July 2019 Savings + other updates

The month of July seemed incredibly short. I enjoyed the bouts of heatwave – yes, even in Manchester!  Funny how the same people moaning about the heat are now moaning about the rain…

This month also saw me attempting to clear out some space around the house in anticipation of my sister and nephew moving in soon – that’s come round fast, yikes!

Anyway, how did I get on in July?

I saved 44.3% of my net salary – delayed holiday costs took the remaining chunk of my bonus so I wasn’t able to boost my savings rate after all. I am actually saving a little more though, my 3% pay rise is in there!

The above savings includes top ups of £100 from a webinar (more on this later), £20 matched betting profit (from last month) and £74.38 affiliate income from OddsMonkey (thank you to all who signed up via my links!).

Shares and Investment Trusts

No new investments – I just topped up existing ones.

Current share/IT portfolio can be found here.

(Entire portfolio here)

Future Fund 

A combination of the rock-bottom pound sterling and markets going up has meant a big jump to £173,204. I’m not getting too excited though – still plenty of political shennanigans which could make it drop right down again!

Dividends and Other Income

A record-breaking month for dividends: Continue reading

Adjustments to My Investment Strategy

As I’ve touched upon in recent posts, I thought it was time to review my investment portfolio.

The last time I checked it (and its allocations) was back in 2017, so here’s quite a lengthy (and rather waffly) post as it’s been a long time coming! 🙂

The large part of my portfolio is made up of index tracker ETFs. The other part is mostly investment trusts (ITs). The intention, when it comes to drawdown/early retirement, is that I will likely sell off the ETFs for capital, whilst taking dividend income from the ITs.

I would describe myself as a passive investor, my strategy is predominantly ‘buy and hold’.  However, as there’s an element of investing which I enjoy, I do tinker about with a bit of active investing, small experimental portfolios and the like.

Index Tracker (ETF) Portfolio

I set up this portfolio after I’d read Tim Hale’s Smarter Investing book, combined with Monevator’s Lazy Portfolio post.

Thus, I created my own Portfolio for All Seasons, one which would supposedly weather all kinds of stock market shenanigans and which suited my own appetite for risk.

I’m thinking now that I do need to perhaps start protecting some of my wealth and increasing the bonds part of my portfolio.

A common rule of thumb is to simply hold a percentage of stocks/equities equal to 100 minus your age. If I followed this rule, that would mean having a 50/50 split equities/bonds, which to me, just doesn’t carry enough risk/opportunity for growth.  Equity to bond ratio of my Portfolio of All Seasons has been 90/10, so rather on the risky/aggressive side.

Apparently some financial planners are now recommending that the rule should be closer to 110 or 120 minus your age and that is what I will initially go for – 120 minus my age so my equity/bond ratio will now aim to be 70/30.

Here’s the Old v New portfolio allocations:

So I’m reducing some of the home/UK bias and the more risky allocations.

If I end up becoming more risk averse, I may go down to 60/40 but that’s for the future.

How did I come up with these allocations? They’re just what I’m comfortable with and happy to invest in. I wanted to start implementing the changes to my portfolio asap and didn’t want inaction as a result of analysis paralysis.

Anyway, here’s how it’s looking right now:

I intend to re-balance mostly via new contributions but I have made a few sales/switches already (sold my entire holding of the global value, VHYL (Vanguard All-World High Dividend Yield ETF)). I’ll be doing more switching over the next month or so.

I may ultimately whittle these allocations down to 4 core holdings for simplification in time, not sure yet – just need to be mindful of dealing fees.

And finally, why ETFs and not funds, like Vanguard Lifestrategy? Although I still hold a couple of funds, I have mostly ETFs as the fees are cheaper for ETFs on the platforms I use.

So here are my main holdings:

Global: Vanguard All World ETF (VWRL)
Bond: Vanguard Government Bond ETF (VGOV)
UK: Vanguard FTSE 100 ETF (VUKE)
Property: iShares Developed Markets Property Yld ETF (IWDP)
Emerging Markets: iShares Emerging Markets Equity Tracker
UK Mid: Vanguard FTSE 250 ETF (VMID)
Global Small Co: SPDR MSCI World Small Cap ETF (WOSC)

Investment Trust/Share Portfolio

I wanted a part of my portfolio which I would just hold and which would generate regular income.

Originally, I had a smattering of individual shares but wanted more diversification  (plus it’s really time consuming trying to research the best individual share to buy) so I started to build up a basket of investment trusts (ITs).

