Here are the results of the typical portfolio of the Institut des Libertés starting on 1/1/2020.
All calculations were made with dividends and interest reinvested.
Two remarks are in order
- Since January 1, 1920, the IDL wallet put twelve points on the index of the Paris Stock Exchange, which is considerable.
- The declines in our portfolio were contained, which was not the case for the CAC 40
How did we arrive at these results?
Let’s go back to the end of 2019.
The least that can be said is that the author of these lines was not delirious with optimism.
And so my first recommendation was to put fifty percent of the capital in “anti-fragile” stocks that would go up if the markets went down.
The two stocks recommended at the time were 10-year Chinese government bonds and gold.
Let’s look at their performance over the period.
Gold, Chinese bonds and the defensive portfolio (2/3 Chinese bonds, 1/3 gold) had similar performances, the IDL defensive portfolio however having lower volatility than its two components.
Two remarks must be made again:
- If the defensive part rises by more than a quarter in less than three years, it has done its job well.
- When the markets really took a hit in the first quarters of 2020 and 2022, my defensive values shave climbed, and therefore cushioned the decline in equities, which make up the other half of the portfolio and which I have to talk about now.
Let’s come to the “aggressive” part of the portfolio, made up of equities.
My mandate was to invest only in shares listed in Paris.
The reader will perhaps remember, with regard to French actions, I had made an essential distinction between, on the one hand, actions which had nothing to do with the state, which I called capitalist actions and on the other, actions representing French crony capitalism, which had to be avoided at all costs and which I called communist actions.
And I had published a list of 10 “capitalist” companies whose shares could be acquired, in my opinion, but I am far from being an expert.
Here it is again: Air Liquide, Schneider, LVMG, L’Oreal, Pernod Ricard, BSN, Cap Gemini, Total, Accor, Sodexo.
The recommendation was to put 10 percent in each of the companies and to “rebalance” each month so that each of the companies was at the beginning of each month again at ten percent of the portfolio.
Here is the result of the “IDL 10” against the CAC 40 since 1/1/2000.
By eliminating the companies on which the State can put pressure, which is a fairly simple principle to implement, I put twelve points in the CAC 40 in three years, which is good, and which is undoubtedly better than the most equity funds managed by major banks on the Paris Stock Exchange.
At this point, I therefore built both my defensive portfolio and my offensive portfolio, each representing fifty percent of my assets.
Now I need to get to my final portfolio, here it is again.
The technique is always the same for each part of the portfolio.
At the end of each month, each investment is systematically reduced to its starting value as a percentage of the total portfolio.
This portfolio significantly “outperformed” the Paris Stock Exchange index, which was the desired goal.
But if the reader studies the charts a little, he will realize that most of this outperformance occurs in big drops.
Which brings me to two remarks.
- Basically, the defensive part of my portfolio serves as a parachute for my investments when the offensive part loses value massively. But like on the long term stocks always do better than gold or Chinese bonds, it is quite obvious that one of these days I will have to sell the defensive part and reinvest the proceeds of these sales in the offensive part and therefore remain without protection…
- But let the reader be reassured, that day has not arrived, quite the contrary. As I explained last week, the future holds difficult days and keeping a parachute to jump before the plane crashes seems very wise to me. The only thing I might do is switch from 1/3 gold, 2/3 Chinese bonds, half gold and ½ Chinese bonds, as the outlook for gold looks so encouraging to me.
I present these results first for readers who want to manage their savings but also for those who are not interested in the financial markets on the pretext that it would be too complicated for them, to make them understand that they are wrong.
Managing their savings in the world we are about to enter is going to be essential. And it’s not complicated, it’s just a bit tedious and you have to be extremely disciplined.
But in my opinion, if they want to be free one day, it’s a task that is within their reach and anyway, they can start with a small part of their savings to grow in strength over time.
At work !