Four months into the year, the Switzer Model Portfolios are in the black and outperforming the benchmark S&P/ASX 200 index. They are benefitting from the performances of the major banks and major miners, and in the case of the income portfolio, having no exposure to IT stocks.
There are two model portfolios: an income oriented portfolio and a growth portfolio. The objective of the income portfolio is to deliver tax advantaged income whilst broadly tracking the S&P/ASX 200. With the growth portfolio, the objective is to outperform the S&P/ASX 200 over the medium term, whilst closely tracking the index.
The objectives, methodology, construction rules and underlying economic assumptions for our model portfolios can be referenced here: (see: https://switzerreport.com.au/admajor vice/model-portfolios/ [1])
These are long-only model portfolios, and as such, they are assumed to be fully invested at all times. They are not “actively managed”, although adjustments are made from time to time.
In this article, we look at how they have performed in 2022. To do so, we will start by examining how the overall market has fared.
Resources, financials and ‘top 20’ stocks lead, technology gets walloped
The broad market as measured by the S&P/ASX 200 is down 0.1% in 2022 (to end of April). With dividends included, the total return (accumulation index) is 1.4%. The top 20 stocks, which includes the 4 major banks, Macquarie and major miners in BHP, Rio and Fortescue, has outperformed the rest of the market with a return of 3.9%. Midcaps and small caps underperformed in a relative sense.
Market Component Performance
With the industry sectors, the largest sector on the ASX, financials, which makes up 29.1% by weighting, has returned 4.9%. Unsurprisingly, energy is the best performing sector with a return of 31.8%. Despite a pullback of 4.3% in April, the second largest sector, materials, also boasts a double digit return for 2022.
Information technology is the worst performing sector with a loss of 22.7%. Other growth orientated sectors such as health care and consumer discretionary, which tend to trade on higher PE (price earnings) multiple, are also struggling. The former has lost 8.0%, while consumer discretionary is down by 12.4%.
The tiny utilities sector has surged on the back of higher wholesale energy prices and corporate activity.
The following table shows the performance of the 11 industry sectors for the month of April and in calendar 2022, and their respective weighting on the ASX.
Industry Sector Weighting and Performance
Portfolio Performance in calendar year 2022
The income portfolio to 29 April has returned 6.46% and the growth oriented portfolio has returned 2.22% (see tables at the end). Compared to the benchmark S&P/ASX 200 Accumulation Index (which adds back income from dividends), the income portfolio has outperformed by 5.09% and the growth portfolio by 0.85%.
Income Portfolio
The objective of the income portfolio is to deliver tax advantaged income whilst broadly tracking the S&P/ASX 200.
The income portfolio is forecast to deliver an income return of 4.65% (based on its opening value at the start of the year), franked to 80%. So far, it has delivered 1.80%, franked to 91.2%.
In the month of April, the income portfolio outperformed the benchmark by approximately 1.15%. Year to date, it has returned 6.42%, outperforming the benchmark S&P/ASX 200 by 5.09%. The performance for 0% and low rate taxpayers will be even higher if they participated in the JB Hi-Fi off-market share buyback.
The income portfolio per $100,000 invested (using prices as at the close of business on 29 April 2022) is as follows:
Growth Portfolio
The objective of the growth portfolio is to outperform the S&P/ASX 200 market over the medium term, whilst closely tracking the index.
In the month of April, the growth portfolio marginally underperformed compared to the index. Year to date, it has returned 2.22%, outperforming the benchmark S&P/ASX 200 by 0.85%. The performance for 0% and low rate taxpayers will be even higher if they participated in the JB Hi-Fi off-market share buyback.
Our growth oriented portfolio per $100,000 invested (using prices as at the close of business on 29 April 2022) is as follows:
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.