Performance 2023

Dear Readers,

At the beginning of the year, we introduced the optimized portfolio for 2023. The most efficient point on the curve is the one where, for a risk level of 51.87%, the return is 55.74%. However, given the assumed restrictions, the optimal portfolio would also achieve a expected return of 22.16% for a risk of 25.62%. 

The optimal portfolio in this case is composed of the following assets and their respective weights:

Microsoft - 22%
Tesla- 14%
Costco - 64%

Based on these considerations, you can find the year-by-year evaluation of this decision in terms of portfolio performance below. When we look at the portfolio, it is composed of 60% in the equity portfolio and 40% in Treasury bonds. Read more here: Optimized Portfolio 2023

Portfolio Composition and Performance

Risk-Free Asset: This makes up a significant portion of the portfolio at 40%.  Despite the slight increase in yield, the amount sold indicates a minor loss, resulting in a negative ROI of -0.72%.

Microsoft: With a 13% weight, the investment in Microsoft has shown a substantial increase in stock price from $237.47 to $376.04. This resulted in a high ROI of 58.27%, indicating strong performance.

Tesla: Representing 8% of the portfolio, Tesla has seen a remarkable price increase from $108.10 to $248.48. The ROI here is the highest among the assets at 129.73%, demonstrating an exceptional return.

Costco: Holding the largest share at 39%, Costco has also experienced significant growth in stock price from $439.87 to $660.08. The ROI is solid at 49.96%.

The total ROI pre-tax for the portfolio stands at 37.47%.

Risk Analysis

The portfolio's risk is measured by variance and standard deviation, with the risky portfolio showing a variance of 6.56% and a standard deviation of 25.62%. These figures suggest a moderate to high level of risk, which is corroborated by the substantial gains from high-volatility stocks like Tesla.
Benchmark Comparison:

Comparing the portfolio’s performance to benchmarks:

Standard Deviation: The portfolio's standard deviation of 25.62% is higher than the benchmark standard deviation of 17.34% from 2018. This indicates a higher risk taken by the portfolio compared to the benchmark.

Returns: The portfolio's return of 37.47% compares favorably to the benchmark return of 36.83% from 2023, suggesting the portfolio manager was successful in achieving returns above the benchmark, albeit with higher risk.
Conclusion:

The portfolio has performed well over the assessed period, outperforming the benchmark return in 2023 with substantial contributions from high-performing assets like Tesla and Microsoft. The higher standard deviation compared to the 2023 benchmark indicates a higher risk, but this has been rewarded with higher returns. The negative ROI on the risk-free asset, however, warrants a review of the assumptions regarding its stability and contribution to the portfolio.

Expect the optimized portfolio for 2024 in the next few days.