Calm, April 2022

My portfolio and perhaps more importantly my portfolio income have both been stable and relatively unchanged in the year 2022 to date and in the month of April. Listening to news headlines about inflation and recession I am wondering whether this is a period of calm before a storm.

April

The FTSE All Share Total Return index, my chosen benchmark, was down by -1.30% in the month, a reversal of March’s positive result, and down by -0.82% for the year so far. My investment return for the month was a gain of +0.03%, and a gain of +1.21% for the year so far. My individual holdings recorded share price movements for the year so far ranging from a loss of -25.43% to a gain of +12.94% with an unweighted average result of a loss of -1.88%. My worst performer is the UK small company investment trust I have been adding to during the last year. My best performer is the commercial property REIT I switched into last year.

Capital

Starting from an index value of 100.00 at 31 December 2013, my capital is now 140.81, as shown in the graph above. This is a slight fall from last month’s new peak. There has been an increase of +0.44% in the year to date. Investment return of a capital loss of -0.23% and dividend income of +1.45%, totalled an investment return of +1.21%. Draw down expenditure deducted -0.77% 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 6.77% at this month end, as shown in the graph above. This is also a slight fall from last month’s new peak. My current portfolio dividend income yield is 4.80%, i.e., 6.77 divided by 140.81.

Investment changes

I sold shares in my dealing account on April 1st and bought them back in my ISA on April 6th. That sale has used up my CGT allowance for the tax year just ended and I have a small amount of tax to pay. It has also used up my ISA allowance in the tax year just started. I also sold shares from my dealing account on April 6th to raise cash for future spending. Cash has therefore risen from 0.76% to 1.42% of my portfolio. Later in the month some dividends were received and re-invested during the month in my tax-sheltered accounts.

Portfolio

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

	Yield %	Capital %	Income %
UK	3.97	38.95	32.16
Asia Pacific	4.98	24.43	25.34
Global	4.19	18.09	15.77
Property	6.87	8.96	12.80
Bonds	8.16	8.15	13.83
Cash	0.30	1.42	0.09
	4.80	100.00	100.00

This version has been analysed by the income or growth category of each holding.

	Yield %	Capital %	Income %
High Income	7.54	25.18	39.50
Income	4.55	46.33	43.83
Income & Growth	3.91	13.50	11.00
Growth	1.98	13.57	5.58
Cash	0.30	1.42	0.09
	4.80	100.00	100.00

Cash

My annual drawdown spending is now around 3.28% of my portfolio value, based on the last two years spending and the opening and closing values for that period. That’s a reduction from last month when this figure was distorted by the pandemic low point for my portfolio. Having raised some cash from share sales my cash holdings are now sufficient to cover about six 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.

Expenditure

Draw down spending was 60.69% of my portfolio income in the last twelve months which is close to the figure of 60.12% for the previous twelve months. Portfolio income rose by 2.89% and expenditure rose by 3.87%.

Discretionary spending choices are still the main determinant of our spending rather than price inflation. RPI and CPI inflation reached annual rates of 8.96% and 7.04% at the end of March. I’m expecting to pay at least 50% more for energy in the next twelve months, and the bill for April usage, payable in May, is about double what we paid just about one year ago. I am comforted by the reality that more than half of our total spending is discretionary so we have some room for manoeuvre as prices rise.

Conclusion

There are some storms in the world today. This can be seen in a war in Ukraine, rising inflation, warnings of a recession, and a downturn in global markets that are dominated by US technology companies. So far this year my situation remains stable and calm and I’m looking to stay calm myself even if that situation changes. A major war in Europe is a new development but I have lived and invested through past periods of inflation and recession, albeit not while being in drawdown. I remain content to maintain my current investments and my current strategy amidst these concerns. I think these will work for me in the medium to long term. I’m currently not convinced by any alternative approaches.