Protective Hypothetical Investment Portfolios During the COVID-19 Recession: Comparison with Superinvestors

Abstract

By examining the portfolios of renowned Superinvestors with different investment strategies, BRK-B of Warren Buffet and ARKK of Cathie Wood, we aimed to design hypothetical resilient portfolios that protect against the damaging effects of recessions.

The presented analysis indicates that ARKK significantly outperformed BRK-B during the stability period. However, in the face of the Covid-19 pandemic-induced recession, BRK-B displayed a higher degree of resilience and stability compared to ARKK. All three of our hypothetical portfolios delivered positive returns during both period of stability and recession and outperformed the benchmark. Importantly, our Equally weighted portfolio demonstrated the strongest performance of all the investigated portfolios during the recession. Moreover, our Tangency Portfolio showed relatively high performance along with high stability.

It is concluded that an investment approach based solely on diversification, can achieve superior returns, and even surpass the broader stock market with an acceptable level of risk.