Wednesday, 17 February 2021

How do you react to a 35% drawdown?

 As I've mentioned previously, my 2020 return for my IBKR account was -1.0%. But this hides the fact that the max drawdown to my IBKR portfolio was about -35%. In other words, it lost more than 1/3 of its value. When that happened, an investor can:

  • Buy more as its the sale worth waiting for.
  • Hold and hope the price recovers
  • Sell everything and put cash in a Milo tin.

My reaction was to buy more in order to average down as this was definitely a sale worth waiting for. On a one-year basis, my return is back to positive thanks to the recent rally. More importantly, a largely flat portfolio performance meant that my 2018 and 2019 gains were protected.

My China holdings are with FSMOne, and in 2020, China performed pretty well.

So overall, I'm happy to see that I didn't suffer huge losses and that I can continue to grow my dividends in 2021.

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