This is an update on my portfolio for the month of August. This was another quiet month, with no changes, but with several dividends reinvested or received as cash in accordance with my standing instructions. I’m looking to make some small changes in early September.
August
I have prepared this month end based on the starting position at 29 July, just ahead of going on holiday on 30 July. The FTSE All Share Total Return index, my chosen benchmark, is up by 2.07% in the month, and is up by 14.66% for the year to date. My investment return for the month was a gain of 1.59%, and a gain of 11.38% for the year to date. My individual holdings recorded share price movements for the year so far ranging from a loss of -7.66% to a gain of 35.14% with an unweighted average result of a gain of 10.96%. The underperformance arises mostly from lower returns on my global, Asia Pacific, and bond holdings. These have risen below that average, whereas my UK holdings have mostly been above that and above the index return. My worst result is from an Asia Pacific income holding with high exposure to China. My best result is from a UK commercial property REIT holding that has been upgraded by the market. The share price now matches the net asset value of each share, whereas my other property holding is priced at 10% below its asset value.
Capital
Starting from an index value of 100.00 at 31 December 2013, my capital is now 138.67, as shown in the graph above. This is a new peak. It is up by 9.16% since the end of the 2020 year. Investment returns, growth and income, were 11.26%, and draw down expenditure deducted -2.10% for the eight months of 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 6.71% at this month end, as shown in the graph above. Portfolio income has increased by 3.66% in the year to date. This is a new peak, but it is likely to fall next month because of investment changes I am currently considering. I may reduce a “high income” holding in order to add to a “growth” holding. I may also reduce an “income & growth” holding in order to raise cash levels. I am prepared to reduce my income a little in order to do this.
Dividend increases are now scarce or minimal in size. Portfolio income has risen recently almost entirely as a result of the re-investment of dividends received. About 80% of dividends received are being immediately re-invested in more of the same shares in order to grow my income. Where this raises income to more than I currently want then I can consider switching a small part of the portfolio to lower dividend holdings with better growth prospects.
Portfolio
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 % | |
|---|---|---|---|
| UK | 4.06 | 41.42 | 34.76 |
| Asia Pacific | 4.96 | 22.74 | 23.30 |
| Global | 4.38 | 18.55 | 16.81 |
| Bonds | 8.17 | 7.74 | 13.08 |
| Property | 7.30 | 7.95 | 11.99 |
| Cash | 0.17 | 1.61 | 0.06 |
| 4.84 | 100.00 | 100.00 |
I have also analysed by the income or growth category of each holding. I am looking to increase my growth holdings to be more than 11.05% of the portfolio over the next several months as and when there is the opportunity.
| Yield % | Sectors | |
|---|---|---|
| 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 % | |
|---|---|---|---|
| High Income | 6.84 | 35.32 | 49.98 |
| Income | 4.50 | 38.62 | 35.98 |
| Income & Growth | 3.71 | 13.39 | 10.27 |
| Growth | 1.63 | 11.05 | 3.72 |
| Cash | 0.17 | 1.61 | 0.06 |
| 4.84 | 100.00 | 100.00 |
Cash
My annual drawdown spending is now around 3.28% 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, about 20% of my dividends are being paid out in cash each year and that is sufficient to cover about four months of spending. This cash position means I will need to sell some investments in the next few months in order to cover spending and to keep a small cash reserve. The dividends being paid out are from, non-tax sheltered, dealing accounts. The sale of shares to raise cash to spend is also taken from these accounts. I have not yet sold holdings or drawn income or cash from any accounts that are tax sheltered.
Expenditure
Draw down expenditure was only 62.40% of my portfolio income for the last twelve months. This compares to draw down spending being 63.73% of my portfolio income in the previous twelve months. Portfolio income has risen by 9.38% whilst expenditure has increased by 7.09%. The increase in income partly results from inheriting extra capital in April last year. Continued dividend reinvestment is also significant. Expenditure is higher this year partly because of the reduced impact of lockdown restrictions such that we had two holiday breaks this summer and only one last summer.
There is much talk of higher inflation and the retail price index (RPI) has increased from an annual rate of 1.62% at July 2020 to 3.84% at July 2021. This hasn’t yet shown up in our expenditure where variations are more down to choices made. One area where prices are increasing rapidly is electricity and gas. On 30 August I got an email advising that “your tariff is changing”. Looking at the detail this amounted to a 46% increase in our monthly payment. We have only been with this provider since April when they had the best variable rate but, by October, they would have the worst. I did a comparison using the Cheap Energy Club, from Money Saving Expert, and actioned a switch within ninety minutes. If that goes as planned, we will be on a twelve-month fixed rate that is 26% more than we currently pay (rather than 46% more).
Conclusion
Markets still seem unsure about the future for covid, for inflation, and for money printing. My portfolio has been moving in a narrow range since April and has this month exceeded the previous peak in May. As usual I am trying not to pay too much attention to the market as I very gradually reposition my portfolio for higher growth in the future.
Are you willing to share actual figures relating to your portfolio or income instead of %?
Thanks for your question. I prefer to use indexes and percentages rather than £ amounts. Some FI bloggers choose to share actual £ amounts but others including myself prefer not to. I think my story can be understood in the way I am presenting it and can be translated in the readers mind to a number of possible situations and £ amounts. For instance, in saying that “my annual drawdown spending is now around 3.28% of my portfolio value” readers can apply that observation to their own situation now or in the future.
Hope your energy switch works out well. They normally do in my experience.
However, earlier this year – in anticipation of price rises – I decided to stay with my supplier but opted for a two year fix. It was an increase on the rates we had been paying – but not outrageous. Less than 48 hours later I happened to be watching the Martin Lewis TV programme where I learned that the supplier had gone bust that morning. Some seven months down the line I am still not convinced that this issue has all been properly resolved; but I am getting there!
Thanks for commenting. I heard that two energy companies failed in the last week, but fortunately not the ones I’m dealing with. It looks to be the worst I have known it for rising energy prices so I’ll be relieved when my new deal is in operation. I hope you gain confidence that your energy supplier situation is fully resolved.