On holiday, August 2022

Source: Pixabay

In August I enjoyed a couple of weeks away from home with my family and paid little or no attention to the markets during that time. I certainly wasn’t looking to buy or sell. Despite the cost-of-living crisis and a significant rise in energy bills, markets have been reasonably stable. I’m also fairly comfortable with the make-up of my portfolio. My portfolio total return was a loss of -1.62% for the eight months to date. That’s just one or two down days in the markets that could be recovered by one or two up days.

August

The FTSE All Share Total Return index, my chosen benchmark, fell by -1.70% in the month, and has now fallen by -2.11% for the eight months of the year to date. My investment return for the month was a gain of +0.77% buoyed by it being a high dividend month. Dividends received fall unevenly across the year. Cumulatively I have a loss of -1.62% for the year so far. I am slightly ahead of my benchmark, probably helped by my overseas holdings gaining from a fall in the value of sterling.

My individual holdings recorded an unweighted average share price movement of a loss of -7.78% for the year so far. My worst performers continue to be in a UK small company investment trust that is down by -36.83%, and in a commercial property REIT that is down by -26.30%. My best performers are a global equity income trust that is up by +8.48%, and a UK equity income trust that is up by +1.27%. The share prices of my other holdings have all fallen, and by up to -10.70%.

Capital

Chart by Visualizer

Starting from an index value of 100.00 at 31 December 2013, my capital is now 135.35, as shown in the graph above. This is -4.02% down from March’s peak, the high-water point for my portfolio. My capital value remains below its ten-month average. There has been a decrease of -3.46% in the year to date. This is comprised of the following elements. Investment return of a capital loss of -5.24% and dividend income of +3.64%, totalled an investment return of a loss of -1.60%. Draw down expenditure deducted -1.86% during the year so far.

Income

Chart by Visualizer

Annual dividend income as a percentage of the opening portfolio value on 31 December 2013 has increased from 3.37% to reach 6.90% at this month end, as shown in the graph above. This is yet another new peak. My current portfolio dividend income yield is 5.10%, i.e., 6.90 divided by 135.35.

Investment changes

During the month dividends received in my tax-sheltered accounts were re-invested. Dividends received in my dealing accounts were paid out to my bank. Otherwise I took a holiday from any trading activity.

Portfolio

The table below shows the composition of my portfolio at the end of the month.

 Yield %Capital %Income %
UK4.1438.7531.49
Asia Pacific5.1425.5725.82
Global4.3118.2515.45
Property8.198.4513.58
Bonds8.528.1113.55
Cash0.660.870.11
5.10100.00100.00

I also analyse the portfolio by the income or growth category of each holding.

 Yield %Sectors
High Incomeabove 6%Property, Bonds, Asia Pacific
Income4.5% to 6%UK
Income & Growth3% to 4.5%Global, Asia Pacific
Growthbelow 3%UK, Asia Pacific

 Yield %Capital %Income %
High Income8.3823.9339.34
Income5.0327.7327.35
Income & Growth4.2632.5227.21
Growth2.0414.955.99
Cash0.660.870.11
5.10100.00100.00

Cash

My annual drawdown spending is now around 3.47% of my portfolio value, based on the last two years spending and the opening and closing values for that period. My cash holdings are now sufficient to cover about three months of spending. In addition, dividends being paid out in cash each year from my dealing account are sufficient to cover about four months of spending. I will need to sell some shares to raise cash again in the next few months.

Expenditure

Draw down spending was 61.82% of my portfolio income in the last twelve months which is a small reduction from with the figure of 62.40% for the previous twelve months. Portfolio income rose by 0.93%. Expenditure fell by -0.01%, so was essentially unchanged.

