March 2021 performance update
Hi folks, here with a a performance update for March. First, the key numbers for the month:
Prime picks: +2.53%
Select picks: +4.15%
SPY S&P 500-Tracking ETF: 2.79%
Bogleheads (80% VTI + 20% BND): 1.14%
As usual, cumulative performance since since we started last May is shown in the chart below.
A few takeaways for March from my perspective:
Select appears to be coming back, substantially outperforming SPY in the month and beating it by more than 100 basis points for the second consecutive month. Over the long run, I’m expecting Select to outperform the market, but underperform Prime, and this is a step in that direction. I use the same foundational model to choose the Select picks as the Prime picks, but deliberately choose stocks for Select that don’t look quite as good as Prime (but still good relative to the modal stock). Another way of saying that is that, per unit of return the Select picks earn, they tend to exhibit a little more volatility relative to the Prime picks (or, equivalently, per unit of risk, they tend to yield a little less).
The composition of the Select portfolio was more heavily weighted toward tech last month compared to Prime (8 of 10 picks for Select; 4 of 10 for Prime). That disproportionality is interesting in light of Select’s outperformance, especially in as far as it runs counter to the popular finance media narrative that rising long-term Treasury rates should have the opposite effect on tech stocks, given their relatively longer cash flow durations and higher sensitivity to interest rate shocks.
Relatedly, one way that rising interest rates likely affected the numbers above in a way they actually would be expected to shows up in the performance of the Bogleheads portfolio. That portfolio has a 20% exposure to the bond-tracking ETF BND. Bogleheads was in positive territory in March because of its 80% equity weight on VTI, but the BND piece of the portfolio was down 1.26% as rising rates hurt bond values.
That’s all for now!
