Returnboost Performance Recap 2020
2020 was a year full of positive and negative surprises. While the entire world suffered under COVID-19, equity markets thrived and our portfolios had the best year in history.
Emotionally, last year was probably a rollercoaster for most of us. However, last year, more than any other year in history, made one thing clear: trust the system — it pays off in the long run. Our Very Aggressive portfolio rose more than 25% in 2020.
All-Time High
- Our Momentum portfolios grew between 17.5% (Conservative) and 25.1% (Very Aggressive)
- Our portfolios outperformed the overall bull market in absolute terms as well as on a risk-adjusted basis
- In comparison, our benchmark, a Global 60/40 stocks/bonds portfolio, rose 13.7%
We are excited to have ended 2020 with an outstanding performance across our four portfolios. Our Very Aggressive portfolio gained 25% with a volatility (risk) of 11%. In contrast to this, its passive benchmark (global 60/40) gained 14% with almost the same level of risk. Hence, our Very Aggressive portfolio generated an astonishing +11.4% outperformance over its benchmark with the same level of risk.
Our Very Aggressive portfolio gained 25% with a volatility of 11%
Returnboost’s portfolios are based on stocks, bonds, commodities, and real estate. In contrast to passive, buy-and-hold approaches, our portfolios actively allocate to the strongest markets on a regular basis. In 2020, stocks, in particular Emerging Markets, as well as Gold and Commodities, were the main performance drivers of our multi-asset momentum portfolios. In contrast to previous years, most asset classes added some performance, even Bonds.
Trust The System
Since 2017, we have been skeptical about the markets as well as the global economy. In January 2018, we wrote that “the market seems to be in the later stage of its current economic cycle.” Multiple times we wrote about the danger of high valuations, increasing trade tariffs, slower U.S. and global GDP growth, peaking earnings growth, political tensions, an increasing wealth gap, Europe’s immigration crisis, and the rise of populism around the world. If this wasn’t enough, our momentum portfolios trended mainly sideways from 2018 to 2020. We could not fully capture the 2019–2020 rally in U.S. stocks (Self-Doubt and All-Time-Highs).
Besides all these doubts, our historic performance shows that it pays off to trust the system. A sound system should beat our trading emotions or gut feeling. Does it come easy? Of course not! There is always doubt. There are always more questions than answers. Every opportunity comes with multiple risks and there are phases of deep self-reflection. It does not come naturally to switch between cautious and aggressive portfolio allocations. It is extremely challenging to watch a portfolio for two years drifting sideways while the popular U.S. stock market reaches new highs. However, time over time, the rule-based RB portfolios have shown what tremendous value they add. They cut emotions short and focus on the main goal: achieving superior risk-adjusted returns in a systematic manner. Eventually, the RB portfolios have been doing exactly what they were designed for and remain one of the better options to achieve solid risk-adjusted returns.
The End Game
COVID-19 accelerated all risks we have been highlighting over the years (valuations, monetary policy, populism, etc.). The world got flooded with even more cheap money and massive loads of government debt. Does it mean that all risks are gone and we can enjoy steady, high returns forever? Probably not. There will be a rude awakening (but nobody knows when). Markets are cyclical and COVID-19 amplified these risks rather than solved them. During this “end game” phase a highly flexible momentum strategy with broad diversification and downside protection seems to be the best risk-adjusted alternative.
Stay in the game.
Best, Sebastian