RPI and CPI inflation reached annual rates of 12.34% and 10.06% at the end of July. This is beginning to impact on our grocery bills. Energy bills are higher than they were but the main impact on us will be after 1 October when the price cap rises and when we put on the heating. Currently we are paying for energy on a month-by-month basis according to our actual meter readings. We will pay a low amount in September based on our August meter reading so are benefiting from being on holiday for two weeks. This will change for the worse, although government support will provide some mitigation.

Conclusion

It is good to feel able to ignore the markets when you’re on holiday and it is of comfort that markets, as they affect us, appear to be relatively stable. It would be good to see share prices rise as I will need to sell some shares to support our drawdown spending soon.

On the rebound, July – August 2022

Source: Pixabay

Markets and my holdings have rebounded in July and in August so far. That is despite increasing inflation, predictions of a prolonged recession, a cost-of-living crisis, and a war in Europe.

My portfolio total return was a loss of -4.99% for the six months to June, but as I write, in mid-August, my total return is a loss of only -0.93% for the year to date. That’s just one down day in the markets.

July

The FTSE All Share Total Return index, my chosen benchmark, was up by +4.36% in the month, and down by only -0.41% for the year so far. My investment return for the month was a gain of +2.79%, and a loss of -2.36% for the year so far. That’s some underperformance against my benchmark.

My individual holdings recorded an unweighted average share price movement of a loss of -7.39% for the year so far. My worst performer continues to be a UK small company investment trust that is now showing a loss of -35.32%. My second worst performer is a commercial property REIT that is down -21.94%. My third worst performer is an Asia Pacific small company investment trust that is down by -14.55%. These are all positions that I have added to in recent months, so I’m hoping for better times ahead. The best performer continues to be a global equity income trust that is up by +7.27%.

Capital

Chart by Visualizer

Starting from an index value of 100.00 at 31 December 2013, my capital is now 134.67, as shown in the graph above. This is -4.50% down from March’s peak, the high-water point for my portfolio. My capital value remains below its ten-month average. There has been a decrease of -3.94% in the year to date. Investment return of a capital loss of -4.90% and dividend income of +2.56%, totalled an investment return of a loss of -2.34%. Draw down expenditure deducted -1.60% during the year so far.

Income

Chart by Visualizer

Annual dividend income as a percentage of the opening portfolio value on 31 December 2013 has increased from 3.37% to reach 6.83% at this month end, as shown in the graph above. This is another new peak. My current portfolio dividend income yield is 5.07%, i.e., 6.83 divided by 134.67.

Investment changes

In July I made a small switch from my best performing global equity income trust to my worst performing UK smaller companies trust. This was only about 0.6% of my portfolio and only slightly shifts their weightings in my portfolio. This is part of my ongoing but slow-moving shift towards more growth holdings and less income holdings in the portfolio. There were also some dividends re-invested in my tax-sheltered accounts during the month.

Portfolio

The table below shows the composition of my portfolio at the end of the month.

 Yield %Capital %Income %
UK4.0639.4631.61
Asia Pacific5.2624.8025.75
Global4.3418.1315.50
Property7.708.9913.66
Bonds8.627.8413.32
Cash1.050.770.16
5.07100.00100.00

I also analyse the portfolio by the income or growth category of each holding.

 Yield %Sectors
High Incomeabove 6%Property, Bonds, Asia Pacific
Income4.5% to 6%UK
Income & Growth3% to 4.5%Global, Asia Pacific
Growthbelow 3%UK, Asia Pacific

My growth holdings are now 14.95% of the portfolio compared to 7.81% in February 2021 just before I began my shift to growth. This is intended to improve the long term growth returns of the portfolio by including more growth oriented holdings including smaller companies.

 Yield %Capital %Income %
High Income8.2823.9139.05
Income4.9228.2927.43
Income & Growth4.3232.0827.31
Growth2.0514.956.05
Cash1.050.770.16
5.07100.00100.00

Cash

My annual drawdown spending is now around 3.51% of my portfolio value, based on the last two years spending and the opening and closing values for that period. My cash holdings are now sufficient to cover about three months of spending. In addition, dividends being paid out in cash each year from my dealing account are sufficient to cover about three months of spending. I will need to sell some shares to raise cash again in the next few months.

