2020 a year in review

Source: Pixabay

My newspaper reported that “the FTSE 100 suffered its worst 12 months since the financial crisis, despite a year-end rally fuelled by the start of Covid-19 vaccine rollouts.” This index of the largest UK listed companies incurred a loss for the year (-14.3%) that “was its biggest annual fall since 2008, when it plunged by almost a third.” They added that the FTSE 250, comprised of mid cap companies, fell by less (-6.4%) but still compared badly to international indices such as the US S&P 500 (up +16%) (The Times, 1 January 2021).

My preferred measure is the FTSE All Share Total Return index which covers capital and income returns from all UK listed shares and that recorded a loss of -9.82%. That was its worst result since 2008 but only marginally worse than the -9.47% fall in 2018.

My investment return for the 2020 year was a fall of -4.62%. My holdings are recording a share price movement ranging from a loss of -27.12% to a gain of 6.78% with an average result of a loss of -10.81%. Looking at unweighted averages my share prices fell by -0.85% (Asia Pacific), -11.03% (global), and -12.53% (UK). My high yield bond fund (-13.62%) and property REIT (-27.12%) were the worst performers with the latter also cutting its dividend. Overall, I calculate the capital return in total as being a loss of -9.84%, but this was mitigated by an income return of 5.22% from dividends received. These percentages are calculated on the opening capital for the year.

Capital

This capital graph shows the portfolio value at each month end since 31 December 2013. Starting at an index of 100.00 this has varied between a low of 87.43 at 31 March 2020 and a new high of 127.04 on 31 December 2020. Including mid-month dates the low was 71.46 on 19 March 2020. Funds inherited this year, and growth on them, contributed 17.48 towards the new high, so without that the value would be 109.56. There is thus an underlying capital gain of 9.56% over seven years.

At the year end the capital value of my investment portfolio is up by 3.55% for the year. Investment returns were a loss of -4.62%, draw down expenditure deducted 3.21%, but funds inherited in early April added 11.38%.

The timing of that has boosted capital returns by 2.87% and I calculate the underlying capital result as -12.71% and total return as -7.49%.

Income

I have tracked the annual level of my dividends received since January 2014 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 6.47% on 31 December 2020, a 92.21% rise. My income measure peaked at 6.58% on 31 July before my property REIT cut its dividend. The 6.47% includes 0.69% from funds inherited this year, so without that it would be 5.78%. There is thus underlying income growth of 71.75% over seven years.

During the year portfolio income rose in every month except August and September. Portfolio income is now 1.73% below the peak in July. The dividend cut on my property REIT cut my portfolio income by -2.97%. Income elsewhere is rising now mainly because of the re-investment of dividend income in more shares rather than from dividend increases which have become scarce.

With dividends received for the whole 2020 year my portfolio income has grown by 19.17% compared to the previous year. 9.74% of that is from funds inherited during the year and 9.43% is from funds already held.

Portfolio and cash

 Yield %Capital %Income %
UK4.5139.9335.39
Asia Pacific4.9924.4223.95
Global4.4719.1016.75
Bonds8.587.7513.06
Property7.767.0710.77
Cash0.241.730.08
5.09100.00100.00

This table shows the composition of my portfolio at the end of the month.

My annual draw down spending is around 3.32% of my portfolio value, based on the last two years spending and the opening and closing values for last year. 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 in the next six to nine months in order to cover spending. I only made one sale to raise cash in 2020 but will probably sell something in the next three months before the end of the tax year. I aim to stay fully invested so as to maximise portfolio income, but as I am 98.27% invested at present, I recognise that I will need to raise more cash soon.

Expenditure

Draw down expenditure for the last twelve months was 62.54% of 2020 portfolio income receipts, compared to 79.63% for the previous year. This spending was 6.40% down on the previous year, whilst income was up by 19.20%.

Conclusion

This was an eventful year for my portfolio of investments during which I remained very inactive. I watched markets fall but did not sell out so I did not have to judge when to buy back in. Nor did I switch my portfolio in the hope of getting better returns. With hindsight one could have profitably sold during February and bought back in late March, and one could have profitably switched into the winning technology funds in March. I did none of this. In being inactive I missed out on some opportunities but I avoided making any major mistakes. Being confident in my portfolio positioning, being focussed on income rather than capital, not needing to make big gains, and not wanting to risk bigger losses, all helped me to stay inactive.

