How’s diversification working for you?

Rough seas out there.  Volatility keeps shooting higher:

The Fear Index - VIX for the past 5 years.  Source: Google Finance.

The Fear Index – VIX for the past 5 years. Source: Google Finance.

What does it all mean?? Well, with the extra volatility comes a lot of unnerved people.  The market commentators finally have something material to talk about – see here and here and here.  ‘Carnage’ is a great word…isn’t it?

Back to the investment portfolio – remember that?  What to do.  I wrote earlier (here and here) that one can either dump stocks (I guess that would’ve been smart a few days ago…) or buckle up.  With this much volatility so quickly, it will be interesting to see how some strategies, which claim to be diversifying, actually stack up for the month.

Let’s see if the holdings in my portfolio has helped with diversification this past month:

Diversification?  Anywhere?  Source: Google Finance

Diversification? Anywhere? Source: Google Finance

Here’s the quick synopsis:

  • US equities: my S&P500 holding has suffered, understandably (6.1% down in the month)
  • Emerging Market equities: Not so diversifying this past month.  Movements in the USD probably didn’t help.  (6.7% down)
  • Government bonds: top marks.  Yields at record lows are helping.  (7.9% up)
  • Alternatives: 
    • Real estate: treading water.  Lower yields must be helping.  (0.1% down)
    • Managed futures: second place overall.  Think this is due to solid trends in USD, oil, bonds.  (5.1% up)
    • Equity volatility: OUCH.  Worst overall, being short vol.  It’s definitely a pain trade now, after months of picking up pennies.  (31.7% down)
  • Overall: bonds were the surprise here, in my mind; they’re still inching up.  Alternatives did what they should – returns in different ways.  Keep in mind an investment in (short) equity volatility is roughly equivalent to long equities…so that’s a bit of a cheat.

How are you feeling about your portfolio these days?  I’m a big fan of Tony from tastytrade’s phrase: ‘intestinal fortitude’ required.  Fear is upon us…

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