Changes made

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This is a late update on my portfolio for the month of March including some detail on actions taken in March and April.

Investment changes

In March I made a few changes. Firstly, I sold some shares, about 0.79% of my portfolio, to raise my cash levels. That covers about three months of drawdown spending. That was my first sale to raise cash since April last year. Secondly, I sold an investment held since 2007 and bought a very similar one in order to realise some capital gains. These should match against some capital losses incurred on some shares sold in April 2020. I therefore expect to pay little or no Capital Gains Tax for the year. The Chancellor hasn’t increased Capital Gains Tax rates yet but I suspect he will do that in the future. I am therefore pleased to have reduced my taxable gains. Thirdly, I sold a slice of one of my UK high income investment trusts and bought shares in a UK smaller companies investment trust that targets growth companies. That represents 0.86% of the portfolio and is a first small step in re-positioning away from high income towards growth. Fourthly, in early April in the old tax year I sold investments in my dealing account and then re-invested the cash in my ISA in the new tax year. Overall, I increased my portfolio income despite raising cash and switching to a smaller companies’ growth fund because the other two switches were to slightly higher yielding trusts.

March

The FTSE All Share Total Return index, my chosen benchmark, went up by 3.98% in the month of March, and it was up by 5.19% for the opening three months of the year.

My investment return for the first three months of the year was a rise of 4.13%, including 4.61% in the month of March. Lagging the index slightly. My individual holdings recorded share price movements ranging from a loss of -5.70% to a gain of 10.96% with an unweighted average result of a gain of 3.43%.

Interestingly an investment platform is saying that their average investor returned 2.91% in Q1 of 2021. They add that returns got better as their customers aged, rising from 1.78% for the 18-24’s to 3.21% for those aged over 65 (ii Private Investor Index).

Capital

This capital graph shows the portfolio value at each month end since 31 December 2013, taking an index value of 100.00 as the starting point. This capital measure on the graph is now at 131.40. At the end of March 2021, the capital value of my investment portfolio is at a new peak and is up by 3.43% since the end of the 2020 year. Investment returns, growth and income, were 4.11%, and draw down expenditure deducted -0.68% for the three months.

Income

I have tracked the annual level of my dividends received since 31 December 2013 as shown in the income graph. This income graph shows the annual dividend income as a percentage of the opening portfolio value. My income has increased from 3.37% on 31 December 2013 to reach a new peak of 6.66% at 31 March 2021. This now exceeds the previous peak of 6.58% in July 2020 by 1.20%. The portfolio income has now recovered from the dividend cut last August by a property REIT but I remain concerned by the possibility of future dividend cuts. My two property REIT’s and my bond fund are perhaps most at risk. My UK equity income trusts are now using up their revenue reserves in order to maintain their dividend hero status. That can only be sustained for perhaps a couple of years so they will need company dividends to increase again in that time.

After three months of the year portfolio income has increased by 2.98%. The income measure on the graph rose to 6.66%. That is a 97.94% rise since draw down started on 31 December 2013. The increases this year were the combined result from the automatic re-investment of dividend income in more shares, from dividend increases announced, and from portfolio changes.

Portfolio

The table below shows the composition of my portfolio at the end of the month. This has been analysed by sector, that is by geography for equities, or by type for non-equities.

 Yield %Capital %Income %
UK4.4639.6534.84
Asia Pacific4.9324.2623.61
Global4.2819.6916.61
Bonds8.687.5612.93
Property8.866.8211.91
Cash0.232.020.09
5.07100.00100.00

I have also analysed based on the income and growth characteristics of each holding. I have classed my holdings as high income (dividend yields greater than 5.5%), as income (yields between 4% and 5.5%), as growth and income (yields between 3% and 4%), and as growth (yielding less than 3%). I am aiming to gradually reduce my investment in high income holdings and increase my investment in growth holdings.

 Yield %Capital %Income %
High Income7.2834.7949.94
Income4.5938.8935.19
Income & Growth3.7415.7711.64
Growth1.868.533.13
Cash0.232.020.09
5.07100.00100.00

Cash

My annual draw down 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. My cash holdings are sufficient to cover about eight months of spending. In addition to this, dividends being paid out each year are sufficient to cover about four months of spending. My other dividends received are being immediately re-invested in more shares in order to grow my income. This cash position means I will need to sell some investments every few months in order to cover spending.

Expenditure

Draw down expenditure was only 57.35% of my portfolio income for the last twelve months. This compares to draw down spending being 75.58% of my portfolio income in the previous twelve months. Portfolio income has risen by 22.47% whilst expenditure has fallen by -7.06%. The increase in income includes inheriting extra capital in April last year, and the continued effect of dividend reinvestment, dividend increases, and portfolio changes. The expenditure comparison is mostly one of pre-lockdown and lockdown. The fall in spending is mostly a result of lockdown restricting spending opportunities.

Conclusion

I have now started to add to my growth holdings which are now 8.53% of my portfolio. Going forward I aim to use further increases in portfolio income as an opportunity to continue this switch by reducing my higher income holdings (now 34.79% of my portfolio) and increasing my growth holdings. I may choose to stall this switch if I face further dividend cuts.

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