Edging up to new peaks, March 2022

Since I wrote two weeks ago my investment returns have edged upwards so I’m slightly up on the year despite the events of the year. Capital values show a tiny reduction but my portfolio income continues to exceed my expenditure allowing total assets to increase.

March

The FTSE All Share Total Return index, my chosen benchmark, was up by +1.30% in the month, and up by +0.49% for the year so far. My investment return for the month was a gain of +2.51%, and a gain of +1.19% for the year so far. My individual holdings recorded share price movements for the year so far ranging from a loss of -22.02% to a gain of +8.48% with an unweighted average result of a loss of -1.29%. My worst performers were my growth holdings and the worst of them is a UK small company investment trust. My best performers were income holdings in the UK, global, and Asia Pacific sectors.

Capital

Starting from an index value of 100.00 at 31 December 2013, my capital is now 141.01, as shown in the graph above. This is a new peak. There has been an increase of +0.59% in the year to date. Investment return of a capital loss of -0.04% and dividend income of +1.23%, totalled an investment return of +1.19%. Draw down expenditure deducted -0.60% 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 6.78% at this month end, as shown in the graph above. This is another new peak. My current portfolio dividend income yield is 4.81%, i.e., 6.78 divided by 141.01.

Investment changes

Some dividends were received and re-invested during the month in my tax-sheltered accounts. I also made another small switch reducing a UK equity income investment trust and adding to a UK small company investment trust. My growth holdings are now 13.75% of my portfolio. This should hopefully bear fruit when growth stocks are next able to enjoy a resurgence. At the moment I seem to be reducing my positions in some of this year’s winners and adding to my positions in this year’s losers. These changes are, however, very small and very gradual, so will have very little impact either way in the short term.

Portfolio

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

	Yield %	Capital %	Income %
UK	3.94	39.92	32.72
Asia Pacific	4.94	24.60	25.26
Global	4.14	17.99	15.51
Property	7.01	8.69	12.67
Bonds	8.25	8.05	13.81
Cash	0.27	0.76	0.04
	4.81	100.00	100.00

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

	Yield %	Capital %	Income %
High Income	7.66	24.67	39.31
Income	4.51	47.26	44.33
Income & Growth	3.81	13.56	10.74
Growth	1.95	13.75	5.58
Cash	0.27	0.76	0.04
	4.81	100.00	100.00

Cash

My annual drawdown spending is now around 3.61% of my portfolio value, based on the last two years spending and the opening and closing values for that period. That’s an uplift from 3.26% last month because two years ago my portfolio was close to its pandemic low point and not because of higher spending. My cash holdings are 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 sell shares from my dealing account to raise cash to spend in the next week but in the new tax year. On April 1st I sold shares to raise cash to fund the next tax year’s ISA and that has used up my CGT allowance for the tax year just ending.

Expenditure

Draw down spending was 62.29% of my portfolio income in the last twelve months which was an increase from 57.36% for the previous twelve months. Portfolio income rose by only 1.85% but expenditure rose by 10.61%. As mentioned before the higher spending is mostly down to discretionary spending choices rather than price inflation, despite RPI and CPI inflation reaching annual rates of 8.18% and 6.14% at the end of February. This may be about to change.

After my previous two energy suppliers both went bust last September I was placed with another supplier. Six months on I have finally had both refunds from the old suppliers and a catchup bill from the new one. I took my meter readings on 31 March and reported on them to coincide with the newly raised price cap. I’m expecting to pay at least 50% more for energy in the next twelve months. Council Tax has increased by 4.1%. We still await an inflation impact on our grocery bills. Groceries, Council Tax and energy are our biggest essential costs, but more than half of our total spending is discretionary so we have some room for manoeuvre as prices rise.

Conclusion

So, despite the news, despite the war in Ukraine, despite increased inflation and the cost-of-living crisis, my capital and my portfolio income rose to new peaks. Now, I know that my capital value is inherently volatile and subject to the moods of the markets so maybe luck is on my side for now. I also have planned for my portfolio income to be a growing one whether from dividend increases or from re-invested income so that increase is more predictable. Overall though I am encouraged to pay even less attention to doom and gloom headlines, and to stay calm and carry on being invested in accordance with my existing strategy.