I chose from a mixture of ITs considered to be ‘dividend heroes’ (paying increasing dividends over many consecutive years) and diversified across global, UK and recently, more specialised sectors.  There’s also a mix of growth and income ITs, although later on, I’ll likely move to more income.

This portfolio currently generates on average £130 a month, my aim is for it pay out at least £250 a month/£3k a year, which should cover the bulk of my household bills.

I guess I’ll aim to do a bit of ‘top-slicing’, ie take profits from the growth ITs and buy more of the income payiing ones in time – not sure how that will work out as I generally only buy when ITs are showing a decent discount to NAV (Net Asset Value) but occasionally, I will buy on a premium.

So whilst the capital of my ETF portfolio will be whittled down in time, I’m intending to hang onto this portfolio for a good while longer.

Why have income paying investments while I’m still accumulating?

Mainly because I need to see that I can actually generate a certain amount of income from my investments – I’d rather avoid finding out belatedly that my portfolio didn’t actually pay the income I thought it would.

Anyway, click here to see this portfolio.

Cash

I haven’t got a lot of cash in my portfolio – most of it is in premium bonds, with a tiny amount in my cash ISA. Before anyone pipes up to say how crap premium bonds are, I don’t really care, I just like the fact that they carry no risk whatsoever and that there’s a chance of winning something every month and I’ll be sure to let you know if I win a decent-sized prize! 🙂

Much in the same way that I’m increasing my bond allocations in my ETF portfolio, I will gradually increase my cash allocation although I’m not rushing on this one, with interest rates still being on the low side.

Perhaps I’ll do a bigger push later on as I’d like to FIRE with a cash buffer.

Everything Else

P2P and property crowdfunding – over the next few years, these should run down to zero as I’m not adding any capital to these types of investments – currently, I have less than £2k invested.

Other crowdfunding – small amounts in Freetrade and BrewDog. It’s possible that I may look at other such opportunities but these are strictly in the ‘fun’ category and not part of my retirement planning.

SIPP or ISA?

The bulk of my savings/investments are ‘tax efficient’, ie either in my SIPPs or my ISAs.

I still continue 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, future government meddling notwithstanding. I currently have more in my SIPPs but hopefully that will be addressed over the years. Note that by the time I FIRE, I will have access to my SIPPs.

Experiments

My Dogs of the FTSE experimental portfolio also falls in the fun category but the dividend income I receive is reinvested into my ISA, so it benefits my overall portfolio. More on my Dogs at a later date, there’s a post pending!

I may run other little experiments or other fun portfolios although I’ll only be risking a tiny percentage of my overall wealth.

So that’s pretty much it for my portfolio for the next couple years.

I’m sure there will be many who might disagree with my strategy and wonder WTF I’m doing but I’m comfortable with it and although I wouldn’t go so far as to say I’m confident that it will do what I want it to do, well, all I can say is that I’ll do what any investor can do and that is to wait and see.

I intend to ride out any economic catastrophes, keep calm and carry on investing, which might be easier said than done!

Timing of FIRE

Among the FIRE community, there are many who wish to FIRE before they are or when they reach 40. Ms ZiYou is one of them and well on her way to achieving her goal.

And why not? Slog it out in the corporate world, maximising your earning power, living frugally and within your means, saving and investing as much as you can, building a pot of wealth so that you can call it quits on your work at/by 40, choose to do some other kind of work or really FIRE, as in retire early.

What’s not to like?

This got me thinking – imagine if I had learned of FIRE in my twenties just as I’d gotten  my first permanent job?

Imagine if I’d been able to save 40-50% of my salary (and save up all my bonuses) and invested it all. I was a different person when I was 24-25 years old, unlikely to have embraced the idea of FIRE but had I done so, my underlying character would have meant that I would have pursued it in the same determined fashion – what hasn’t changed since my younger days is that if I set my heart and head on something, I don’t give up too easily.

So, imagine I’d been on the FIRE path since my mid-20s. Coming up to the age of 38/39, I’d be planning to pull the FIRE plug; I’d be thinking about what I could do with all my spare time, what places I could travel to.

Except that my plans would have gone completely pear-shaped because I would have been pulling the plug just as the 2008 global financial crisis happened, a complete meltdown of the stock markets and the near-destruction of the global economy. Ouch.

That would have been really unfortunate timing, yet sequence of returns risk could still affect any of us currently on the FIRE path.

