSE remaining at 7300+, some stocks I gave up on a while ago though are doing OK – HSBC is above £5, and Shell is above £20.

Continue reading “The market’s in freefall: what should I do?”