• Reinhardt Coetzee

Portfolio Update: Jan 2022



It's an unfortunate reality of investing in the capital markets. Nobody can predict when a correction like we are experiencing now might happen. History shows us that on average, you can expect a 10% drop a little more than once per year. You'll see an overall market decline of 20% or more roughly every four or five years. And once every decade or so, you'll have to endure a 30% fall. That's on average for the market $SPX500 - for a concentrated portfolio of growth stocks those swings will be more pronounced.


Staying invested during those times is the only real way to be successful in the stock market. For me this is a long-term investment portfolio to build wealth over multiple years, I have been through corrections even crashes before, even with those events factored in, my view is that stocks over a long-term horizon still are the best-returning investment class, particularly technology-related growth stocks.


The stats also back that up, even with the current drawdown factored in:


▪️ The annualized return for the portfolio since 2016 is still above 20%

▪️ The total return over that time up to now is around 240% vs 140% for the market.

▪️ The portfolio has never been negative over a 2-year rolling period.


The key is to start investing earlier and then to stay invested for as long as possible and during ups and downs and if possible add to your investment regularly over time.


I also like to keep a % cash in the portfolio to mitigate the effects of a possible downturn and can then re-invest that cash at or near the bottom, nobody can call the bottom 100% though.


To that effect, we had roughly 10% in cash or uninvested funds before the general market sell-off started, I've used that to counter the drawdowns using some short-term hedging and already re-invested some of that profit back into $NVDA, $SHOP, and $MSFT those are 3 excellent quality businesses with huge revenue existing growth and profitability and with a great runway for further growth - especially from these levels.


History also shows that these are some of the best times to add to an investment. I understand that's not easy and not possible for everyone and you must have a long-term investment horizon and can accept a certain amount of volatility.


Have a look at the attached chart, showing the average 5-year return after various trailing 6-month returns for the $SPX500 going all the way back to 1926 (Source: The Motley Fool)


What it shows, is the worst-performing short-term performance in the market is usually preceded by the best next 5-year return. It also shows the next 5-year return if you had waited 6 months for a better time to invest, again showing that trying to time the market seldom works.


Best, Reinhardt

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Stock returns for portfolio and individual  trade returns correct as of 2022/02/03

© 2022 by reinhardtcoetzee.com

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