In this Newsletter, I will share how the portfolio did in 2024 and continue the discussion about setting out my future portfolio strategy. I have already started to make changes to the portfolio with some new positions as well as some exits.
How Did The Portfolio Do?
That is often a complicated question. In real dollar terms the portfolio gained 21%. Any way you look at that, it’s hard to complain. Compared to other small investors who only achieved mid single digit returns, it did really well.
Digging down however, much of that performance came from a huge currency win (about 5%). If you factor that out, then the portfolio returned 16%. We do this because we are trying to measure stock performance and not currency speculation. For reference, the S&P500 returned 23.3%.
So did my portfolio perform badly? It depends on how you look at it. As many of you know, I purposely lowered my exposure to risky or expensive areas of the market early in the year. I knew there was going to be a cost to that strategy if the market kept going up. My results reflect this and were expected. In my opinion, the portfolio return is really good for the amount of risk it was exposed to. This is often difficult to quantify.
Sadly the same 3 sectors (Communications, Information Technology, and Consumer Discretionary) kept charging forward all year. Financials came in a strong 4th, which was different from the year before. Every other sector in the index under performed. This made it difficult for everyone except ETF index holders who were big winners once again this year.
From a international weighting perspective, the portfolio was again at a disadvantage. My current international weighting is US 40%, CDN 36% and INTL 24%. A normal US weight should be about 65%. Since US was the big winner again this year, the portfolio suffered for a lack of US exposure.
My Strategy Going Forward
My strategy for going forward is the same as earlier in the year, except I will continue to remove risk from the portfolio. I will do this by selling or pairing down positions that have become expensive or too big. These will be replaced with high quality, better value positions. Sectors will also be re-weighted slightly, with a bit more emphasis on losing sectors. For example, the Consumer Staples sector will be overweight (boring but safe).
I will adjust the portfolio to be more “all weather”. No matter what happens, it should do relatively well. There’s no way to tell what kind of year 2025 will be. If you read my last Newsletter, you know that it is likely to be either another winning year, or a very bad losing year, and not likely anything in between. As a result, it makes no sense to position the portfolio to be either too defensive or too aggressive. We can, however, position it for the known risks associated to an expensive market.
More Defensive Because A Crash Is Near?
Absolutely not. People often believe that when the Market gets expensive or when we have had too many big positive years in a row that a crash is imminent. In reality these are not indicative of bad or good returns in the short run. In 1995, there were 5 monster years in a row. If you missed the last 3 years of that market, you did yourself more harm by being safe than by exposing yourself to the carnage of the 2000 bubble. What I am saying is that market risk has increased with another big market return this year, that is all. So I am basically building in a bit more safety. Nothing drastic here.
Speaking of Bubbles
Bubbles are only identified after they pop. They are difficult to call when you are in one as there are a lot of moving parts. The dangerous parts of bubbles are people (you). If you go all in on a bubble – i.e. put all your money in Tech or Bitcoin (assuming these are bubbles) – you can actually permanently destroy your capital. I know because I did exactly that in 2000. Lots of my positions were down 90% or more and never recovered. This should be avoided and it is why it’s important to be diversified by sector, country, factor, asset class, etc. Owning a bit of everything, including unwanted industries, is a way to protect your wealth.
Approximately 33% of the S&P500 index is dominated by Information Technology, followed by it’s closely related cousin Communications at 9.4%. As you can see, the weighting is a bit of a problem if you are trying to avoid a tech bubble. These 2 expensive sectors represent over 40% of the market. To shun these sectors completely is taking a rather drastic bet. Should you be wrong, you will heavily under perform. Without an ability to confidently call a bubble for 2025, you have to hold these sectors. At the very least, be picky about each holding as well as it’s weight. Managing these 2 sectors is unfortunately a big part of the returns game.
Notable Sell: Apple
Yes, I sold Apple after holding it for about 13 years. It has become expensive and too big. I try not to be emotional about my positions. Apple returned 100 times it’s initial investment over the years; it was a great performer. Is it still a good company? Yes. However, I decided to replace it with ASML, which has a monopoly in it’s industry. It’s a better defensive position, it’s international, and it is still technology. ASML was down 8% in the last year while Apple gained a whopping 30%.
The other recent buys and sells were mostly one for one swaps, exchanging one stock for a better similar one.
How Did Your Portfolio do?
I always include this question because you should always challenge yourself. If you are going to the effort of managing your own money, you should be as critical and honest of yourself as you would be of someone you hired. Were you a good steward to your money? Do you deserve a bonus this year? Or should you be fired and have a new Wealth Manager take over? It’s a question that I ask myself all the time. This year, I get a marginal pass. I didn’t beat the market. I still believe that being more defensive is prudent considering how weird the market is.
Marc’s Monthly Moves
Sells
| Stock | Return |
| Apple (APPL) | 1000% |
| Bank of Nova Scotia (BNS) | 18% |
| ING Groep (ING) | 34% |
| Taiwan Semi Conductor (TSM) …partial sale | 90% |
| CBRE Group (CBRE) | 64% |
Buys
| ASML Holding (ASML) |
| TD Bank (TD) |
| BNP Paribas (BNPQY) – a French Bank |
| VICI Property Inc. (VICI) |
| Ingles Groceries (IMKTA) |
Recap: Marc’s 2024 Portfolio Performance
- Portfolio return: 21% (including currency gains)
- Portfolio return: 16% (without currency gains)
- S&P 500 return: 23.3%
- RSP ETF S&P equal weight 11.05 %
- TSX: 17.99%
The portfolio under performed the S&P500 by 7.3 % points.
Money with Marc 
I did 2.7% for 2024. A large portion was in T-bills most of the year, and I had a large position in Intel. Also my energy stocks dropped. I got called away from IBM, GE and META.
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