Portfolio Reallocation – Was it the right decision?

In this week’s article, I take a look at a portfolio I reallocated several months ago to ask the pointed question: “was it the right decision?”.

At the time, I had discussed with the client (inherited from another Financial Advisory firm in Singapore) the basis for my proposal to sell him out of funds he was in; due to poor past performance vs. benchmark, primarily, but also (which was a contributing factor to the poor performance) the unnecessarily high fund-level charges in play.

We had also discussed my proposed new fund allocation and its comparative advantages on the basis of each of the important portfolio metrics I’ve previously covered in these articles:

• Total Expense Ratio (https://www.linkedin.com/pulse/portfolio-analysis-basics-1-focus-ter-total-expense-davidson/)
• Yield (https://www.linkedin.com/pulse/portfolio-analysis-basics-2-focus-yield-michael-davidson/)
• Volatility (https://www.linkedin.com/pulse/portfolio-analysis-basics-3-focus-volatility-michael-davidson/)

And so, after a thorough discussion, based on all of the available facts and figures, we agreed to perform the proposed reallocation, in early March 2019.

The 3 month performance of the client’s new portfolio allocation can be seen below (in SGD valuation terms). Note the “dot” around 4th March: that is the date that the new allocation came into effect:

So, several months later, a really worthwhile question to ask is: “how would the portfolio have performed over the period, if the client had stayed in the original allocation of funds?”

Fortunately, we can see exactly that, simply by checking an option, and re-running the graph:

The red line represents how the portfolio would have performed if the previously-allocated funds had been left in place:

• Considerably higher volatility than the new allocation.
• 4.25% in lost gain over less than a three month period.

If the red line looks familiar, and/or you would appreciate a transparent, data-driven and collaborative discussion around how your money has been allocated, please PM me and I’d be very happy to perform a complementary analysis on your existing portfolio..