What a difference a day makes

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 %
UK	4.78	39.48	35.37
Asia Pacific	5.28	24.31	24.05
Global	4.65	19.28	16.82
Bonds	9.05	7.58	12.86
Property	8.40	6.87	10.81
Cash	0.18	2.48	0.09
	5.33	100.00	100.00

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.