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! ūüôā

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! ūüôā

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 ‚Äėtax efficient‚Äô, 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!

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

May 2019 Savings + other updates

The month started off with a welcome £50 win on the premium bonds (2 x £25).

It was then pretty much just a blur of work, gym, a lovely weekend away (which will be in a future blog post) and a trip to the cinema to watch ‘Avengers: Endgame’ (which I thought was epic). Is it wrong to take my own water and snacks to the cinema?

There were a couple of unexpected costs which had me dipping into my emergency fund – the down-pipe/gutter at the back of my house had blown down so I had to get that fixed and my car failed its MOT, requiring a new tyre and repair to windscreen washer.

Anyway, on with the numbers – how did I get on in May?

I saved 39.3% of my net salary, which was better than I thought as some expenses (holiday ones) have been carried over into June on my credit card.

I should be due the second part of my work bonus next month, plus a small pay rise will come into effect, so should in theory, be able to save more of my salary.

The above savings includes top ups of the above-mentioned £50 premium bond win,  £67.40 from Google Adsense income and £138.30 affiliate income from OddsMonkey (thank you to all who signed up via my links!).

Shares and Investment Trusts

As mentioned recently, I sold some AJ Bell shares (which I acquired from IPO) and used this money to open up an investment in International Biotechnology Trust.

Current share/IT portfolio can be found here.

(Entire portfolio here)

Future Fund 

The markets have been rather jittery this month I believe and my Future Fund has gone a little backwards at £164,227. Nothing to worry about, just continuing to invest.

Dividends and Other Income

Compared to last month, a more typical amount of dividends received. Continue reading

Serious Investing

I mentioned in a recent post that I attended an ‘investment meet up‘.

I had been contacted out of the blue by someone who had read my blog and who had wondered if I’d be interested in attending a meet up for investors in Manchester, which was run by SIGnet, the Serious Investors Group Network.

My immediate reaction to the ‘serious’ bit was that it wasn’t for me. Yes, I do invest on a regular basis but I don’t see myself or put myself in the ‘serious investor’ category – that to me would be someone who’s been investing a lot longer than I have, someone who lives and breathes investing, and who actually knows what they’re talking about! You know…people like the guys from Monevator or John from UK Value Investor.

However, I thought about it some more and I realised that in my own way, I am ‘serious’ about investing (Dogs of the FTSE and Monkey Stock portfolios aside!) as I am committed to investing long-term to grow my wealth and to ultimately fund my early retirement. My net worth is currently made up of around 60% in equities.

I was assured that it was just a group of like-minded private individuals who liked to meet up and chat about their investments, what they’d bought, sold and are interested in. SIGnet has a heavy presence in London and has apparently been around for 20-30 years.¬† I first heard of them when Mike @ 7 Circles blogged about them¬†(though not in a very good light) but they were looking to secure a stronger base in Manchester.

So I agreed to attend. The fact that I had to book the day off work to attend gave me an idea of the types of people who would arrange a meet up on a Monday morning/ afternoon, when folk like me would normally be working in the office…

Meet Up

Anyway, the meet up took place in the boardroom of the Rain Bar pub in Manchester city centre. There weren’t that many in attendance, just the ten of us in total, and they all seemed to be regulars as they knew each other.

I fully expected to be the only woman there but was pleasantly surprised to find another.

As predicted, they were a mix of retirees, semi-retirees and freelancers/self-employed. And from the sounds of it, all experienced investors, including the chap who looked young enough to be a millennial.

I was hoping to just lurk in the background and listen, hoping that I wouldn’t be out of my depth, but within minutes of kick-off, as the newbie present, I was asked to introduce myself to all and talk about my investing background – yikes!

So, I just talked about my buy and hold strategy, investing in broadly diversified index tracker ETFs and investment trusts and building dividend income.

When prompted, I talked a little about my aim to FIRE, although none of them had heard of it before – my guess is that most of them had actually achieved FIRE already, but just weren’t aware there was a cool acronym for it!

We broke up for a pub lunch and when the event was all over, I stuck around for a drink with a few of them for a pleasant chat.

Did I Learn Anything?

It was fascinating to hear about other people’s investment strategies. Being in the bubble that is the FIRE community, it can be easy to forget that there are strategies other than just buying and holding index trackers, not that there is, of course, anything wrong with this strategy!

There was a lot of talk about AIM stocks, ‘ten-baggers’, which I assumed to be the likes of Fevertree (if you had bought at the start). As one said, he wasn’t interested in bits of dividends from FTSE stocks – that wouldn’t be enough for him to live on so he looked for stocks with potential for big capital growth. Good, if you can spot those kinds of stocks.

A couple had investments in properties (buy to let), there was mention of one dabbling briefly in bitcoin but in the main, everyone was investing in the stock markets.

Another mentioned that one of his strategies was to sell half of a stock, pocketing the profit and to hold onto the rest, a strategy which I adopted myself recently when I sold some of my AJBell shares to take advantage of the >170% gain since its IPO – I intend to hold onto the rest.

There were two presentations, with the millennial guy talking about how he personally went about choosing his investments, his analysis and research etc.

Another couple of the guys did an interesting presentation of a company (they were investors themselves, not owners of the company) but it prompted me to read more about it when I went home.

There was no hard-sell, nobody was asked to part with any money or to invest in anything – it was all quite casual though professional, all very informative.

Ultimate Lesson

The people in attendance made me feel very welcome and by the end of it all, I didn’t feel like an ‘impostor’.

However, I did realise that I wasn’t quite ready to be part of their club of ‘serious investors’. By that, I mean that I’m not where they are right now but I’m on my way there.

They are where I would like to be upon achieving FIRE, a position where I envisage I will have more time to dedicate to my investments, due to not having to work full-time.

That’s not to say that I wouldn’t attend future meet ups – I fully intend to (and to pay SIGnet’s annual ¬£25 membership fee) because not only did I enjoy their company but I think there is still so much I can learn about investing, despite having invested for over 6 years. These people will have been invested during the big stock-market crashes, something I’ve never experienced before and many likely to be living off their investments already.

I’m not sure I would book the day off to attend another meet up (unless I had surplus holidays to use up) but I believe there’s the occasional evening meet up so will definitely be looking to attend a few of those.

Has anyone else ever been to one of these kinds of meet ups specifically for investing?