In August I enjoyed a couple of weeks away from home with my family and paid little or no attention to the markets during that time. I certainly wasn’t looking to buy or sell. Despite the cost-of-living crisis and a significant rise in energy bills, markets have been reasonably stable. I’m also fairly comfortable with the make-up of my portfolio. My portfolio total return was a loss of -1.62% for the eight months to date. That’s just one or two down days in the markets that could be recovered by one or two up days.
August
The FTSE All Share Total Return index, my chosen benchmark, fell by -1.70% in the month, and has now fallen by -2.11% for the eight months of the year to date. My investment return for the month was a gain of +0.77% buoyed by it being a high dividend month. Dividends received fall unevenly across the year. Cumulatively I have a loss of -1.62% for the year so far. I am slightly ahead of my benchmark, probably helped by my overseas holdings gaining from a fall in the value of sterling.
My individual holdings recorded an unweighted average share price movement of a loss of -7.78% for the year so far. My worst performers continue to be in a UK small company investment trust that is down by -36.83%, and in a commercial property REIT that is down by -26.30%. My best performers are a global equity income trust that is up by +8.48%, and a UK equity income trust that is up by +1.27%. The share prices of my other holdings have all fallen, and by up to -10.70%.
Capital
Starting from an index value of 100.00 at 31 December 2013, my capital is now 135.35, as shown in the graph above. This is -4.02% down from March’s peak, the high-water point for my portfolio. My capital value remains below its ten-month average. There has been a decrease of -3.46% in the year to date. This is comprised of the following elements. Investment return of a capital loss of -5.24% and dividend income of +3.64%, totalled an investment return of a loss of -1.60%. Draw down expenditure deducted -1.86% 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 6.90% at this month end, as shown in the graph above. This is yet another new peak. My current portfolio dividend income yield is 5.10%, i.e., 6.90 divided by 135.35.
Investment changes
During the month dividends received in my tax-sheltered accounts were re-invested. Dividends received in my dealing accounts were paid out to my bank. Otherwise I took a holiday from any trading activity.
Portfolio
The table below shows the composition of my portfolio at the end of the month.
| Yield % | Capital % | Income % | |
|---|---|---|---|
| UK | 4.14 | 38.75 | 31.49 |
| Asia Pacific | 5.14 | 25.57 | 25.82 |
| Global | 4.31 | 18.25 | 15.45 |
| Property | 8.19 | 8.45 | 13.58 |
| Bonds | 8.52 | 8.11 | 13.55 |
| Cash | 0.66 | 0.87 | 0.11 |
| 5.10 | 100.00 | 100.00 |
I also analyse the portfolio by the income or growth category of each holding.
| Yield % | Sectors | |
|---|---|---|
| High Income | above 6% | Property, Bonds, Asia Pacific |
| Income | 4.5% to 6% | UK |
| Income & Growth | 3% to 4.5% | Global, Asia Pacific |
| Growth | below 3% | UK, Asia Pacific |
| Yield % | Capital % | Income % | |
|---|---|---|---|
| High Income | 8.38 | 23.93 | 39.34 |
| Income | 5.03 | 27.73 | 27.35 |
| Income & Growth | 4.26 | 32.52 | 27.21 |
| Growth | 2.04 | 14.95 | 5.99 |
| Cash | 0.66 | 0.87 | 0.11 |
| 5.10 | 100.00 | 100.00 |
Cash
My annual drawdown spending is now around 3.47% of my portfolio value, based on the last two years spending and the opening and closing values for that period. My cash holdings are now 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 need to sell some shares to raise cash again in the next few months.
Expenditure
Draw down spending was 61.82% of my portfolio income in the last twelve months which is a small reduction from with the figure of 62.40% for the previous twelve months. Portfolio income rose by 0.93%. Expenditure fell by -0.01%, so was essentially unchanged.
RPI and CPI inflation reached annual rates of 12.34% and 10.06% at the end of July. This is beginning to impact on our grocery bills. Energy bills are higher than they were but the main impact on us will be after 1 October when the price cap rises and when we put on the heating. Currently we are paying for energy on a month-by-month basis according to our actual meter readings. We will pay a low amount in September based on our August meter reading so are benefiting from being on holiday for two weeks. This will change for the worse, although government support will provide some mitigation.
Conclusion
It is good to feel able to ignore the markets when you’re on holiday and it is of comfort that markets, as they affect us, appear to be relatively stable. It would be good to see share prices rise as I will need to sell some shares to support our drawdown spending soon.