Older and Wiser

Caveman recently wrote that the best time to start on the FIRE path was in your 30s/40s and in much the same way, I’m glad that I didn’t discover FIRE in my 20s and stopped working at 40, global financial crisis notwithstanding.

That’s because in terms of job satisfaction, I’ve found that the work I’ve done and the jobs I’ve had between the age of 40-50 have been far more rewarding than any I’ve done or had earlier in my career.

No, it’s not the increase in salary – having spent most of my career with the same company for over 20 years, my wages were stagnating so did not really increase in any significant increments (or not at all for several years). I’ve never been one to chase the higher wages.

I think part of the satisfaction comes from experience – I’ve learned to work with all kinds of people at all different levels, managing their expectations, learned to work smarter, not be afraid when to speak up but also to know when to shut up/not say anything.

In my 20s-30s, i recall getting caught up in office politics, stressing about promotions (mine and other people’s), stressing about pay (what I earned and what other people earned), stressing about people’s time-keeping, the number of ‘sick-days’ people had,  the time they spent going out for cigarette breaks, people’s extended lunch-breaks, the overtime they did, the clock-watching, my long working hours, etc, etc. I was once labelled a ‘trouble-maker’ by one of the directors – well,  I obviously hadn’t learned at the time when to shut up!

That’s a lot of stress, with very little to do with me personally!

As I got older, I became only concerned about my own performance at work and that’s it. What anyone else did (or didn’t do) was their problem. My work ends when I leave the office – I argued that it was unnecessary for me to have a work mobile (and won) and I don’t take my laptop home (unless there’s an urgent piece of work that can’t wait). This attitude meant that I enjoyed my work a lot more and was able to concentrate and focus more on the job at hand. I have a good work/life balance.

You could argue that I was bothered and stressed by all those things when I was younger because my personal finances weren’t in a great way. I was carrying high credit card debts and funnily enough, once I’d paid them all off, I was a much happier person.

Final Stage

And so, I now move to what I believe will be the final stage of my working career. I’m not looking to progress up the career ladder – I’m just looking to remain gainfully (and happily) employed until I hit my FIRE goal.

I like my job and I enjoy the work I’m doing – I’m given a lot of flexibility and autonomy, the work is challenging, my colleagues are nice and I like and respect my boss. But I can see how just a few factors changing could make things really difficult for me.

I’ve mentioned that change/company re-organisation is on the cards, perhaps later this year but more likely to be next year.

The question is: will I be able to ride out the changes until I reach my FI goal?

And of course, another global financial crisis could still happen just as I reach my goal and I don’t know if I’d be any more prepared.

Since I can’t control what will happen in the future with my job or with the stock market, I will concentrate on what I can control, that is my spending, my saving/investing and living my life.

Update on Freetrade’s Free Shares

And finally, further to my recent mention of free shares via Freetrade worth up to £200 (previously £80), I’m beta-testing their referral scheme so if you want to check out their cool app and bag a free share, DM me via Twitter (@QuietlySaving) or via the Contact Me form for a one-use only link – first come first served!

UK only and Android users will need version 7.0 or above.

Hope you all have a great weekend!

June 2019 Savings + other updates

Just back from my hols, so here’s my belated update for June.

This month saw numerous social outings with friends, interspersed with meeting new people at my second investors’ meet up in Manchester (similar to the first one, except in the evening) and attending my first crowdfunding event.

Reaching my milestone age and attending these events nudged me to reconsider the allocations in my portfolio. After revisiting some old Monevator posts, including one on age and portfolios, I’ll be starting to implement some small initial changes – I’ll sort out a post on that soon.

So, how did I get on in June?

I saved 50% of my net salary! I should have/could have saved more as I received the second part of my small annual bonus this month. However, I’ve put some funds aside to cover for some holiday spends, some of which may carry over into July. Perhaps a missed opportunity to really bump up my savings rate but it’s been an expensive month!

The above savings includes top ups of £33.68 from TopCashback*, £60 matched betting profit (from last month), £50 from another premium bond win and £74.67 affiliate income from OddsMonkey (thank you to all who signed up via my links!).

Shares and Investment Trusts

I opened a small new investment in The Renewables Infrastructure Grp Ltd (TRIG) but mostly added to existing investments. I also made a small crowdfunding top up to my Freetrade investment.

Current share/IT portfolio can be found here.

(Entire portfolio here)

Future Fund 

The markets have been pretty buoyant lately as my Future Fund has risen to £169,631.

Dividends and Other Income

A decent month for dividends: Continue reading