Financial Update Q4 2023

Here we finally are at the end of 2023, it’s time to understand how my financial portfolio performed. It has been a year of great successes from this perspective, also helped by the favorable market. The real question is, did I beat the market?

Let’s start by understanding how the market has performed, using the iShares Core MSCI World UCITS ETF USD as a benchmark. It is immediately evident from this graph that the market has done very, very well:

Beating a 19% annualized return of the global market seems to be quite a challenge, but even just matching it would be a significant financial success for a small market enthusiast like myself.

Let’s start by analyzing my theoretical portfolio, which, truth be told, hasn’t exactly been adhered to:

The desired distribution of my portfolio.

The distribution within the “stocks” section of my portfolio.

The actual distribution my portfolio had during the year deviated for two main reasons:

1. I overallocated to cryptocurrencies (which represent 22% instead of the desired 20%).
2. I added European and US small-cap companies only in December 2023
3. I have allocated some fun money over the years to specific products that I should rebalance over time to gradually make them disappear or drastically reduce them.

So, let’s get to the point: how did this 2023 go?

Red: the value I invested each month. Green: the actual counterpart value (updated at the end of each month).

Before revealing the actual percentage and discovering whether I beat the benchmark or not, let’s start with two simple considerations.

• Firstly, I remained consistent throughout 2023 with my PAC, despite it being very aggressive (more than half of my monthly income). Even though I moved out to live alone, the increase in my earnings allowed me to maintain the monthly amount.
• Secondly, after a year and a half of struggle, I returned to a positive balance, and by quite a margin.

So, even before going ahead to see the actual percentages, I can allow myself to self-congratulate a little after another year of hard financial work:

Stocks and bonds

The equity (and bond) part of my portfolio was overall satisfying. The only sore spot was the battery market, which suffered significant losses due to excessive extraction and a slowdown in demand. This doesn’t worry me because I have in mind 2035 as the year when every car in Europe must be electric. There are more than 10 years until that day, so a retracement at this moment doesn’t frighten me.

Artificial intelligence performed very well, even though it was only 2% of my portfolio. I wanted to make this bet following the release of ChatGPT (and I did well).

The small caps didn’t perform as well, but they’ve only been in the portfolio for 4 months, and their performance typically follows a cyclical pattern. My hope is that their time has not yet arrived. I will explain in a separate article why I believe in them and why I have included them.

Cryptocurrency

It has been an extraordinary year for cryptocurrencies thanks to a conservative strategy that led me to prefer stable assets (BTC and ETH) in this particular year and continue to accumulate CRO and ATOM passively due to their high staking percentages.

I am very bullish on cryptocurrencies for three main reasons:

1. The recently approved ETF will bring a lot of institutional liquidity over time.
2. In two months, there will be the halving, and historically, the year following the halving is always very positive for the crypto market.
3. The two disastrous years that cryptocurrencies have gone through have cleaned up the market significantly and helped with regulation.

Overall, my cryptocurrency portfolio grew by 45%. Not bad for a year in the middle of the halving and without any major news about adoption, except for the ETFs (which, however, have just arrived). I am aware that I am particularly exposed to this market, but I think I will maintain this overexposure for at least 1 year after the halving expected in April 2024, and then I will update my forecasts. At the moment, I am too bullish to rebalance.

So…..

Overall, my portfolio increased by 24.41% this year!

I am very satisfied with this result, especially in light of a year that emphasized how important it is to invest to combat inflation. Here, not only have I won against the rampant inflation of 2023, but I have completely surpassed it!