Portfolio Update – July 2022

This month has seen rallies in stock and crypto markets, even though the general picture is not that good. Let’s summarize what happened and see what we would expect next month.

On 05/07/2022, RBA increases the cash rate by 50 basis points to 1.35 percent. The sole reason is to combat inflation, well all other things that the US already mentioned. Australia just follows what the US is doing anyway. What I am interested in more is the housing market. I am having this thought to buy a house (well mostly because my parents want me to buy one). The impact of a rise in interest rate would slow down the growth of the housing market. I do not know much about real estate. My goal is to buy a house and live in it for a long time. I don’t consider real estate as an investment because a house is for living only. I am interested to see how the market will react to all the “fun” that we have last year in the housing market.

Another small piece of news is that Elon has decided not to buy Twitter anymore and wanted to back out on 08/07/2022. Eventually, this matter should be decided in court. The lesson from this is that do not trust others to make your investments. People were saying about easy money when Elon announced buying Twitter. They did not consider the risk that Elon could potentially back out of his offer. Well, this happened.

For the first time, the euro hit parity with the USD since 2002. The recent rate hike has made the USD stronger and the euro is at its lowest because of inflation. The inevitable had to happen, the Europe Central Bank increased the interest rate for the first time in 11 years, 50 basis points on 21/07/2022 to combat inflation. The era of free money is long gone now. Countries can feel the inflation at their back now. And then the worst came, inflation rose to 9.1% in the US (news from 14/07/2022). This means people were preparing for another rate hike in July.

On 16/07/2022, Russia banned digital payments. Now, the weird thing was that there were rallies in stock and crypto markets during 19-20/07. Bitcoin almost reached 24k and altcoins recovered. This could be explained by the upcoming “The Merge” event. This event would mark the end of Proof-of-Work for the Ethereum network, and it then switches to Proof-of-Stake. Regardless of these rallies, we are still in a bear market and should not let these rallies fool us. What’s important is the FED meeting on 28/07/2022 and how many basic points FED would raise. As expected from the investors, 75 basis points, which makes the current federal fund rate from 2.25% to 2.50%, and all markets reacted positively on that day. And till now, the crypto market is still pumping. There’s still one more thing to mark at the end of this month, GDP for Q2 in the US, and GDP fell 0.9%. According to Investopedia:

A recession is a significant, widespread, and prolonged downturn in economic activity. Because recessions often last six months or more, one popular rule of thumb is that two consecutive quarters of decline in a country’s Gross Domestic Product (GDP) constitute a recession. 

Technically speaking, we are in a recession now but the White House still insists that we are not. This could be because of the upcoming election and Mr. President might not want to associate himself with a recession at the end of his term.

As we can see from the summary above, we did not have any good news at all. High inflation, high-interest rate, recession (probably yes), as Sri Lanka defaults on their debt. Markets were already priced in everything and when all the news came out, everything is fine by then. My crypto portfolio can see an improvement compared to last month. This is due to recent pumps in the market, though these pumps seem a bit odd in my opinion. There’s nothing to indicate that we are going to have a bull run soon, and this could be just a temporary relief since we already had consecutive months of downturn. In recent months, I started DCA-ing to Bitcoin only because I believe Bitcoin is the safest among others. My current holding for Bitcoin is about 25% of my crypto portfolio, my short-term goal is to get this number to at least 50%. I have been buying Bitcoin every day to lower the average cost, and I am quite happy with the current progress now with the average at $27k (it used to be at $50k-60k). For altcoins, even with recent pumps, most of the altcoins I have are still down around 60-70%, compared to 80% last month. I am planning to remove all the small positions and retain only the ones that I believe and have already done my research on. 

My stock portfolio recovers a bit this month. With the dividend reinvested back to shares, I can see why there’s a big difference between DRIP (Dividend Reinvestment Plan) and no DRIP. The obvious improvement is in SYI – I started with 65 shares and with DRIP, I have collected another 11 shares. The total dividend payments for SYI so far are $351.96, which is decent for a dividend ETF. SYI is currently up 4.09%, just second after IVV. VDHG is still my biggest holding and a big part of my dividend comes from this ETF. VDHG has dropped quite an amount but for me, I would consider this to be an opportunity to accumulate more. The price when I bought the first time for VDHG was around $58 (11/03/2021). It’s currently at $54.49, and as a long-term holding, I am lucky to buy more. Other holdings are doing fine as well, even though there’s not much difference in values. Raiz’s portfolio is performing better than last month. I also finally reach $10,000 in principle for Raiz after 1 year and 8 months. This is another big milestone for me as well in terms of being consistent in the micro-investing app. The small amount that Raiz has put into the account has grown strong, and to be honest, the current value of my Raiz account is at $9,579.76, $500 short compared to the principal but considering what had happened for the last couple of years, it performs better than I expected. The amount of dividend that I have collected and reinvested in Raiz is $364.57. That’s a lot with a small account like that. I can see why time is an important element when investing as we all know about the compounding effect. But that will not happen unless you have to be disciplined and always stay with your plan. I am quite happy that I have made it this far in the last 2 years.

Lots of things happened and I learned quite expensive lessons during the bull market. However, the mistakes that I made become knowledge, and that helps me to navigate my investing journey. The investments we make reflect who we are, choose the strategy that fits us, and never listen to other people’s advice on social media. Investing is simple but it requires mental strength, and you need to train yourself to have that. That’s what I have learned so far. Let’s see what lies ahead for me.

Some of the articles I use for the information above:

• https://www.rba.gov.au/media-releases/2022/mr-22-20.html#:~:text=At%20its%20meeting%20today%2C%20the,points%20to%201.25%20per%20cent.
• https://www.usatoday.com/story/money/2022/07/08/elon-musk-not-buying-twitter/10018335002/
• https://www.cnbc.com/2022/07/12/euro-and-us-dollar-near-parity-heres-what-that-means-for-travelers.html
• https://www.cnbc.com/2022/07/13/inflation-rose-9point1percent-in-june-even-more-than-expected-as-price-pressures-intensify.html
• https://decrypt.co/105240/russian-crypto-ban-signed-by-putin
• https://ethereum.org/en/upgrades/merge/
• https://www.cnbc.com/2022/07/21/european-central-bank-raises-rates-by-50-basis-points-its-first-hike-in-11-years.html
• https://www.cnbc.com/2022/07/27/fed-decision-july-2022-.html
• https://www.cnbc.com/2022/07/28/gdp-q2-.html
• https://www.cnbc.com/2022/07/29/white-house-goes-on-offense-to-argue-that-the-us-is-not-in-a-recession-.html