Our total return currently stands at negative 1.76 percent, outperforming the PSEi’s negative 11.08 percent, yet falling short of what could have been achieved if we included a proper hedge.
The key issue is now clear in hindsight: we lacked a proper hedge—a component designed to move differently, or even opposite, from the broader market.
Although the portfolio contains a mix of dividend-yield and growth stocks, this alone was not enough to counteract the year’s volatility and external noise.
The missing piece
Market uncertainties—from inflation concerns to political scandals—tend to expose whether a portfolio is adequately diversified.
One area where we fell short was in not holding assets that typically gain value when risk appetite falls.
Among these, gold and gold-mining stocks stand out. Gold remains a time-tested hedge against currency depreciation and economic instability.
Gold-mining stocks such as OGP often benefit from rising gold prices and have historically shown the ability to move against or less in line with the broader market.
Including such a position would have given the portfolio a stabilizing element during this year’s turbulence.
Beta and correlation tell the story
Our model portfolio’s performance over the year shows that it moved largely in tandem with the market.
As of Nov. 18, 2025, its beta stood at 0.74, indicating lower volatility than the PSEi but still a clear directional alignment.
This became especially evident during the flood control scandal, which shifted our portfolio’s correlation with the market from negative 0.58 (moving in the opposite direction) to 0.93 (moving almost exactly with the PSE Index).
This surge in systematic risk exposure was a clear signal: the portfolio lacked an effective counterweight that could have softened the blow of market-wide sell-offs.
A significantly different outcome
To understand the impact of including a gold-mining stock, we ran a scenario where the portfolio included an overweight position in OGP from the start.
The results were striking as the portfolio’s total return would have been positive 10.65 percent year to date, which represents a 22.59-point spread over the PSEi.
This is also a complete reversal from our actual loss of negative 1.76 percent, with the portfolio’s beta falling to 0.68, further reducing market-linked risk.
This scenario shows how a gold-mining stock could have significantly improved our portfolio’s resilience with its tendency to move differently from the market and its added benefit of issuing dividends.
A costly lesson
In periods of heightened uncertainty, a portfolio built solely around typical growth and dividend-yield stocks is vulnerable to broad market swings.
Incorporating a hedge like a gold-mining stock can help lower overall volatility by reducing exposure to market-wide shocks, leading to improved total returns.
While gold itself may be volatile when viewed historically, its relationship to market risk is what makes it valuable.
Looking forward, ensuring that a portfolio contains at least one counter-cyclical or negatively correlated stock will be essential—especially in market environments where external noise can easily rattle investor confidence.
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