Portfolio Updates

Portfolio Update January 2022 – Brutal Selloff to Start the Year

Calvin Lo

What a terrible start to the year 2022, adding to the misery towards the end of last year 2021. The selloff in tech sector and high growth stocks accelerated and brought the rest of the market down with them.

Personally, I find it difficult to pinpoint the reason for the selloff. The media seems to point to spiking inflation and the Fed finally conceding that inflation is not transitory, thus officially opening the door to rate hikes and bond tapering. Thing is, we’ve seen this coming so why the big reaction now? Maybe most investors were still hoping that the Fed won’t turn hawkish as quickly as they did.

Anyway, I didn’t sell anything this month despite the selloff and endless warnings about further declines. The fact is, we aren’t in depression just yet. Yes, the era of easy money is ending and we will indeed see valuation contractions, but market corrections (drawdowns >10%) like these are so common. Maybe investors have forgotten how it feels like after such a strong bull run. Taking a step back, we’re not even in bear market territory yet (drawdown >20%), except for the Russell 2000 which briefly touched the -20% mark.

In my view, I don’t believe we will go into a bear market, at least not yet. Inflation has only just started to rise and the Fed has plenty of room to raise rates (since we’re practically at zero). There is risk of course that the Fed might be too far behind the curve, being too late to raise rates and thus letting inflation run away, but I think we are still far from that happening.

That said, I didn’t sell mainly because I still have an active income with fresh capital coming in every month so I’m not worried about my lifestyle being affected or running out of cash to invest. I also have about 15% in cash to cushion any drawdowns and to pick up shares at cheaper prices.

I’ve also built a portfolio I’m comfortable with even with large drawdowns. Usually I only sell when either fundamentals of the underlying business has materially deteriorated or when a stock becomes wildly overvalued (rare).

If you’re a long-term investor, you might have gotten really excited this month to be able to pick up more shares of your favourite stocks or ETFs at much lower prices that just a month ago. Don’t get me wrong, I’m not saying buy the dip blindly. We may still have more ways to drop and this volatility we are experiencing now can be pretty gut-wrenching. So far though, I’m staying the course.

See my portfolio holdings and strategy on my Portfolio page. I’ve included portfolio pie charts that update in real-time.

Family Portfolio

  • January performance: -8.4% vs SPX -5.2% vs NDX -9.0%
  • All-time performance (since Aug 2016): +2.2% (+4.4% including dividends)
  • January dividends: S$81 (-19% yoy)
  • Bought: VT, QQQ, MSFT, SE, PLTR, AAPL, VNQ, TSLA
  • Sold: None

After a pretty big clean up in December, January was a month of buying. I’m always happy to buy the dips. At least so far, when the market has been pretty quick recover. The feeling seems to be that we might be headed for a more protracted decline in stocks as the Fed starts to pull out liquidity from the market.

That doesn’t mean the decline doesn’t hurt. 8 percent is a big decline in just a month. I admit there were times I was tempted to sell some of my more speculative growth stocks, but I decided against it eventually since I still believe in these companies. The problem was their valuations, which I had also forgotten when I got caught up in the FOMO. Oh well, lesson learnt. To manage risk though, I started putting a tiny bit of capital into learning how to use protective puts (read post here) in anticipation of further declines.

However, I’m not much of a trader or an economist so I’m not really bothered about timing the market and short-term rotations from value to growth, etc. I’m focused on putting in the building blocks for the long haul, i.e. until retirement. Even 3-5 years is not considered long enough for me. I’m looking to invest in secular trends that will take 5-10 years or more to be realised.

For those shorter term trends, I’d prefer to use shorter term hedges. I don’t mind holding some value stocks temporarily to cushion the drawdowns or even going as far as options in small amounts. However, the bulk of this portfolio should be reserved for companies I think will dominate in the next 5-10 years and beyond. To take some of the stress off stock-picking, almost half the portfolio are in index funds (both passive and active).

I continue to average down my cost basis in Sea (SE) and Palantir (PLTR) because I believe these will become dominant companies in their respective sectors. Same for Microsoft (MSFT) and Apple (AAPL), huge companies that continue to outperform the market and posted pretty impressive earnings recently.

My conviction keeps growing in Tesla (TSLA) and it has become the 4th largest holding in this portfolio overtaking MSFT. For this portfolio, I try not to go overboard in terms of the weight of individual stocks (my line in the sand is currently 8-10%). TSLA posted phenomenal delivery numbers and earnings results, but fell as much as 11.5% on disappointing product roadmap. So I took the opportunity to load up on more shares.

As usual when the market dips, I take the chance to buy more index funds VT, QQQ, and VNQ. As I write this, the market seems to be bouncing back a little so I hope the worst is behind us. I still have around 17% cash on hand to deploy if the market drops further.

Personal Portfolio

  • January performance: -10.3%
  • All-time performance (since July 2020): +40.0%
  • Bought: TSLA, PLTR
  • Sold: None

More of the same in my personal portfolio, since both Tesla (TSLA) and Palantir (PLTR) declined this month. The performance would definitely have been worse if I didn’t average down my cost basis.

So far, I haven’t found any other company outside Big Tech that I can see dominating their respective fields in the next 5-10 years besides TSLA and PLTR. I’m still keeping a lookout and still have about 40% cash to deploy when the opportunity arises.

I would probably load up more shares of both TSLA and PLTR if they fall to $800 and $11 respectively.

Social Portfolio

My copy trades with jaynemesis and KoraTrades are still languishing in the red. KoraTrades has fared worse because of the crypto weakness.

I’ve also opened short-term trades in Archer-Daniel-Midlands (ADM) and XLE/XLP/XLU/XLV to play the growth-to-value rotation. The only other open position is in Tencent (0700.HK) which is my play for a Chinese tech rebound.

If you’re interested in opening an eToro account, you can through my referral link here.

How did your portfolio fare in the brutal January selloff?

Follow me on Facebook, Telegram, Twitter and Youtube.

Disclaimer: This is not financial advice. I am not professional financial advisor nor do I work in the finance industry. Anything I write here is purely my personal opinion. Please do your own research and due diligence before investing into anything. All investments come with associated risks. Best to consult a financial advisor if you’re still unsure.

For more investing resources, see my Referrals page.

Disclosure: This post may contain affiliate links and I may get a commission when you click on the links or open an account through the links, at no additional cost to you. I only recommend products or services that I have personally tried and have found useful.