Expenditure

Draw down spending was 63.49% of my portfolio income in the last twelve months which is almost identical with the figure of 63.55% for the previous twelve months. Portfolio income (+0.02%) and expenditure (-0.08%) was essentially unchanged.

RPI and CPI inflation reached annual rates of 11.84% and 9.43% at the end of June. This impacts us in higher energy bills and grocery bills that are beginning to rise.

Conclusion

I am pleased to see capital values rising again. That is helpful in that I will need to raise cash to spend by selling some shares soon. My portfolio income continues to rise, albeit slowly, and my shift towards growth is progressing, also slowly.

A bad month, June 2022

Source: Pixabay

The Telegraph reported that “the global market rout has wiped $13 trillion off world stocks in the worst start to any year on record as business and consumer confidence collapses amid surging inflation. The MSCI World Equity Index has shed more than 20pc so far this year in the steepest first-half decline since its creation, led by a plunge in loss-making tech companies as investors panic over the end of ultra-low interest rates. In the UK, the FTSE 100 fell 1.96pc on Thursday to close out its worst month since the early days of the Covid pandemic.”

The Spectator World, which usually concentrates on US political news, reported that “this is the worst first six months for the S&P 500 in fifty years. The index is down 20.6 percent since January 1. The only first-six-months that were worse for [US] investors: 1970, 1962 and 1932.”

I can report that my portfolio total return is a loss of -4.99% for the last six months. As at the end of May my portfolio was showing a positive investment return of +1.43% for the year to date, but June was my third worst month of the past eight and a half years of drawdown. The worst two months were February and March 2020 at the onset of the pandemic.

June

The FTSE All Share Total Return index, my chosen benchmark, was down by -5.98% in the month, and down by -4.57% for the year so far. My investment return for the month was a loss of -6.37%, and a loss of -4.99% for the year so far. My individual holdings recorded widely different share price movements for the year so far. My worst performer is a UK small company investment trust that is showing a loss of -40.63%. My second worst performer is a commercial property REIT that is down -23.00%. I added to my position in that one during the month. Only three holdings are in positive territory. The best performer is up by +6.75% and is invested in global equity income. My other commercial property REIT is up by +1.60%. My best performing UK equity income holding is up by +1.65%. The unweighted average result of all of my holdings is a share price loss of -10.33%.

Capital

Chart by Visualizer

Starting from an index value of 100.00 at 31 December 2013, my capital is now 131.31, as shown in the graph above. This is 6.88% down from March’s peak, the high-water point for my portfolio. My capital value has fallen below its ten-month average for the first time since 2020. This is a worrying trend if it continues. There has been a decrease of -6.33% in the year to date. Investment return of a capital loss of -7.44% and dividend income of +2.48%, totalled an investment return of a loss of -4.95%. Draw down expenditure deducted -1.38% during the year so far.

Income

Chart by Visualizer

Annual dividend income as a percentage of the opening portfolio value on 31 December 2013 has increased from 3.37% to reach 6.81% at this month end, as shown in the graph above. This is another new peak. My current portfolio dividend income yield is 5.19%, i.e., 6.81 divided by 131.31.

Investment changes

I took advantage of changes in the relative pricing of my holdings in a bond trust and a commercial property REIT to make a small switch from the former to the latter. Both are now yielding close to 9%, whereas the property REIT used to yield about 1% less than the bond trust. The effect of this is to reduce my exposure to a high yielding (“junk”) bond trust and increase my exposure to a property REIT that is out of favour, whilst maintaining my income yield. I’m reluctant to add to my high-income holdings but I will switch between them to try and get a better return or to try and reduce the risks to the portfolio.

There were also some dividends re-invested in my tax-sheltered accounts during the month.

