The newspaper report told me that “the FTSE 100 was the world’s best performing major stock index during a miserable 2022 for financial markets.” Total returns of 4.6% for this index of the UK’s largest companies compared well with a fall of over 20% for both the US S&P 500 index and the UK FTSE 250 index of mid cap companies.
December
The FTSE All Share Total Return index fell by -1.42% in the month and has risen by +0.34% for the full year of 2022. My investment return for the month was a loss of -0.43%. Cumulatively I have a loss of -0.97% for the full year of 2022. That’s -1.31% behind my benchmark index. On a two year view I am also behind but on a three year view I am ahead of this UK index.
My individual holdings recorded an unweighted average share price movement of a loss of -8.52% for the year so far. My worst performers are in the UK small company (-39.45%), and commercial property ( -37.17%) sectors. These are some of my smaller positions. My best performer, up +15.40%, is in the global equity income sector. Overall, my portfolio choices this year have underperformed my benchmark UK index.
Capital
Starting from an index value of 100.00 on 31 December 2013, my capital is now 134.54, as shown in the graph above. This is -4.59% down from its all-time peak in March this year, and-4.03% down for the full year of 2022. Investment return of a capital loss of -5.99% and dividend income of +5.04%, results in a loss of -0.95%. Draw down expenditure deducted a further -3.08% during the year so far.
Income
Annual dividend income as a percentage of the opening portfolio value on 31 December 2013 has increased from 3.37% to reach a new peak of 7.04% at this month end, as shown in the graph above. My current portfolio dividend income yield is 5.23%, i.e., 7.04 divided by 1.3454.
Investment changes
During the month dividends received in my tax-sheltered accounts were re-invested and dividends received in my trading account were paid out. No other trades were made.
Portfolio
The table below shows the composition of my portfolio at the end of the month.
| Yield % | Capital % | Income % | |
|---|---|---|---|
| UK | 3.98 | 34.25 | 26.04 |
| Asia Pacific | 5.49 | 25.38 | 26.61 |
| Global | 4.11 | 19.41 | 15.26 |
| Property | 7.94 | 12.06 | 18.31 |
| Bonds | 8.45 | 8.38 | 13.53 |
| Cash | 2.46 | 0.53 | 0.25 |
| 5.23 | 100.00 | 100.00 |
I also analyse the portfolio by the income or growth category of each holding.
| Yield % | Sectors | |
|---|---|---|
| High Income | above 6% | Bonds, Property, Asia Pacific |
| Income | 4.5% to 6% | UK, Property |
| Income & Growth | 3% to 4.5% | Global, Asia Pacific |
| Growth | below 3% | UK |
| Yield % | Capital % | Income % | |
|---|---|---|---|
| High Income | 8.85 | 23.99 | 40.57 |
| Income | 4.91 | 27.02 | 25.34 |
| Income & Growth | 4.14 | 37.40 | 29.58 |
| Growth | 2.01 | 11.07 | 4.26 |
| Cash | 2.46 | 0.53 | 0.25 |
| 5.23 | 100.00 | 100.00 |
Cash
My annual drawdown spending is now around 3.35% of my portfolio value, based on the last two years spending and the opening and closing values for that period. Cash holdings cover about two months of spending. Dividends being paid out in cash each year from my dealing account are sufficient to cover about three months of spending each year. In January I expect to sell some shares to raise cash again. That will slightly reduce portfolio income below the recent peaks.
Expenditure
Draw down spending was 62.30% of my portfolio income in the last twelve months which is less than the figure of 63.67% for the previous twelve months. Portfolio income rose by 3.26% as more dividend income was received. Expenditure rose by 1.04%. This table compares the last two years.
| Year | 2021 | 2022 | Change % |
|---|---|---|---|
| Income | 100.00 | 103.26 | 3.26 |
| Essential | 25.31 | 24.76 | -2.15 |
| Luxury | 16.03 | 18.24 | 13.79 |
| Discretionary | 22.33 | 21.33 | -4.50 |
| Expenditure | 63.67 | 64.33 | 1.04 |
| Income – Expenditure | 36.33 | 38.93 | 7.15 |
| as % of 2021 Income |
Perhaps surprisingly essential spending is lower than last year. Year on year groceries were only up 5% but weekly grocery bills in recent weeks are up by about 15% compared to one year ago. Energy costs for 2022 were 25% lower than 2021 because we were overcharged last year and were refunded this year. Council tax was also lower, by 13%, in 2022 because of timing changes resulting from changing payment methods. Those are our top three essential spending items. We expect them all to increase in 2023.
Discretionary spending was also lower this year. This was because of some choices we made such as stopping or reducing some subscription payments. Luxury spending was higher this year. We spent more on holidays, dining out, entertainment and clothes.
Conclusion
After what was described as a miserable year for the markets my UK bias helped to limit my losses to below 1%. A drawdown of only around 3% leaves my capital only 4% down for the year. Hopefully that reduction can be recovered in 2023.
Interesting update; thanks for sharing.
A small number of questions please:
1) are all the values nominals – ie not corrected for inflation;
2) did HMG’s cost of living payments (£66 or £67 PCM) also help to lower your energy costs;
3) was your energy refund repaid in nominal £’s rather than, say, kWh
Thanks for your questions. I can advise that the values are nominal and not inflation adjusted. We had £66, £66 and £67 reductions to our monthly energy bills dated 25 October, 26th November, and 24th December. The first two helped to reduce our energy costs in 2022. Those bills also show that the energy price guarantee saved us £62 and £126 in 2022. The third bill is a large cost falling into 2023 despite the £67 reduction and a £204 saving from the energy price guarantee.