As I reset my portfolio at the beginning of the year, I included a US micro-cap fund based on my subscription to Motley Fools Rising Stars 2020 service. There were 40 recommendations but I bought 38 of them as I could not access to one recommendation and the other is a Vanguard small cap fund. I made it up with two other micro-cap that I came across – Alteryx and Zuora While I do track the individual stock performance, my focus is on the overall performance as the individual investment is extremely small.

Having established that at the end of the year, I decided to start another mini-fund that is made up of eight of the better known Software-as-a-Service (SaaS) companies in February. Similar to MFRS portfolio, I am focusing on the overall performance, rather than individual stocks’ return.

To give you a sense of how small my investment in these two funds is. My original amount invested in MFRS2020 and SaaS mini-fund only takes up 3.0% and 1.9% of my portfolio which translates to an average of only 0.07% and 0.24% per counter respectively.  Is it worth it? I am not sure at the moment as it is experimental in nature. I am positioning these as youth academy, such that in 5 to 10 years time, a few of them will challenge a place for the first team.

How are they faring so far?

Pretty good I would say. The two images below show their year to date performances. So MFRS2020 returns about 6.8% (-6.8% with subscription fees) and SaaS mini-fund returns a whooping 29.2% over just 2 months.

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In terms of volatility, they are about the same as SPY but maximum drawdown for MFRS2020 is evidently higher which is expected as they are made up of micro-cap.

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Individual Holdings and Update

I am not going to reveal my MFRS2020 counters as it is an active subscription service and I would like to respect the company and other subscribers who own the services. I would just like to point out that one has get used to the large swing in the prices and uneven performances for micro-caps. Among the 40 counters, the worst is down by 83%, while the best is up by 108%.

Based on the latest update by the services, they have categorized the group of counters into high, normal and low conviction. They are putting in more money to high and normal conviction counters, while holding the low conviction counters. For me, I decided not to add more money to this portfolio and instead of holding to the low conviction counters, I have divested them. And will probably re-allocate the money into the higher conviction counters at the appropriate juncture.

As for my SaaS mini-fund, I am not doing anything to them yet. I have yet to have time to find out more about them but recent quarterly report shows that they have continued to do well at least in terms of their sales. Will learn more about them before deciding if I want to add more money to this portfolio.

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Final thoughts

These are experimental portfolios to test out new strategies. The positions are kept small, so that if this is a mis-step, the impact would be minimised. Worst case scenario, my portfolio will be 5% down. As it is so far, it has improved my portfolio returns by about 1%. On the other hand, if this turns out to be a valid strategy after a few years of monitoring, I can scale it up.