Portfolio

The table below shows the composition of my portfolio at the end of the month.

 Yield %Capital %Income %
UK4.2937.9731.41
Asia Pacific5.2825.2925.72
Global4.3518.8715.82
Property7.878.9313.56
Bonds8.737.9113.32
Cash0.901.020.18
5.19100.00100.00

I also analyse the portfolio by the income or growth category of each holding. I have amended the yield criteria for these groupings this month following the market falls.

 Yield %Sectors
High Incomeabove 6%Property, Bonds, Asia Pacific
Income4.5% to 6%UK, Asia Pacific
Income & Growth3% to 4.5%Global, Asia Pacific
Growthbelow 3%UK, Asia Pacific

My global holdings are now all in the income and growth category.

 Yield %Capital %Income %
High Income8.3424.2438.98
Income4.9735.1733.67
Income & Growth4.2825.7921.30
Growth2.2113.785.88
Cash0.901.020.18
5.19100.00100.00

Cash

My annual drawdown spending is now around 3.47% of my portfolio value, based on the last two years spending and the opening and closing values for that period. My cash holdings are now sufficient to cover about four months of spending. In addition, dividends being paid out in cash each year from my dealing account are sufficient to cover about three months of spending. I will need to sell some shares to raise cash again in the next few months, so I’m hoping for an uplift in prices. The share price of the holding I would probably choose to sell is down by about 14% this year.

Expenditure

Draw down spending was 62.55% of my portfolio income in the last twelve months which is in line with the figure of 61.16% for the previous twelve months. Portfolio income rose by 1.59% and expenditure rose by 3.90%.
RPI and CPI inflation reached annual rates of 11.66% and 9.03% at the end of May. Analysis in the Sunday Times this week suggested that most households (excepting the very highest income ones) needed between £98 and £164 extra cash each month to cover cost of living increases. For us the higher energy bills will account for all or most of those amounts. We don’t routinely use much petrol so are not much impacted by petrol price rises. I think, however, that this inflation may be beginning to impact on our grocery spend based on the last four weeks, but the last six months overall is still in line with last year’s spend.

Conclusion

My portfolio income is stable and rising at present, so I’m not too perturbed by the fall in portfolio capital values. I need to consider when next to raise cash to spend, and I will also look for any opportunity to make small switches to the portfolio. These would be small moves involving less than 1% of the portfolio. Otherwise, I expect to continue to sit tight through this market storm.

Don’t panic, May-June 2022

Source: Pixabay

My portfolio capital and my portfolio income continued to be stable and relatively unchanged in the year 2022 to date and in the month of May. Things have, however, changed a bit since then as regards capital values.

May

The FTSE All Share Total Return index, my chosen benchmark, was up by +2.33% in the month, and up by +1.50% for the year so far. My investment return for the month was a gain of +0.22%, and a gain of +1.43% for the year so far. My individual holdings recorded share price movements for the year so far ranging from a loss of -29.75% by a UK small company investment trust, to a gain of +14.01% by a commercial property REIT, with an unweighted average result of a loss of -3.88%.

Capital

Chart by Visualizer

Starting from an index value of 100.00 at 31 December 2013, my capital is now 140.58, as shown in the graph above. This is another slight fall from March’s new peak. There has been an increase of +0.28% in the year to date. Investment return of a capital loss of -1.04% and dividend income of +2.47%, totalled an investment return of +1.43%. Draw down expenditure deducted -1.15% during the year so far.

Income

Chart by Visualizer

Annual dividend income as a percentage of the opening portfolio value on 31 December 2013 has increased from 3.37% to reach 6.79% at this month end, as shown in the graph above. This is a new peak. My current portfolio dividend income yield is 4.83%, i.e., 6.79 divided by 140.58.

