Determinant portfolio: situation as of 01.11.2023

October did not fail to live up to its bad reputation. The market plummeted, even harder than in previous months. Three consecutive months of decline, we haven't seen that since the Chinese virus. Does Moderna also have a vaccine to offer us in this scenario? That would do them good, given that their own share price has been divided by five since the last peaks. Cheh.

Monthly performance in CHF

In detail, here is the performance of the PF, of each of its strategies and of its benchmark index, the MSCI Switzerland:

There QVM strategy continues to play yo-yo. After a nice month of September, it once again weighs down the overall result (which already did not need this). Fortunately, this strategy was underweighted last month, which helped limit the damage. 

Despite a less than pleasant decline, the Blue Chips Strategy is doing relatively well compared to the Swiss market. The defensive nature of many of its constituent stocks has certainly helped.

THE Trading Auto Signal has once again achieved a somewhat disappointing performance. Here too, we can console ourselves by saying that it is a little better than the MSCI Switzerland.

Finally, these are the ETFs managed in adaptive allocation who are doing the best, since they limit the loss to -1.4%.

Year-to-date performance in CHF

This gives us a performance in CHF since the beginning of the year of 1.9% for the determining PF. This is obviously a disappointing result. However, we are now above the MSCI Switzerland (at 0.9%). Also helped by its lower volatility, the portfolio still maintains a better Sharpe ratio (which measures profitability in relation to risks).

Determinant portfolio and MSCI Switzerland index since the beginning of the year (performance in CHF)

Performance since 2010 in CHF

Since its launch in 2010, The portfolio maintains a slight lead over the Swiss market (7.1% annual average against 6.1%).

MSCI Switzerland portfolio and index since 2010 (performance in CHF)

Changes within the portfolio

I continued to backtest as part of the portfolio split into four separate strategies, which was done in the first half of this year. I noticed that thereal estate (via the VNQ ETF) no longer brought any added value to the overall result. In fact, it tended to lower the Sharpe ratio (profitability in relation to the risks incurred) of the portfolio.

This result is somewhat paradoxical, because real estate is among the best stand-alone strategies, as confirmed by research carried out as part of my book. However, my latest backtests reveal that other assets, such as stocks, gold, treasuries and cryptos, perform slightly better, as part of a tactical asset allocation, without real estate.

The strong correlation (0.74) that exists between stocks and real estate largely explains this phenomenon. In this context, the addition of an ETF like VNQ as part of a tactical asset allocation has the effect of reducing the profitability relative to the risks incurred (Sharpe ratio) of the entire portfolio.

The line dedicated to real estate, via the VNQ ETF, is therefore now removed from the "Adaptive Allocation" strategy. This does not change anything in the current positions of the portfolio since this line was positioned on "cash" anyway.

Portfolio Update

The determining portfolio will be updated between November 1st and 2nd, in the members section. I invite you to keep an eye on what is happening, because, given the recent market turmoil, there is change in the air...