FFG offers a diverse selection of managed portfolios for the different objectives or our clients. In our quarterly investment update, we focus on 3 of our core portfolios; the On Deck Portfolio, the Dividend Portfolio, and our tactically managed portfolio, Survive & Thrive™. The FFG Investment Update is intended to give some insight into our thoughts about recent adjustments in the portfolios and our outlook as we plan ahead.
The On Deck Portfolio
The On Deck Portfolio seeks low volatility while earning a strong income yield.
We have been very pleased with the 2019 performance of the On Deck Portfolio. The volatility we have seen in the stock markets has not shown up in the On Deck Portfolio, yet the returns in this lower risk portfolio are higher than projected. The strong, consistent income of the private credit and real estate holdings have lead the way. Meanwhile our most recent addition, the Janus Short Term Bond Fund, has also beaten return expectations for an ultra-conservative, ultra-liquid piece of the portfolio. Therefore, we currently have no reason to make any large adjustments to the On Deck Portfolio. After 3 rate cuts in 2019, it seems as if the US Federal Reserve is now on hold – for now. This “wait and see” strategy is allowing economists to evaluate our strong, yet slowing economy amid all of the global trade tensions. For the On Deck Portfolio, this means we will continue using the current strategies of private credit and real estate to find steady yield in a low yield environment. However, as we move in to 2020, we are exploring opportunities to diversify the portfolio further by expanding into more liquid positions that offer a broader exposure throughout the fixed income asset class. “Low volatility and consistent yield” isn’t the most exciting objective for an investment portfolio, but in the craziness of our ever-changing world, it is arguably the most important piece of your overall investment strategy.
The Dividend Portfolio
The Dividend Portfolio seeks long term growth primarily using stocks paying strong dividends.
There is never a dull moment… As in life, sometimes it seems like change and volatility are the only constants in the stock market. In the last 90 days we have seen some of that market volatility in the Dividend portfolio. July was relatively quiet and the portfolio showed steady growth, but in August and September things started moving. A sharp downturn in August was followed by growth in early September, but the portfolio fell once again to end up slightly down for the quarter. Our position in the energy sector was up slightly and fared the best this quarter, while Large Cap stocks were mostly flat. However, as expected, International stocks and Small/Mid Cap companies underperformed this quarter. News headlines are definitely influencing movement in the stock markets. Reports about the ongoing trade war with China and new tariffs with Europe are impacting the stock market (both negatively and positively) on a daily basis. Plus, the added political uncertainty in the US and abroad is keeping all investors on the edge of their seat. With all of the uncertainty grabbing the headlines, the overall strong (albeit slowing) US economy remains. Looking ahead, we see much of the same. Therefore we are continuing to move away from the more volatile sectors of Small/Mid Cap and International companies and toward large, profitable US Companies. We believe these adjustments will better position the portfolio for the next “Breaking News” report. The dividend-focused objective of this portfolio also means that regardless of how the market moves, investors can benefit from consistent dividend income which is systematically reinvested to take advantage of price fluctuations.
Survive & Thrive™ Portfolio
The Survive & Thrive Portfolio seeks long term growth using tactical movements of cash in a diversified stock portfolio.
Despite significant uncertainty in the stock market and in the world, the Survive & Thrive Portfolio showed some gains this past quarter. The portfolio was mostly flat in August and September, with a nice growth trend in October. While portfolio growth this quarter didn’t trigger the harvesting of gains for most portfolios, it did contribute to the overall strong performance thus far in 2019. However, the current level of uncertainty in the stock market is definitely remarkable. The daily “Breaking News” reports on the unpredictable tariffs, Brexit, and US politics would make any investor extremely cautious. We feel the same way. We are adjusting the portfolio further away from International and Small/Mid Cap stocks and overweighting Large US companies with low debt, consistent earnings and growing profitability. In other words, we believe that lower risk stocks will continue to out-perform for the remainder of the year and into 2020. With all of this uncertainty comes stock market volatility, and the systematic Survive & Thrive methodology of “buying low” and “selling high” is well positioned to capitalize on the craziness.
As always, please do not hesitate to reach out with any questions as we would be happy to discuss any of your investments in further detail.