The headline after the stock market closed on Christmas eve read “‘Santa rally’ sees FTSE 100 hit 22-month high on Omicron optimism.” The article then stated that “data suggesting the variant is not as severe as feared pushes index close to pre-pandemic levels.”
A week later on reviewing my portfolio for the month of December I concluded that the Santa rally had delivered for me. Half of my (unrealised) capital gains for the year were made in December. The month was the best of the year since we had similar gains in March and April. In my portfolio 94% of my total gain for the year was made in those three months.
December
The FTSE All Share Total Return index, my chosen benchmark, was up by +4.68% in the month, and is up by +18.32% for the year to date. My investment return for the month was a gain of +3.95%, and I have a gain of +13.94% for the year to date. My individual holdings recorded share price movements for the year ranging from a loss of -9.65% to a gain of +45.17% with an unweighted average result of a gain of +12.43%.
My best performers were in commercial property with average share price gains of 29.50%. My UK holdings made share price gains between 4.80% and 25.06% with an unweighted average of 13.44%. That is just below the capital gain of 14.60% from the FTSE All Share index. My international and bond holdings detracted from my overall results. The share price of my bond holding rose by 7.31%. My Asia Pacific and global holdings recorded share price movements between a loss of -9.65% and a gain of 28.05% with an unweighted average of 6.41%.
My UK dividend income return will have exceeded the 3.72% income return on the FTSE All Share index and allowing for the fees payable on a UK index tracker fund then I believe that total returns on my UK holdings have near enough matched the total return on the UK index. If we include my property and bonds then the 57% of my portfolio I have invested in the UK, and in property and bonds has beaten the UK index, but the 42% invested in Asia Pacific and global holdings has not.
Capital
Starting from an index value of 100.00 at 31 December 2013, my capital is now 140.19, as shown in the graph above. This is a new peak. It is up by +10.35% for the 2021 year. Investment returns, growth (+8.33%) and income (+5.38%), added +13.71%, and draw down expenditure deducted -3.36% during the 2021 year.
Income
Annual dividend income as a percentage of the opening portfolio value on 31 December 2013 has increased from 3.37% to reach 6.74% at this month end, as shown in the graph above. This is a tiny fall from last month’s peak, and arises from the investment changes mentioned below, but is still a doubling of the starting income eight years ago. Portfolio income has increased by 4.14% in the year to date.
Investment changes
Some of last month’s dividends were re-invested early in the month. Also, in early December I sold part of an “income” holding in order to add to a “growth” holding. This is part of my gradual switch towards growth.
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 | 4.03 | 40.42 | 33.87 |
| Asia Pacific | 4.87 | 23.44 | 23.73 |
| Global | 4.32 | 18.21 | 16.37 |
| Bonds | 8.01 | 8.18 | 13.64 |
| Property | 6.91 | 8.58 | 12.34 |
| Cash | 0.21 | 1.16 | 0.05 |
| 4.81 | 100.00 | 100.00 |
I have also analysed by the income or growth category of each holding.
| Yield % | Sectors | |
| High Income | above 5% | Property, Bonds, Asia Pacific, UK |
| 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 | 7.45 | 25.98 | 40.29 |
| Income | 4.62 | 46.86 | 45.07 |
| Income & Growth | 3.77 | 13.46 | 10.56 |
| Growth | 1.54 | 12.54 | 4.03 |
| Cash | 0.21 | 1.16 | 0.05 |
| 4.81 | 100.00 | 100.00 |
This allocation has changed, again, since last month as some holdings have moved from the higher income to the income category because their share price rose. My holdings in the growth category have grown from 8.06% to 12.54% of my portfolio over the last twelve months.
Cash
My annual drawdown spending is now around 3.36% 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, dividends being paid out in cash each year from my dealing account are sufficient to cover about four months of spending. Most of my dividends are being reinvested in my tax-sheltered accounts. I last sold shares from my dealing account to raise cash in early September. I will need to do that again in the next few months.
Expenditure
Draw down spending was 63.67% of my portfolio income in the year to 31 December 2021 which was an increase from 62.54% for the previous year. Portfolio income rose by 6.66% and expenditure rose by 8.60%. This increased spending represents exceptional items and spending choices and fewer restrictions but not yet higher inflation.
Our energy costs have not risen significantly yet as our energy company transfer away from our failed provider has still not completed. Our grocery costs are slightly lower than the previous year. I expect both to rise along with Council Tax.
Conclusion
I’m pleased with the progress of my investment portfolio this year. Total returns were in double figures even after deducting draw down spending. I achieved a balance of an increase in portfolio income and a slight shift towards owning more holdings seeking growth. It would have been nice to have beaten the UK index too but it’s not essential for me to do that every year.