Here is an update on my portfolio for the month of June.
Investment changes
In early June I sold small slices of my holdings in UK and Asia Pacific equity income investment trusts and added to my holdings in UK and Asia Pacific smaller companies’ investment trusts as part of my re-positioning from income to growth. This has marginally reduced portfolio income. In the three months since mid-March, I have built up a position of about 3% in smaller companies trusts that target growth. This has increased my total growth holdings to 10.79%.
June
The FTSE All Share Total Return index, my chosen benchmark, is up by 0.2% in the month, and is up by 11.1% for the year to date. My investment return for the month was a fall of -0.80%, and a rise of 9.38% for the year to date. This underperformance arises mostly from lower returns on my global and Asia Pacific holdings. My individual holdings recorded share price movements for the year so far ranging from a loss of -0.77% to a gain of 23.55% with an unweighted average result of a gain of 8.64%.
Capital
Starting from an index value of 100.00 at 31 December 2013, my capital is now 136.87. This is a slight reduction from last month’s peak. It is up by 7.74% since the end of the 2020 year. Investment returns, growth and income, were 9.31%, and draw down expenditure deducted -1.57% for the year to date.
Income
Annual dividend income as a percentage of the opening portfolio value on 31 December 2013 has increased from 3.37% to reach 6.65% at this month end. This measure is reduced slightly at the end of June because of the investment changes mentioned above.
Portfolio income has increased by 2.82% in the year to date. Increases in income arise from the re-investment of dividend income in more shares, from dividend increases announced, and from portfolio changes. Going forward any increase is likely to be small because increases arising from re-investment are likely to be matched by decreases from portfolio changes as I reduce higher income holdings and increase growth holdings. Dividend increases are less prevalent at present although dividends are being maintained at the level of the previous year.
Portfolio
The table below shows the composition of my portfolio at the end of the month. This has been analysed by the income and growth characteristics of each holding. I am aiming to gradually increase my investment in growth holdings.
| Yield % | Capital % | Income % | |
|---|---|---|---|
| High Income | 6.86 | 35.26 | 49.81 |
| Income | 4.52 | 38.77 | 36.02 |
| Income & Growth | 3.70 | 13.60 | 10.35 |
| Growth | 1.69 | 10.79 | 3.75 |
| Cash | 0.24 | 1.57 | 0.08 |
| 4.86 | 100.00 | 100.00 |
Cash
My annual drawdown spending is now around 3.26% 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 six 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 and to keep a small cash reserve.
Expenditure
Draw down expenditure was only 61.16% of my portfolio income for the last twelve months. This compares to draw down spending being 69.42% of my portfolio income in the previous twelve months. Portfolio income has risen by 13.75% whilst expenditure has increased by 0.21%. 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 impact of lockdown restrictions on expenditure is no longer evident now that both years include periods of lockdown.
Conclusion
Portfolio income has been stable for the last four months whilst I have added to my growth holdings and reduced my income holdings. This will likely continue so long as my drawdown spending is less than my portfolio income. This will accelerate if dividends increase, or decelerate or even reverse if dividends are cut. The stock market growth this year has maybe stalled as we await what the removal of lockdown restrictions brings.