I watched my portfolio fall 41.75% up to 19 March and then, partly boosted by inherited funds, rise by 77.78%. The year-end capital position is 3.55% higher than a year ago. I have prioritised income growth and it is good to see portfolio income 16.38% higher than a year ago. I need to ideally sustain current income levels whilst seeking out more capital growth in the year ahead.

What a difference a day makes

Source: Pixabay

On Monday 9 November as the stock market reacted positively to the emerging result of the US Presidential election, the news of a successful vaccine against the coronavirus was released. What a difference that day made. My portfolio recorded a gain of 4.80% on that day as my individual holdings rose between 2.00% and 8.23%.

Today’s newspaper states that “FTSE enjoys best month for 30 years” explaining that “the Footsie, which tracks London’s biggest listed companies, rose 12.4 per cent last month” (The Times, 1 December 2020). They report that it is the biggest percentage rise in a month since January 1989. I didn’t have much money invested then, but I do now. My portfolio recorded a gain of 16.06% in the month of November and my individual holdings rose between 4.89% and 30.19%. In cash terms it amounts to enough to cover four or five years of spending money.

The paper reported that the FTSE 100 was still 16.8 per cent below its high in February. My portfolio is still down on the year to date, despite inheriting some money, and all my holdings are recording a share price loss of between -1.64% and -32.69%, but this is a good recovery. I think more gains will follow.

My Asia Pacific holdings have held up best, followed by my global holdings, and all are less than 15% down this year. My UK holdings are more mixed, between 4.26% and 27.60% down, but on average are about 17% down, similar to my bond fund. My property REIT has been the worst performer with the dividend cut and the share price down 32.69%. It is partly because these holdings are still down on the year that I am hopeful for more gains.

Perhaps once the uncertainty of Brexit is removed by a deal or a no deal then UK shares can move ahead. Perhaps as vaccinations begin and restrictions are further eased then most shares, even property ones, can move ahead.

Capital

This capital graph shows the portfolio value at each month end since 31 December 2013. Starting at an index of 100.00 this has varied between a high of 122.69 on 31 December 2019 and a low of 87.43 at 31 March 2020. Including mid-month dates the low was 71.46 on 19 March 2020. The current value is 120.80. Funds inherited this year contributed 16.76 towards this, so without that the value would be 104.04. A 4.04% capital gain over almost seven years.

After eleven months of the year the capital value of my investment portfolio is down by 1.54%. I received some inherited funds in early April that added 11.37% so the underlying reduction was 12.91%. Of that total draw down expenditure was 2.76% so the investment result was a decline of 10.15%. There was a capital decline of 15.30% but income receipts have added back 5.15%.

Income

I have tracked the annual level of my dividends received since January 2014 as shown in the income graph. This income graph shows the annual dividend income as a percentage of the opening portfolio value. My income had increased from 3.37% to 6.58% by 31 July. It then fell to 6.38% at 30 September but has risen to 6.44% by 30 November. This includes 0.69% from inherited funds. Without that it would be 5.75%.

Portfolio income rose in October by 0.28% and in November by 0.63%, after falling by 2.51% in August and by 0.52% in September. This leaves portfolio income only 2.13% down from a month-end peak in July prior to the dividend cut on my property REIT. Income has risen because of the re-investment of dividend income in more shares. Dividend increases have been more scarce or else small or even token ones to maintain dividend hero status. I’ll settle for them not being reduced.

With dividends received or declared for the whole 2020 year my portfolio income has grown by 19.17% compared to the previous year. 9.74% of that is from funds inherited during the year and 9.43% is from funds already held.

Last time I wrote that I expected to receive 54 dividends in the year. I have now received 52 with only 1 in due in December giving a total of 53 for the year. This is one less than expected because the payment date on one dividend was moved from late December to early January. This makes no practical difference but it does help the 2021 year at the expense of the 2020 year.

Portfolio and cash

 Yield %Capital %Income %
UK4.7839.4835.37
Asia Pacific5.2824.3124.05
Global4.6519.2816.82
Bonds9.057.5812.86
Property8.406.8710.81
Cash0.182.480.09
5.33100.00100.00

This table shows the composition of my portfolio at the end of November.

