Dear Subscribers,
I'm writing to share that this will be my concluding Portfolio update in the current paid subscription format. It's been a remarkable journey, and I'm deeply thankful for your engagement and support throughout this venture. As we part ways in this format, I extend my heartfelt wishes for your prosperity and success in the financial markets.
Looking ahead, I am stepping back to cherish and dedicate time to my family during these precious growing years. The decision to step back is not made lightly, but with a deep sense of fulfillment for what we've accomplished here.
May you and your loved ones find continued success and fulfillment.
Warm regards,
Trace
Year-End Reflections
The close of each year offers a prime opportunity for introspection within the markets and a deeper dive into portfolio performance. With the year's activity winding down, I find this moment ideal for a detailed analysis, approached with clarity and fresh perspective. For insights into the previous years, please refer to the linked recaps for 2021 and 2022.
A Look Back at 2023
2023: A Year of Turning the Tide
2023 was quite the year. We saw the portfolio make a solid comeback, especially when compared to the Major ETFs. It's a welcome change from the more subdued pace of 2022.
In this update, I'll take you through the year's final results, highlight the trades that really stood out, and honestly assess those that didn't quite meet our expectations. Plus, I've got some thoughts to share about our journey over the years.
Final Returns vs. Major ETFs
Since we started, the portfolio has come a long way, with a +151% cumulative performance, significantly outpacing the +51.5% average return of the four major ETFs.
In 2023, the portfolio value doubled, realizing a return of +103%. In the same period, the combined average return of the four major ETFs was +27%, significantly boosted by QQQ's +54% gain.
Statistics
2023 Portfolio Performance: “Doubling” Down on Success
Highlight of the Year: Of the 2023 entries, MELI was the star performer, achieving a +72.7% gain since its initiation in January. This position, still active, exemplifies the potential of well-timed entries.
Challenge of the Year: Managing Risks with ENPH
ENPH presented a significant challenge, resulting in a -39.4% return. This trade highlights the importance of risk management in trading.
The Role of Position Sizing and Discipline
A crucial element of our strategy revolves around meticulous position sizing. Take ENPH, for instance – we limited it to two separate 5% positions of the initial deposit, ensuring that each trade was a manageable slice of the portfolio. This precise sizing was pivotal in maintaining a clear head and keeping emotions in check during the trade.
Adhering to this disciplined approach is fundamental in trading. It's not just about the numbers; it's about the mindset. By keeping each position to a proportionate size, we're able to stick to our plan and manage risks more effectively. It's about staying grounded, even when the markets try to sway us otherwise.
Long-Term Performance Overview
In 3.5 years, our portfolio has made significant strides:
Reached an 8x return with one position (>700% gains).
Attained notable returns ranging from 7x to 2x, covering several positions with gains over 100%.
These achievements underscore the effectiveness of our strategic approach.
Notably, the three most substantial losses occurred in previous years:
MARA: -64.1%
MARA: -54.0%
BTBT: -49.2%
Five Rules of Thumb for a Portfolio Trade
When considering positions for both traditional investing and options trading, it's imperative to approach each entry with a calculated mindset. The following five guiding principles, essential for thoughtful decision-making, apply equally to both realms. Each position we take should be the result of careful deliberation and alignment with these key criteria:
Overall Market Health: Evaluating the broader market's health is key, but it's not always black and white. Typically, this involves checking if the four major indices are above their 50-day Simple Moving Averages (SMAs), and whether these SMAs are positioned above the 200-day ones. However, there are times when only three out of the four indices align with this criteria and an individual stock looks promising.
In such scenarios, a judgment call becomes necessary. It's about interpreting the market's overall momentum and direction, even when one of the indices might not be fully on board. This flexibility allows for a more nuanced approach, recognizing that market conditions are often complex and require a discerning eye.
Stock Essentials:
Price: Is the stock trading above support or below resistance levels?
Volume: Does the volume indicate a peak or turning point?
Relative Strength vs. SPX: How's the stock performing compared to the S&P 500?
Earnings Reaction: Was the response to the last earnings report positive or negative?
Sector and Industry Analysis: Is the stock's sector and industry outperforming the rest? Leading sectors often provide a supportive backdrop for individual stock performance.
Point and Figure (PnF) Target: What’s the upside potential versus the downside risk? A favorable reward-to-risk ratio is key.
Stop Out Level: Can a clear stop-loss level be defined before entering the trade? This is essential to maintain discipline and control over the trade.
The overarching goal here is to create a system that takes emotion out of the equation. By sticking to these principles, we ensure that each trade is backed by a solid rationale, not just a gut feeling.
The Long-Term Strategy
Overall, I believe slow and steady wins the race, and this is reflected in some of the long-term positions that remain open from 2020 and 2021. There are seven positions that were opened in either 2020 or 2021 that remain open, with four winners and three losers, and overall they have an average return of +132%.
In 2022, a strategic decision to invest heavily in BTC during a market dip proved advantageous. With four substantial positions, each accounting for 10% of the portfolio’s initial deposit, the average cost basis was $22,817, leading to an average return of +92.9%. These decisions weren't impulsive but were made at critical support levels or at long-term indicator extremes, with two entries around $19,000.
Portfolio's Pace: Navigating Like a Steady Barge
When I look at the portfolio, especially in comparison to the fast-paced world of options, it feels like steering a slow-moving barge. This is even true with typically volatile names like BTC. In the portfolio, these high-volatility assets don't swing wildly on a weekly basis as they often do in options.
This steadier pace is something I appreciate. It's a reminder that not every investment needs to be a roller coaster ride. The portfolio's movement, more gradual and measured, gives a different perspective on growth and risk. It's like having a reliable, steady hand at the wheel, even when the markets get choppy.
Final Portfolio Reflections
Since starting the portfolio in June 2020, the journey has been rich with learning and adaptation. It's been a path of both market responsiveness and strategic choices.
In these 3.5 years, the portfolio has seen a range of successes, from significant multi-bagger gains to insightful lessons in market dynamics. This period has been as much about financial growth as it has been about gaining deeper investment insights.
I’m grateful for your support throughout this endeavor. Your engagement has been a key part of this journey.
With the end of the paid service, I'm processing pro-rated refunds, expected to complete within the next 10 business days. For any queries, please feel free to contact me at (chartsforfreedom@gmail.com).
While I’m pausing these regular updates, I'll continue sharing my market views and experiences on social media. You can follow me on X (@TraceBustaChart) and on StockTwits (@TraceBusta) for ongoing insights.
Thank you for joining me on this journey. It’s been a rewarding experience, and I value the time we’ve shared exploring the markets.
Warm regards,
Trace