We have made several changes to the portfolio’s stock composition since its inception, reflecting changes in expectations and where we see better opportunities. Save for the short periods between the selling of a stock and reinvestment of the proceeds, we have kept the Absolute Returns Portfolio fully invested — even though we are exercising more caution as market volatility rises. As we explained at the outset, our objective is to grow a retirement fund. And when you invest for the long term, timing the market becomes secondary. Time in market, on the other hand, is very important — because of the power of compounding.
Time flies. Tong’s Absolute Returns Portfolio has just turned six months old, in what certainly seems like the blink of an eye. Still, plenty has happened in the global markets during this relatively short time, including bursts of high global market volatility — for instance, the Standard & Poor’s 500 index dropping sharply between mid-July and early August before quickly rallying to fresh record-highs — and, of course, the much-anticipated US Federal Reserve’s kicking off of the interest rate cut cycle with a big 50-basis-point reduction.
Fed chair Jerome Powell went to great pains to emphasise that the outsized cut was to protect the still-strong job market as inflation declined, and not because it has fallen behind the curve. Against this backdrop of heightened uncertainties, the Absolute Returns Portfolio performed very well — chalking up total returns of 14.9% since it started on March 21, 2024.