My annual draw down spending is about 3.33% of my portfolio value. My cash holdings at the end of November were sufficient to cover about eight or nine months of spending. In addition to this, dividends being paid out each year are sufficient to cover about three or 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 in the next eight to twelve months in order to cover spending. I have only made one sale to raise cash in 2020 and don’t now expect to sell any more until 2021.

Expenditure

Draw down expenditure for the last twelve months (December 2019 to November 2020) was 60.72% of 2020 portfolio income receipts. I expect the 2020 year-end position to be close to this. This spending was 5.93% down on the previous twelve months. We spent less on holidays and eating out because of lockdown restrictions this year.

Conclusion

I aim to stay fully invested so as to maximise portfolio income. I am 97.52% invested now. I aim to sell only to raise cash to spend which would be less than 4% of my portfolio during a year and this year has been about 1%. Otherwise I only sell to reallocate or switch between holdings which I last did in September. I am not trying to time the markets. In my view the share price gains this month shows the importance of staying invested so you can benefit from such sudden rises.

The first dividend cut is the deepest

Source: Pixabay

The UK situation at present is somewhat confused. There is a worsening in the covid-19 statistics and there are pressures to enact more restrictions or even another lockdown. Different restrictions have been applied to different parts of the UK. There is a debate about what these statistics show us, whether more restrictions are needed or proportionate and about their costs and benefits. There is also a suggestion that only the vulnerable should be shielded and most of us be allowed to return to near normality. There is not a clear path ahead. This does not bode well for business, employment or the economy, and is another incentive to invest globally rather than in the UK.

The confusion was brought home to us, literally, a couple of weeks ago, when one month after returning to school our children were sent home from school. A few children at their school have tested positive for covid-19 so now a number of the year group bubbles have been sent home and are now working from home getting their lessons online via Microsoft Teams. Hopefully this will be a temporary phase for the school.

I consider myself to be financially independent and I am not in paid employment, nor am I looking to resume such employment nearly seven years after quitting it. I am dependent on living off my savings and investments. I look to spend less than the dividends paid on my investments, although I will draw the required cash to spend by a combination of dividends received, investments sold, and cash deposits reduced. Maintaining dividends received, and receivable in the future, at a higher level than our spending now, and in the future, is critical to the success of this approach. The prospect of dividend cuts is a threat to this.

I now expect to receive 54 dividends in 2020 and nearly all have been higher per share than those paid in 2019. There are three dividend declarations I am still waiting for, whilst there have been some reductions. After suffering my first dividend cut in late August, the second one came in late September. Fortunately, this second one has left a smaller impact. My high yield bond fund maintained its dividend at the same level as last year.

That first dividend cut, on my only UK commercial property REIT, reduced my portfolio income by 2.97%. I decided to keep that holding because it was still one of my highest yielders and alternatives that could match the reduced yield of 8.37% were in short supply. After the cut 7.29% of my portfolio capital and 10.55% of my portfolio income were tied up in that holding and I didn’t relish making a big switch. I’m hopeful that the dividend will be increased again next year given that they are claiming to be collecting over 90% of the rent due at present.

The second dividend cut, on one of my UK equity income investment trusts, only reduced my portfolio income by a further 0.44%. This holding had been described as a dividend hero for increasing its dividend every year for over twenty years but the Directors of this investment trust decided to sacrifice that badge. They appointed new managers and prioritised a preference for value investing. This almost casual dismissal of their dividend reputation made it easy to sell. This had been my worst performing holding this year and I had previously reduced my holding and I had intended to sell the remainder for cash. Instead, I decided to sell that holding and buy a holding paying a lower dividend. This switch of 1.46% of my portfolio marks a beginning of a shift to prioritising capital growth in my investment approach. It was an addition to an existing UK equity income investment trust holding that is more focused on growth and that has produced the best results for me this year. This is now my second biggest holding and represents 9.15% of my portfolio. I won’t be selling this one to raise cash anytime soon.

