Summarizing the above last month chart of our core portfolio:
- The straight green represents a 4% annual growth. It shows +0.33% for the month.
- The blue line with the large dots is our core portfolio performance. It shows -1.5% for the month.
- The yellow dotted line is the S&P 500. It shows -4.5% for the month.
- The yellow dotted line is the Toronto Stock Exchange index. It shows -5.3% for the month.
We maintain a 40/60 asset allocation between an index-exchange traded fund and cash in our core portfolio. (We changed from a 50/50 allocation a few months ago.) In a rising market such as we have had for the last decade, cash drag leads to portfolio underperformance. More memorably stated, cash is trash in a rising market. In a declining market, cash is king.
Our core portfolio declined by 1.5% in a market that declined three times as much! When the market declines by 10% which, someday, it will, our cash position will allow us to buy it at bargain prices.
The 10/22/2018 blog dealt with the prospects of a market correction.