Investment Strategy – updated

It’s been over a year since I made a ‘tweak‘ to my investment strategy so I guess it’s about time I did a bit of an update and rehash of the post.

Party Politics?

This post follows hot on the heels of the UK snap election. I have to say that my investment strategy was going to be the same regardless of what happened and I’ll not be doing anything different now that we have a ‘not very strong and stable‘ government for another five years and there are the extremely rough seas of Brexit to navigate through yet.

Original Plan

My original plan had been to build up a large enough pot of investments (funds) and to sell off funds gradually, until I was able to draw down on my company pension at 65 and then state pension at 67.

My money was pretty much all in tracker funds, which followed my Portfolio for All Seasons plan, a plan which I set into motion in 2014.

When my company pension got frozen in 2015, I realised that I needed to review my whole investment plan, as I would need some extra income to make up for the unplanned pension shortfall.

Income

It’s still my plan to try to get dividend income of at least £3000 per year. Obviously, more will be better, but this is the minimum that I’m aiming for, and I think I’m on track for my goal of £1500 this year.

I know it seems like it would be easy to just double it but I’m still adding to the tracker funds too so my monies are spread out.

£3000 a year currently covers the following expenses for me – electricity, gas, internet/broadband, mobile phone, water, boiler cover, TV licence and dental/optical cover. That’s a lot of bills to not have to worry about!

Of course, these costs are likely to go up with inflation but hopefully, if I’ve invested wisely, my dividends will also continue to grow and kind of keep in line with inflation.

Share and IT portfolio can be found here.

Last year, I switched some of my tracker funds into ETF equivalents which added to the monthly income received, whilst at the same time reducing some management fees (the fees on my investing platforms are capped for ETFs but not for funds).

Living off dividend income is very appealing but to only live off income and not sell off any capital would be pretty much beyond my financial capacity.

I don’t earn a mega salary, there’s only one income coming in (gotta get dating again) and I don’t have the luxury of saving/investing for >20 years to build a massive pot, not if I want to retire early.

I could probably save and invest more but who wants to live like a frugal nun? Not that I have anything against frugal nuns but I choose not to go down the extreme path.

This past year or so, I’ve been steadily throwing cash at a basket of investment trusts to grow my dividend income. The shares I already own also contribute to this income. I practice a buy and hold strategy, apart from the little experimental portfolio I have, whereby I will sell in accordance to the ‘Dogs of the FTSE’ strategy – well, I’ve not sold anything yet but plan to do so early next year!

P2P and Property Crowdfunding

As well as the trackers/ETFs and the shares/ITs, I’ve also got a small amount in peer-to-peer (P2P) loans and some in property crowdfunding (via Property Moose*).

I’ve been invested in P2P for 3 years and my portfolio has grown by over 15%. However, I have now started to divert some of the P2P funds (interest and repayments) into my other investments.

This is for no reason other than to start simplifying my portfolio, although if it was possible to convert my existing P2P accounts into one of those new innovative finance ISAs (it’s not), I would probably just leave them as they are.

I won’t be cancelling or cashing in any P2P loans early, just withdrawing the repayments and interest, so this exercise could take up to 4 years before the loans are fully cashed out, since I took on some long term loans early on when the interest rates were really high (some of my Funding Circle loans were at 17%).

I’m likely to keep the property crowdfunding ticking over for a while longer – I want to see how it does since it has been purely funded by matched betting profits.

SIPP or ISA?

Aside from the bit of money tied up in P2P and property crowdfunding, the rest of my savings/investments are ‘tax efficient’, ie either in my SIPPs or my ISAs.

I’m continuing to invest in both, although I plan to build up more in my ISAs as I feel they offer more flexibility and (hopefully) will continue not to be subject to tax. I currently have more in my SIPPs but hopefully that will be addressed over the years.

Cash

As someone who may consider stopping working full-time within the next ten years, I don’t have a huge amount in cash in my overall portfolio.

