Time flies and the year end is just around the corner. I am writing this post to conclude the performance of year 2022 portfolio. To remind, this is a virtual portfolio and the stock selection is based on the most number of recommendation from The Star, Affin Hwang, CGS-CIMB, Hong Leong, RHB, and Maybank.

I calculated the portfolio return with price-weighted, market-cap weighted, and average weighted method and benchmarked with FBMKLCI Index. From the picture below, if an investor is following market-cap weighted allocation, it would be ended up with a market proxy return -5.5% (vs. FBMKLCI return -5.7%). The reason is mainly because this portfolio is large-cap bias and most of the selected stocks are currently FBMKLCI components. Anyway this portfolio is slightly outperforming the benchmark index by 20 bps assume no external costs (such as paying to the fund manager).

Then, if an investor used price-weighted allocation despite this method is not practical in real world, the result would be much better. In the picture above, price-weighted allocation would have YTD return -4.5% (vs. FBMKLCI return -5.7%). Hence outperforming the benchmark by 120 bps. The reason is also because of concentration in large-cap stocks whereas the stock price is high such as TENAGA, PCHEM, and TM and at the same time, these stocks declined less than INARI, MYEG, and MRDIY.

Finally it comes to the average-weighted allocation, whereas most retail investors like to use. But, the result would be underperformed by 20 bps if compared to the benchmark return -5.7%. The reason is because of tech stock, INARI was underperforming and declined 33.8% since the beginning of the year. Despite GAMUDA and RHBBANK helped to cover some loss, this is just not enough to improve the overall performance.

In summary of my point of view:

1. If we decided to follow the crowd, then just use index investing and market-cap weighting
2. When the whole stock market is in down trending, the most recommended stock also can be the worst performer, just like INARI in this case
3. Successfully picking a winning stock is always because of God blessing, in this case, by luck, we still can get two stocks (GAMUDA, RHBBANK) to have positive returns when the whole market is underwater.

Let’s see what stock would be recommended in the coming year 2023…

Disclaimer:

This article did not offer any investment advice or buy/sell recommendation.

Reference:

​https://streetanalystblog.wordpress.com/2022/12/18/year-end-review-for-the-portfolio-of-year-2022/​