This is an update on my portfolio for the month of October. This was a quiet and uneventful month, but our annual spending is up 15% on a year ago.
The FTSE All Share Total Return index, my chosen benchmark, was up by +1.82% in the month, and is up by +15.63% for the year to date. My investment return for the month was a gain of +0.48%, and a gain of +9.74% for the year to date. My individual holdings recorded share price movements for the year so far ranging from a loss of -8.58% to a gain of +37.30% with an unweighted average result of a gain of +9.01%. The underperformance again arises mostly from lower returns on my non-UK holdings in the Asia Pacific and global equity income sectors. Returns from my UK holdings have, however, been mixed with only some of them ahead of the index. My UK holdings had share price movements ranging from +0.57% to +22.60%.
Starting from an index value of 100.00 at 31 December 2013, my capital is now 135.67, as shown in the graph above. This is below August’s peak of 138.67. It is up by +6.80% since the end of the 2020 year. Investment returns, growth and income, were +9.61%, and draw down expenditure deducted -2.81% for the ten months of the year to date.
Annual dividend income as a percentage of the opening portfolio value on 31 December 2013 has increased from 3.37% to reach 6.69% at this month end, as shown in the graph above. This is below August’s peak of 6.71%. The small increase in the month arose from one holding increasing its dividend and the dividend being re-invested on another holding. Portfolio income has increased by 3.37% in the year to date.
The reduction in portfolio income since August is a result of investment changes I made in September. I sold some “income” and “high income” holdings in order to raise cash and to add to my “growth” holdings. I didn’t trade in October. I may raise more cash, or switch towards growth, or do both, later this month or in early December.
The table below shows the composition of my portfolio at the end of the month. This has been analysed by the sector of each holding.
|Yield %||Capital %||Income %|
I have also analysed by the income or growth category of each holding.
|High Income||above 5%||UK, Property, Bonds, Asia Pacific|
|Income||4% to 5%||UK, Global, Asia Pacific|
|Income & Growth||3% to 4%||Asia Pacific, Global|
|Growth||below 3%||UK, Asia Pacific|
|Yield %||Capital %||Income %|
|Income & Growth||3.87||13.42||10.54|
Increasing share prices in the UK have reducing dividend yield percentages such that some of my UK holdings have moved from the high income to the income category this month.
My annual drawdown spending is now around 3.39% 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 five months of spending. In addition to this, 19% of my dividends are being paid out in cash each year and that is sufficient to cover about four months of spending. The remaining 81% of my dividends are being reinvested in my tax-sheltered accounts.
[Note: Annual Income 31-Oct-20 = 100]
In the above graph draw down spending was 62.20% of my portfolio income in the year to 31 October 2020. Then portfolio income for the last twelve months rose by 5.47% and expenditure rose by 14.85%. Draw down spending was therefore 67.73% of my portfolio income for the year to 31 October 2021 (i.e., 71.44 / 105.47 in the graph).
Expenditure was lower in October after a high spend in September, but expenditure has been 14.85% higher in the last twelve months compared to the previous twelve months. Looking into the detail of this higher spend gives this analysis.
|Higher Spend||% Share|
|Elec & Gas||10.22|
The higher discretionary spend included both routine yearly spending but also some less routine spending such as a gas cooker, washer dryer, two laptop computers, and some furniture. The higher tax was for Capital Gains Tax on share disposals in 2019/2020 that was not repeated for 2020/2021. The higher car spend was incurred in September and will hopefully not be so high at the next MOT. Groceries don’t appear in the table because we spent slightly less than in the previous year! So far, our higher spending has been mostly based on choices we have made or one off or exceptional costs but that may soon change.
Talk of higher inflation has continued and the retail price index (RPI) has increased to an annual rate of 6.0% as at October 2021. The consumer price inflation index (CPI) is showing an annual rate of 4.2% but the Bank of England base rate of interest has been held at 0.1%. Our energy costs are already rising and I expect council tax and grocery costs will now also increase. We may soon need to be more choosey on what not to spend when making discretionary choices.
Presumably interest rates will rise at some point soon in order to attempt to reduce price inflation. The challenge of price inflation and higher interest rates does pose some concerns for the current level of share prices. I’m content to stay nearly fully invested in order to maintain my portfolio income at around the current level, but I may choose to raise a little extra cash rather than continuing my move into growth shares.