I’ve been having a crisis over the past two months in my main investment account. Performance has been lagging for a year and it isn’t one stock. I have exactly one strategy that now appears to not be working. I really didn’t have a backup plan so I have decided to take on some risk.
Part of the portfolio has been dedicated to FAANG and BAT stocks. This consists of Facebook, Amazon, Apple, Netflix, and Google along with Baidu, Alibaba, and Tencent. It has been interesting to watch these stocks rise aggressively (in aggregate) since my purchase. Some are neutral which is heavily offset by the rapid rise in Netflix.
The rest of the portfolio got trimmed down and I started to notice a trend. Some stocks would get hit with a bad news report. I began to look at history and noticed a lack of positive news articles. It seems my technical indicators are finding companies with non-top tier management teams.
It occurs to me that I should be looking for the best management teams in selected sectors. Yet while I can pick the sectors based on macroeconomic situations, I do not have the ability to select management teams. Okay, scrap that idea.
Today, I re-joined the American Association of Individual Investors (AAII) after a several decade absence. They have a model portfolio that looks really good on a ten-year basis but is below average on an eleven-year basis. The portfolio had a 50% loss in 2007. That is a nasty performance to overcome. Recently the portfolio has severely lagged as several stocks have had negative surprises. Technically I called these oval events due to the oval pattern that forms on their Bollinger Bands.
I am going to allocate a modest percentage to selected companies in the portfolio. This will be a test year.
It is interesting trying to figure out how to invest in a market where the Federal Reserve is raising interest rates, reducing its balance sheet, and the Federal Debt is rising at an accelerated rate. Add in an administration that is starting a trade war and the result is a situation that I am unfamiliar with.