Extra income from re-invested dividends elsewhere meant that I could mostly absorb that second cut and the investment switch quite easily. Portfolio income was reduced by only 0.52% in September. It has now fallen by 3.02% since its’ month end peak in July. I am hopeful that any further cuts will be less deep and can ideally be covered by increased income from re-invested dividends. Where and when possible, I will be shifting my portfolio in the direction of international and smaller company investment trusts that aim for higher growth.

 Yield %Capital %Income %
UK5.5538.0135.46
Asia Pacific5.6725.0923.95
Global5.0919.6516.84
Bonds9.538.0912.97
Property9.776.4910.66
Cash0.242.670.11
5.94100.00100.00

This table shows the composition of my portfolio at the end of September.

My cash holdings at the end of September were sufficient to cover about nine months of spending. In addition to this, dividends being paid out each year are sufficient to cover about four months spending. My other dividends received are being immediately re-invested in more shares. This cash position means I will need to sell some investments in the next nine to twelve months in order to cover spending. I have only made one sale to raise cash in 2020 so far. When I do decide to sell, I intend to reduce one of my UK equity income investment trusts.

After nine months of the year the capital value of my investment portfolio is down by 12.46%. There was a capital decline of 25.42% but income receipts have added back 3.86%. This gives an investment portfolio decline of 21.56%. I received some inherited funds in early April that added 11.37%. I have incurred draw down expenditure of 2.27%.

With dividends received for the first nine months of the year my portfolio income has grown by 20.38% compared to the same point last year. I am now expecting income growth of 21.42% for the twelve months, with 9.64% of that from funds inherited during the year. This assumes there are no more dividend cuts from the few dividends yet to be declared.

Draw down expenditure so far this year was only 58.81% of portfolio income receipts. This indicates to me that expenditure will be below 62% of income at the year end, and that a high proportion of income has been re-invested in more shares. This reinvestment accounts for much of the income growth this year and will hopefully enable more income growth next year and counter any more dividend cuts.

Dividend cut

Source: Pixabay

After six months of the financial crisis situation brought about by the pandemic my investment portfolio has suffered a first dividend cut. After over twenty dividend announcements that increased or maintained the dividends in payment over the last six months I have now had one that reduced it.

In a recent discussion with my brothers we considered whether we were out of lock down yet. At that time, we had all enjoyed the freedom to go out for a drink or a meal or a holiday but those of us working were still working from home and our children were still awaiting a return to school. This week the children have finally and successfully (so far) gone back to school but we now have the prospect of other things being restricted for months ahead. Contrary times in which to live, and contrary times in which to invest too. Those invested in growth companies in the dominant USA technology sector seem to be prospering this year, whilst those of us invested in higher dividend and value companies in the unloved UK FTSE 100 companies have seen a significant fall. In bearing with these declines in my capital assets this year I had been able to comfort myself with the belief and hope that my investment trust dividends would be maintained so it is a blow to have heard the news of my first dividend cut during the past month.

I’m expecting to receive 57 dividend payments in the 2020 calendar year. In the year so far 38 payments have been received. A further 9 payments have been declared including two from the dividend cutter (each dividend from a REIT being paid in two payments). Of the remaining 10 dividend payments yet to be declared and paid in 2020 one from the dividend cutter is now expected to be a further cut but I’m still hopeful that will be the only one cut.

It was unsurprisingly the one UK commercial property real estate investment trust I hold that reduced the dividend. Despite talking up recent rent receipts during a time of lock down, furlough, and working from home, and despite favourable comments on that in the press, the Directors decided to be cautious and reduced the quarterly dividend by 21.05%. Their guidance on future dividends suggests a 22.42% reduction in the annual dividend this year.

I have tracked the annual level of my dividends received since January 2014 as shown in the income graph. This property trust was a significant contributor to my dividend income in providing 13.25% of the total. This has now been reduced to 10.55% of the lower total. My diversification across other sectors means that this 22.42% reduction amounted to a 2.97% reduction on the annual level of dividends I recorded at the end of July. Fortunately, the reinvestment of dividends received in August has meant that by 2 September the annual level is only 1.88% below that of 31 July. That is not too much of a blow considering the wider picture of the economy and of FTSE 100 companies dividend cuts.

The next test for my portfolio income will be whether my high yield bond fund maintains the dividend in payment. I won’t know about that until October. I’m more confident that my other holdings in investment trusts invested in UK, Asia Pacific and global equities will maintain or increase their dividends. A recent report indicated that “just two investment trusts out of 182 investing in equities have cut their dividends”.