The latest Monevator post reminds us that we’re not getting any younger and that your investments should reflect your age.

The classic principle governing age and asset allocation is:

Hold 100 minus your age as a percentage in equities
Hold the remainder in bonds (or cash?)

Equities currently make up around 85% of my portfolio which is pretty high risk for my age. I’m ok with that.

The majority of the 15% cash element is sitting in premium bonds. Yes, I know, crap returns and all that, but I don’t care – I just love that every month, I get the chance to win something. In fact, I won again this month, the second time this year, although it was just a £25 prize!

It’s possible that I might not leave so much in cash/premium bonds – I might feel the urge to pick up some bargains when the stock markets take a dive. Or not. Probably not. Who knows if I’ll be feeling ‘brave’ when the news and noise is full of doom and gloom!

Anyway, as mentioned in my May update, my emergency fund isn’t looking too shabby now, with the equivalent of about 4 months’ living expenses, courtesy of some of my redundancy payout.

So that’s my investment/savings plan for the next couple of years or so.

It’s not set in stone and is subject to change depending on what obstacles life (or government legislation) throws at me and will be reviewed as required.

How are you investing for your future?

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9 thoughts on “Investment Strategy – updated

  1. Good luck. Im similar about 85% of my portfolio is equity. My cash holdings themselves are in things like P2P so they too are fairly high risk. However I have 20+ years. Well done on your income. Im a bit behind you but made £500 in 2016. So far in 2017 Im up to £480 so Im hoping I might get somewhere near the £1000 by December. Keep going!

    • Thanks Sharespur

      If you have 20+ years to go but your dividends are already at £480, you’re well on your way to having a fantastic income! Good luck with the £1k goal by the end of the year!

  2. Hi Weenie,

    Always interesting to see the update and any changes. Good luck with the ongoing investment, keep throwing the money in and it will build up faster than you would think.
    £3k a year in income being thrown off, covering your bills, is a really nice place to be – it takes so much of the day to day worry out of things.
    I am really jealous of your Ernie wins – I’ve not had anything yet, that means it will be saving up for the big one soon 😉
    Keep up the good work, and hope the new job is keeping you busy and enjoyable!
    Cheers,
    FiL

    • Hi FiL

      Yep, £3k to cover those bills will be a great place to be. The stretch would be to cover ALL my bills but I’ll be happy with just the basics!

      My ex-boss seems to get a premium bond prize every month yet he claims he hasn’t maxed out his allocation – I don’t believe him! Good luck with yours and hope you hear from ERNIE soon! 🙂

  3. weenie,

    Thanks for the update on your strategy. Its always interesting to see practical examples of how people go about organising their savings.

    I had a brief look at your shares and ITs and see there is quite a mixed picture on returns for your shares but a more consistently positive return from your investment trusts (and I imagine also with your index funds). Just wondering what are your thoughts?

    • Hi DIY

      To be honest, until you mentioned the returns, I hadn’t noticed as I’ve not really been paying attention to the values. I’m painfully aware that I still own the likes of Tesco and Standard Chartered, but I hang on in hope that they will start paying dividends again (I think Tesco are planning to soon). At some point, I may have to cut my losses and offload them but I might give them a while longer.

  4. Best of luck with your new strategy! I have just started on the journey to FI, and have planned to do many of the things you mention in your post and some I already do. Just started matched betting this month, going slow to start to make sure I dont make any mistakes. I shall watch out for your updates:)

  5. Excellent update, thanks Weenie. Really helpful to see the ‘big picture’ of how someone is investing, as it helps give some comparison for what I’m doing. I’m planning to put more into my 60/40 equity/bond tracker fund ISA, lump sum rather than regular savings, and am cautious because the market is high and I’m not sure how I’ll cope when it falls. Are you comfy with the 85% in equities because you’re confident the market will have recovered by the time you need the funds? I’m probably more risk averse, but am already worrying slightly about my 12 year investment horizon!

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