As 2023 draws to a close, the financial markets have taken us on a remarkable journey, ending the year on a strong note after enduring a challenging fourth quarter. This resilience in the market has been a beacon of optimism amidst a year riddled with economic uncertainties.
Globally, inflation continues to be a stubborn adversary. Despite aggressive interest rate hikes in countries like Australia and the United States, the anticipated slowdown in inflation remains elusive. This persistent inflationary pressure has undeniably shaped investment strategies and economic outlooks worldwide.
Despite these challenges, the portfolio has weathered the storm quite effectively. It has been a year of cautious navigation, resulting in a modest yet encouraging 9.47% growth after fees; with net worth growing at 6.73% this year. A significant part of this success can be attributed to a strategic reallocation, with a focus on bond ETFs. This move has not only helped in hitting my target allocation but also in building a resilient portfolio better equipped to handle market fluctuations.
The year also marked a significant shift in the cryptocurrency landscape. The implosions of major players like FTX and Binance signaled the end of the post-COVID crypto craze. Witnessing these events, I made the decision to liquidate my entire crypto portfolio, opting to harvest the capital losses. This decision, while painful, underscores the importance of adaptability and risk management in investment strategies.
| Percentage | Target | |
|---|---|---|
| Australia | 28.40% | 30.00% |
| Emerging | 4.26% | 4.00% |
| US | 26.96% | 28.00% |
| International (non-US) | 13.58% | 14.00% |
| REIT | 1.46% | 0.0% |
| Bonds | 14.34% | 13.00% |
| Gold | 6.76% | 7.00% |
| Cash | 4.24% | 4.00% |
Currently, my portfolio allocation for this year stands at 75% in equities and 25% in a combination of fixed income and cash. If we set aside the cash component, the split adjusts slightly to 78% in equities and 22% in fixed income. Looking ahead to next year, I aim to maintain this allocation balance, implementing re-balancing strategies as appropriate to align with market conditions and investment goals inside and outside of superannuation accounts.
As we step into 2024, I remain cautiously optimistic. The lessons of the past year have been invaluable, shaping a strategy that is both resilient and adaptable, ready to embrace whatever challenges and opportunities the new year may bring.