This income graph shows the annual dividend income as a percentage of the opening portfolio value. My income had increased from 3.37% to 6.58% by 31 July but has now fallen to 6.42% by 31 August and 6.46% as at 2 September. Income from funds inherited this year contributed 0.69% of this, so without that my current income would be 5.77% of my capital as at 31 December 2013. A 71.46% increase in portfolio income over six years, eight months and two days.

This capital graph shows the portfolio value at each month end since 31 December 2013. Starting at an index of 100.00 this has varied between a high of 122.69 on 31 December 2019 and a low of 87.43 at 31 March 2020. Including mid-month dates the low was 71.46 on 19 March 2020. The current value is 110.98. Funds inherited this year contributed 16.10 towards this, so without that the value would be 94.88. A 5.12% capital loss over six years and eight months.

 Yield %Capital %Income %
UK5.5537.9336.42
Asia Pacific5.6024.4123.63
Global5.0719.1016.75
Bonds9.167.9212.54
Property8.377.2910.55
Cash0.203.350.11
5.78100.00100.00

This table shows how the percentage yield on my property trust has fallen to 8.37% from 12.44% last month. This arises because the expected income has fallen by 22.42% at the same time as the capital value has risen by 15.38%. Presumably other investors were more pessimistic than me in July and had already assumed a dividend cut and maybe a higher cut.

My cash reserve would currently fund eleven months of spending, and dividends being paid out to me would fund four months of spending each year. My other dividends are being re-invested so as to further grow my income. I therefore need to make investment sales to cover eight months of spending each year, or else run down that cash reserve. I retain a small holding in my worst performing trust after selling most of it earlier in the year. If I sell that I can raise enough cash to cover five months of spending. I am considering when to action that.

After eight months of the year the capital value of my investment portfolio is down by 9.54%. There was a capital decline of 22.68% but income receipts have added back 3.74%. This gives an investment portfolio decline of 18.94%. I received some inherited funds in early April that added 11.37%. I have incurred draw down expenditure of 1.97%

With dividends received for the first eight months of the year my portfolio income has grown by 24.04% compared to the same point last year. With the known dividend cuts on my property trusts I am now expecting income growth of 21.37% for the twelve months, with 9.64% of that from funds inherited during the year. That assumes there are no more cuts – so it may change.

Expenditure in the first eight months of the year is 10.69% down on the same period last year. We have had fewer opportunities to spend this year because of lock down restrictions.

Increasing income and reducing expenditure could mean that expenditure will be below 62% of income this year. This will mean that more income is re-invested. I am now aiming to maintain rather than increase my current level of portfolio income so I should soon start to reinvest that income in new ideas. I will look to reinvest in international and smaller company investment trusts that aim for higher growth and produce lower income.

Holding my own

Source: Pixabay

After six years and seven months on the road marked financially independent draw down I am holding my own in the most challenging year so far.

I maintain and update these graphs at each month end to help review longer term progress.

This income graph shows the annual dividend income as a percentage of the portfolio value at 31 December 2013. My income has almost doubled from 3.37% to 6.58%. An increase of 3.21%. Income from funds inherited this year contributed 0.69% of this, so without that the increase would be 2.52%.

This capital graph shows the portfolio value at each month end since 31 December 2013. Starting at an index of 100.00 this has varied between a high of 122.69 on 31 December and a low of 87.43 at 31 March 2020. Including mid-month dates the low was 71.46 on 19 March 2020. The current value is 107.14. Funds inherited this year contributed 15.47 towards this, so without that the value would be 91.67.

According to one definition holding your own means to maintain your position despite difficulties. I think that sums up my current view. I’m essentially maintaining my position in terms of my portfolio holdings and my investment approach for now. I’m certainly open to adapting them to changing personal circumstances and the evolving world situation but that will happen over the medium to long term. No knee jerk reactions or short term moves for me.

My portfolio remains in investment trusts in the UK equity income, global equity income, Asia Pacific income, Debt loans and bonds, and UK commercial property sectors. My approach is to pursue a high and growing income. I aim to remain essentially fully invested and to minimise portfolio turnover. I hold only a small cash reserve.

