Investment Committee January - DMG Diversified Portfolio
Our meeting on 24th January 2018 saw us reflect on recent market events and consider the timing and level of the next market correction or crisis.
We addressed many issues and reviewed our allocation and holdings thoroughly.
The first step is to make sure that compliance is in order
As always, the first part of the meeting related to compliance matters. We ensure that the portfolio is in compliance with the Government regulations and our Product Disclosure Statement (PDS). One example is that our asset allocation must sit within the ranges that we have outlined within the PDS.
All was in order again this month.
Onto the markets and how we are positioned overall (the big picture)
We then discuss the overall economic and financial markets environment and considered reports and input from our Portfolio Manager, Bart Dowling and Lukasz De Pourbaix from Lonsec, our Research provider. The aim was to ensure we have a clear view on these areas and that we are satisfied with the portfolio positioning in relation to this. Key points were;
- Economic growth around the world is strong
- Inflation is not a problem at the moment
- Volatility levels remain unusually low
- Share Market valuations are on the high side, particularly the in the US
- In the short term markets seem like they will hold up
- Pressure will increase over the coming year
We recognised that this is the consensus view and this has two consequences. Firstly, the consensus can be wrong and secondly if many people in the markets are thinking along the same lines, then some will try to anticipate the downturn and sell early. This becomes self-perpetuating and losses occur sooner than originally expected.
The Investment Committee addressed how to best manage this. There are two main risks;
- Selling too late and incurring losses
- Selling too early and missing out on gains as markets could continue to move higher for longer than expected.
Our solution, aside from continuing to monitor key areas closely, is to consider selling down small portions of those investment that have performed most strongly for us in recent times. This means taking some profits, whilst retaining the majority of each of our holdings.
We are not implementing this yet but intend using this as our strategy if markets continue to rise strongly.
A review of the holdings within the fund
We are very happy with our holdings and do not see a need to make any changes at this stage.
Summary of changes
Sometimes no change is a good thing and that was the case this month. We are ready to change when it is appropriate but for now all the hard work and research is paying off, so we are letting it continue to work as it should for investors.