Portfolio Update September 2020 — COVID Recovery
A mid-pandemic portfolio check-in as markets bounced back from the March crash, with a strategic pivot away from REITs and into bonds.
Here is a snapshot of the portfolio allocation as at September 2020. Some of the current allocation percentages were well off the revised targets — a natural consequence of the extraordinary market movements earlier in the year.
🦠 COVID and the Market
📉 Since the last update, COVID happened. The market retracted around 30% at the beginning of March, but it had since bounced back, with most asset classes returning to pre-COVID levels or higher. For long-term investors, the lesson was clear: short-term market volatility, however dramatic, tends to resolve itself over time.
The Australian REIT asset class was the slowest to recover. It looked like it would take a while longer to get back to pre-pandemic levels.
🏢 REIT Reassessment
REITs felt too risky at that point. I was not a fan of their recent performance or the amount of risk they carried. The plan was to actively reduce exposure in the coming years.
🔒 New Addition: Bonds
Bonds through Vanguard index funds were the latest significant addition to the portfolio, made possible by the availability of Vanguard’s personal platform in Australia. This was an important step in building a more diversified and defensive allocation.
🎯 Current Allocation
| Asset Class | Allocation | Target |
|---|---|---|
| Australia | 22.8% | 25.0% |
| Emerging Markets | 6.6% | 7.0% |
| US | 8.7% | 10.0% |
| International (non-US) | 7.2% | 8.0% |
| REIT | 12.0% | 6.0% |
| Bonds | 32.9% | 34.0% |
| Fixed + Cash | 9.8% | 10.0% |
🛡️ The heavy bonds allocation reflected a deliberate defensive tilt during a period of extreme uncertainty. The REIT overweight was legacy exposure that would take time to unwind without triggering excessive capital gains.
💭 Final Thoughts
Keep working hard towards your personal financial goals, and stay sane. Volatile times test patience and discipline, but they also create opportunities for those with a long-term view.