 Yield %Capital %Income %
UK5.6538.3235.26
Asia Pacific5.7524.5322.95
Global5.1519.3216.19
Bonds9.278.1012.22
Property12.446.5513.25
Cash0.233.190.12
6.15100.00100.00

I aim to stay fully invested so as to maximise portfolio income in the current near zero interest rate situation. I am 96.81% invested now. I aim to sell only to raise cash to spend or else to reallocate or switch between holdings. Clearly if you sold at the right time in say February and bought back in at the right time in mid-March then you could have made substantial gains. I don’t pretend that I can achieve that sort of timing.

I am reasonably comfortable with my cash position and available cash flow. Cash holdings currently would fund ten months of spending. At present dividends being paid out would fund four months of spending each year. My other dividends are being re-invested so as to further grow my income. I therefore need to make investment sales to cover eight months of spending each year, or else run down my cash reserve. My practice has been to sell shares every three months. Each sale would be for just under 1% of the portfolio. This year I have made only one such sale. I did raise extra cash last December just ahead of the election. Some of my inherited funds were received in cash.

In choosing in April to re-allocate my inherited funds to lower yielding international holdings I am beginning to nudge the portfolio away from all-out income growth and to reduce my home country bias. Going forward I will aim to maintain my current level of portfolio income whilst re-allocating in favour of both international and smaller company investment trusts. If dividends are not reduced then I can move more quickly on this.

This year

After seven months of this exceptional year the capital value of my investment portfolio is down by 12.68%. I have incurred draw down expenditure of 1.73%. My investment portfolio has declined by 22.32%, but I received some inherited funds in early April that have served to shore up my position.

With dividends received or declared for the first eight months of the year my portfolio income has grown by 24.04% compared to the same point last year. This included 7.54% from the inherited funds but 16.50% from the existing portfolio. As yet no dividends have been reduced! If that continues to hold true then my expectation is for income growth of 22.65% for the twelve months, with 9.64% from the inherited funds and 13.01% from the existing portfolio. This prospective income growth compensates somewhat for the currently disappointing capital returns.

Expenditure in the first seven months of the year is 8.25% down on the same period last year. This is because we have had fewer opportunities to spend since lockdown. In 2019 expenditure was only 78.10% of income. Increasing income and reducing expenditure could mean that expenditure will only be 62.15% of income this year.

My commercial property holding has been reporting reasonable news but I still await news on the next quarterly dividend. The share price of this holding has given an exciting ride. A near 60% fall from best to worst prices earlier in the year has been followed by a volatile recovery. Save for reinvesting the last quarterly dividend I have thus far resisted selling out or buying more. Having 6.55% of my portfolio in this holding is enough and hopefully not too much.

More robust and less fragile?

In a comment on my previous post it was suggested to me that my position was “pretty fragile” given that “equities may fall 50%” and “dividends may be cut 50%” and that my “margin of safety seems quite small”. This is useful feedback that helps me to test my own thinking.

I have experienced equities falling 50% around 2002 and again around 2008 so I stand ready for that variability. Interestingly we haven’t had a 50% fall this time. At least not yet! In 2002 and 2008 I wasn’t in draw down but although company dividends would have fallen investment trust dividends were mostly maintained or increased. Having a revenue reserve of around one year’ s dividends enables them to be sustained for a time. That is part of my margin of safety, so I’m watching the dividends. As we are spending significantly less than our current dividend income that provides a further margin of safety. Spending could also be reduced further if that were needed. We also have a small cash reserve. I’m hopeful that these factors prove to be robust rather than fragile. Time will tell (stay tuned).

We could raise more capital by moving house to a smaller property or a cheaper area but we wouldn’t want to do that. I’m not looking to go back to work and I’m not sure what my prospects would be nearly seven years on and with higher unemployment. We are debt free but would like to keep it that way. So, none of these options are up for consideration, and only the first offers some margin of safety.

Income investing has not given me good capital returns this year, and my UK home bias has not helped either. It has, however, allowed me to build up a good level of portfolio income that will hopefully be robust. Going forward I’m looking to gradually move my portfolio towards more exposure to international markets and to smaller companies that are growing, whilst ideally sustaining my current level of portfolio income.