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Managed vs. Core Portfolios

Last update on: Jun 18 2020

Periodically it is fun and instructive to compare our Core Portfolios and Managed Portfolios.

Longtime readers know I recommend dividing a portfolio into two portions. The Core Portfolio is long-term, buy-and-hold, diversified, and balanced. It keeps us disciplined. The Core Portfolio won’t let our emotions take us in and out of the markets at the wrong time as other investors do. We are sure to capture the long-term upward trend of the markets. We use primarily value funds to reduce risk and increase long-term returns.

In the Managed Portfolio we try to generate higher returns with less risk by managing the portfolio with the valuation cycles of different assets. We don’t engage in short-term market timing. Instead, we try to capture intermediate-term trends and opportunities in the markets. The big risk in this portfolio is that we will be out of an asset when it has strong gains.

The returns of the portfolios are listed on page 11 of each issue. With our two oldest portfolios, the Sector and Balanced, you can see how the strategies have worked.

In each portfolio the Managed Portfolio has a significantly higher long-term return than the Core Portfolio. One reason is that the Managed Portfolios captured some opportunities not available in the Core Portfolio. For example, we had a heavy allocation to growth stocks in the last stage of the bull market. In addition, we sharply reduced stock holdings in the bear market, while the Core Portfolios maintained their long-term holdings.

More recently, the situation is the reverse for Sector investors. I’ve been conservative in the Managed Portfolio because of concerns about geopolitics and the stability of the economy. In the Balanced Portfolio, the Managed Portfolio has outperformed the Core Portfolio. The bond holdings in the Core Portfolio restrained performance more than the hedges in the Managed Portfolio.

Overall, the strategy is working. The portfolios are performing as expected. Most importantly, any way you want to slice them, the portfolios are generating safe, steady returns and beating most other portfolios while taking very low risk.



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