FFG Investment Update
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.
In our current low yield environment, achieving yield in a portfolio remains a challenge. However, this quarter the On Deck Portfolio continued its steady growth and income, just as it has since the early days of the pandemic. The portfolio’s use of private credit and real estate funds boosted performance and helped the portfolio significantly outperform the fixed income market for the past 6 months. As 2021 continues, we see these alternative assets as a key to long-term growth in the portfolio. Private credit and selective real estate not only offer the portfolio strong income with a low correlation to the bond market, but they are also positioned to benefit from price appreciation as the world emerges from the COVID pandemic. While we remain confident in our positions with alternative assets, this quarter we adjusted many of our fixed income holdings. We are now utilizing a bond fund focused in “Fallen Angels”. Fallen Angels refers to investment grade bonds that have recently fallen to a High Yield bond rating (below investment grade). As the recovery from the pandemic continues, we expect these securities to gain strength while continuing to pay higher yields. We are also looking to maintain stability in the portfolio by utilizing treasury bonds and mortgage backed securities. This barbell approach of balancing short-term stability with long-term growth will continue to be the foundation of our portfolio management for the foreseeable future. The On Deck Portfolio has the difficult task of remaining consistent in a very inconsistent world, but we are confident that these adjustments, along with our ever-watchful eyes, will help guide us through another eventful year.
The Dividend Portfolio
The Dividend Portfolio seeks long term growth primarily using stocks paying strong dividends.
After all the excitement of flipping the calendar to 2021, some are already counting down the days until 2022! The first couple weeks of the year have certainly been eventful, with many wondering what could possibly happen next? However, the stock market has remained forward-thinking, and the Dividend Portfolio has continued its steady climb from March 2020. Last year the Dividend Portfolio ended with positive performance for the year, but it lagged when compared to our other portfolios focused in Growth Stocks. This was expected, as the economic shutdown had a greater impact on Value and Dividend Stocks. However, we are expecting 2021 to play out much differently as the world recovers and emerges out of the pandemic and undervalued Dividend Stocks gain strength. The world is certainly different from a year ago, and the tactics used to combat the health and economic crisis will shape policy for years to come. With that said, there are adjustments to make and opportunities to be had. This quarter we are adjusting the Dividend Portfolio toward Financials and Small Cap stocks – for different reasons. Most experts agree that inflation rates will trend higher over the long-term, and Financial Stocks (banks) can take advantage of this trend with increased financing charges. With Small Cap stocks, however, we are taking advantage of short-term opportunities as greater COVID stimulus is rolled out and undervalued small companies rebound. While we still feel confident in the long-term growth of the Dividend Portfolio, there will certainly be some bumps as we journey through the year. We will continue to be vigilant as 2021 unfolds, but I think we still might order our 2022 calendars early this year.
Survive & Thrive™ Portfolio
The Survive & Thrive Portfolio seeks long term growth using tactical movements of cash in a diversified stock portfolio.
After a full month into the new year there has been a lot of change, yet much of 2020’s uncertainty lingers on. Hope is building for upcoming vaccinations and additional COVID stimulus, and the market responded with its continued march to record highs over the quarter. However, variants of the virus have emerged and concerns over vaccination distribution are keeping volatility high in the markets. The Survive & Thrive portfolio enjoyed this strong growth over the last 90 days, and all accounts harvested gains this quarter. Emerging Markets lead in performance as China’s economy continued to improve, while US Value Stocks started gaining strength after underperforming in 2020. Adjustments were made to the portfolio to take advantage of this shift from Growth Stocks to Value and Momentum funds. Additionally, we increased the allocation to Small Cap Stocks as the COVID stimulus should encourage growth for these smaller companies. This year is proving to be as unpredictable as ever. Therefore, we feel very good about moving this quarter’s gains to cash as we await for new buying opportunities later in the year.
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.