Now I know that it’s not over yet and there’s big questions over the shape of the recovery post-Corona, but it’s worth a look at how the David Swenson allocation that I use performed during this crisis.
There were some huge moves across almost all asset classes. At one point, the UK 100 index was down around 30% from its highs in Jan 2020. The idea behind diversified asset allocations such as Swenson’s is that you should be protected from the big moves like this. If you were 100% invested in equities, then you would track the 30% fall yourself. If you had a proportion of your portfolio in bonds, then in theory, you should see some insulation from this this 30% move because bonds are supposed to move roughly in the opposite direction.
My asset allocation definitely didn’t see complete insulation. At the lowest point, my portfolio was down about 16%, with all of the bond assets in overall positive territory. So the diversification definitely protected me from the full impact of the drop in equities.
As at 5th June 2020, my portfolio is around flat since inception around 2 years ago. (That might sound pretty naff but that does include regular monthly investment into a previously rising market, which would dampen overall returns) But to be flat and in slightly positive territory after such a crazy downward move in equities feels pretty good and gives me confidence in the Swenson allocation that it can weather seismic events.
