I’m back in action! My wedding was last weekend and I’ve been SO busy with wedding planning, the wedding itself and all of the thing we need to do after. I’m not writing to you on our honeymoon, but we’ve got a week set aside for a break in mid-September. I’m happy to report that everything went very well and now I’m married to a pretty awesome person!
Although I took a break over the last few weeks from writing content, the market didn’t take a break. The market’s volatility has spiked a bit over the last few weeks, with the Volatility Index (VIX) showing a spike in volatility that peaked on Thursday.
Let’s take a look at how my Roth IRA has performed over the last few weeks. My balance is at an all-time high from any of my blog posts, which is indicative of how well the market has done lately.
Let’s check in on my portfolio’s relative performance vs. the market.
- S&P 500 from January 4th – Aug 21st: +20.23% ((407.61 – 339.03) / 339.03) x 100
- My portfolio from January 4th – Aug 21st: +19.33% ((54,125.61 – 6,000 – 821.03) – 39,641.18) / 39,641.18 x 100
I’m still a bit behind the market this year, but I’ve closed the gap a bit since my last post. I’m within a percentage point of the market excluding dividends, so my overall return is probably pretty close to the S&P given my portfolio’s higher yield.
I’m happy with the performance over the last few weeks – my portfolio is overweights financials so the fact that I gained ground vs. the market despite the 10 year bond t-note yield going down gives me encouragement. My long-term thesis is that bond yields should go up eventually in a hot economy, and when that happens financial institutions make more money off of their cash on the sidelines.
We’ve got just about three months until the end of the year, so my 2021 portfolio composition is in the home stretch.
For my supplemental content today I wanted to share a podcast with you guys that I’ve absolutely loved listening to over the last few weeks. As a finance junkie, I’m always looking for podcasts to listen to while I’m out and about doing things. I ran across a few podcasts that
There are two podcasts from this group that I like to listen to:
- The Animal Spirits Podcast with Ben Carlson and Michael Batnick
- The Compound and Friends with Josh Brown, Michael Batnick
The way Josh, Ben and Michael weave back and forth between funny banter and complex topics is wonderful. I’ve learned a lot from them.
For example, one thing that I didn’t realize is that it’s apples to oranges to compare the P/E ratios of one country’s stock market to another, because the biggest industries that make up each country’s economy dictates that country’s P/E ratio.
The P/E ratio of Chile’s stock market is 19, while the P/E ratio of the S&P 500 is 31 right now. The reason? The biggest companies in Chile are Mineral/Mining companies, banks, and utilities. Those companies have naturally lower price to earnings ratios than other kinds of companies like tech companies. The biggest companies by market cap in the US are huge tech players that command higher P/E ratios given higher growth and profitability.
The Chilean market doesn’t have the kind of market dominance we see from Tech companies in the US, so it’s P/E ratio reflects the composition of the companies that are the biggest in its economy. It’s an imperfect comparison – and it doesn’t even tell us anything about how overpriced or underpriced each market is, because that analysis is unique to the distribution of company types within that market.
Before really thinking about this, I just assumed if you compared one country’s market to another, the P/E ratios told the full story about how overpriced or underpriced each market was, but that’s not actually the case.
That’s only one of the many things I’ve learned from listening to this podcast over the last month. I think you guys will enjoy it.
If you want to learn more about what a P/E ratio means, check out a prior post I made here.