I’m going to round up the year by reviewing the 2022 year-end portfolio which the market happened to close last night with all but sums up how this year went.
This year has been a bumper to many people, with most taking the hit from the drawdown effect of the massive tech companies run in 2020 and 2021, while regulatory and political agenda hit the Chinese banks, properties and tech companies in general.
My portfolio was clearly nowhere near being insulated from these drawdowns and this year it was not exception. In fact, I think this is the worst drawdown year I have faced in my entire decades of investing journey post the Great Financial crisis.
The time weighted rate of return adjusted for additional deposits and withdrawals stand at a negative -35% this year. This is huge because it underperforms many of the rest of the other markets including S&P (-19.4%), Dow (-9%), and STI (0%).
If I were to compare the portfolio, it is probably closer to the return of the likes of Nasdaq (-33%) and HSI tech ETF (-33%) which means that the portfolio is heavily skewed towards the tail end of the technology companies, which bear the impact from most of the drawdowns this year.
This return also did not take into account two things:
First, the options premium generated from this year amounted to a good $73,780. This was the resulting effect from the writing of both the puts and the calls as the market turned volatile which made trading much more impactful. Whilst the total premium generated looked impressive in any given year, this year was exceptionally special because it could not cover the unrealized losses so far that were sitting in the book.
Still, I see it as a mitigating impact while waiting for the market to recover, almost similar to the concept of dividends where you keep receiving it but still own the main mother shares.
Second, this return also did not take into account the gains from the property that we sold.
I wanted to separate the two performances so that it looked cleaner. On hindsight, the investment made back in late 2019 proved to be a good decision as otherwise it would be invested in the stock market instead. But I guess we’ll never be able to know that earlier.
Going into 2023, I am cautiously optimistic about the future performance of the portfolio.
I think with China opening up and pushing to revive the economy back into health, we should be seeing quite a good amount of injection into the economy and market, and this should benefit the portfolio – which is closely tied to the news on HK and China.
Similar like this year, I will be using the options premium as a strategy to generate cash and inject funds consistently into the portfolio each month to buy shares here and there. Will pick it up again once we hit the month of January.
In the meantime, wishing everyone a great end to the year and a better start to 2023!
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