Investment changes

Following a burst of activity in the first week of April as I raised cash for regular spending and for reinvesting in my ISA, and realised some capital gains, things have gone quiet again. The only activity during the month of May was that some dividends were received and re-invested in my tax-sheltered accounts and some dividends were received and paid out from my dealing account. These dividends amounted to about 1% of my capital and this was my second highest monthly pay-out of dividends. This reinvestment has pushed portfolio income to a new peak. This gives me a little scope to reposition the portfolio towards lower dividend holdings or else to raise a little more cash without reducing my portfolio income too much.

Portfolio

The table below shows the composition of my portfolio at the end of the month.

 Yield %Capital %Income %
UK3.9938.0531.43
Asia Pacific5.0224.7625.75
Global4.0518.9315.87
Property7.068.7612.80
Bonds8.348.1314.04
Cash0.381.360.11
4.83100.00100.00

The portfolio is now much more diversified than it used to be. The traditional UK equity income “dividend heroes,” actual and aspiring, make up only 28% of the portfolio now. Asia Pacific equity income is 21%, and global equity income is 19%. High yielding bonds and property accounts for 17%, and low yielding growth holdings, in UK and the Asia Pacific, amount to 14%. (Should I now add more to these growth holdings or should I build back up my UK equity income holdings?)

I also analyse the portfolio by the income or growth category of each holding as follows:

 Yield %Sectors included
High Incomeabove 5%Bonds, Property, Asia Pacific
Income4% to 5%UK, Global, Asia Pacific
Income & Growth3% to 4%Global, Asia Pacific
Growthbelow 3%UK, Asia Pacific

My recent switches mean that I no longer have any UK holdings in the high-income category.

 Yield %Capital %Income %
High Income7.7624.2238.93
Income4.5446.9144.11
Income & Growth3.8613.7110.96
Growth2.0613.815.89
Cash0.381.360.11
4.83100.00100.00

Cash

My annual drawdown spending is now around 3.39% of my portfolio value, based on the last two years spending and the opening and closing values for that period. That’s an increase from last month but still consistent with recent months. My cash holdings are now sufficient to cover about five months of spending. In addition, dividends being paid out in cash each year from my dealing account are sufficient to cover about four months of spending. I will need to sell some shares to raise cash again but not for several months.

Expenditure

Draw down spending was 63.41% of my portfolio income in the last twelve months which is higher than the figure of 59.44% for the previous twelve months. Portfolio income rose by 0.21% and expenditure rose by 6.90%.

May was our highest spending month since December 2020. We had additional to normal spending on home improvements, a new laptop computer, a summer holiday booking, and some capital gains tax. We also had our biggest ever monthly spend on energy. It was about double what we paid just about one year ago.

RPI and CPI inflation reached annual rates of 11.13% and 8.99% at the end of April. My impression is that this has not yet impacted on our grocery spend. With about 60% of our spending being on discretionary or luxury items I still believe we can make some choices to avoid the full impact of such double-digit inflation on our total spend.

Two weeks of June

At the time of writing this, my portfolio has dropped by about 3.5% in June. That is a reduction of over -3% in the 2022 year to date. That drop in June will include a little June spending but is mostly the result of the market downturn in recent days. I estimate that the year-to-date total return on my growth holdings is a loss of around -20%. I expect that a loss of around -20% is the total result for other investors targeting only growth. (Should I switch to add to my growth holdings at these reduced prices or should I hold fire for now because they will continue to fall?) Most of my other portfolio segments are showing around a -1% loss, except global income which I estimate is in positive territory at +6%.

Conclusion

Based on recent months this mid-month turbulence may have subsided by the end of June, but alternatively it could worsen. I will likely sit tight with my current portfolio and consider my next moves at my leisure. My portfolio income is at a new peak and dividends continue to be maintained or increased slightly. I have experienced no dividend cuts since one commercial property holding cut its dividend in 2020. In addition, I am effectively able to reinvest over one-third of my portfolio income in more dividend paying shares. I can therefore afford to sit tight and see how this market storm plays out.