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?

[*referral/affiliate link]

 

October 2016 Savings, plus other Updates

I was a little distracted last month and this continued to be the case this month. With various social outings, the weeks have just gone by in a haze.

Work has continued to be chaotic and also very weird, as my boss has now been laid off and I have a new boss, someone I had a dotted line report to previously. Whilst I get on with my interim boss, I miss my old boss already!

On a personal front, I actually secured a date the old fashioned way! That is, there wasn’t a Tinder-swipe or online dating profile in sight! I got dancing with someone at my friend’s wedding, we swapped numbers, we went out on a date. Ok, so there was to be no 2nd date (sorry, he had too many young children to support!) but hey, it’s good to see that old-school ways can still work in today’s dating environment! 😉

Anyway, how do things look on the numbers front?

oct16saved

So I managed a savings rate of 40.7%, not quite as good as last month but not bad considering the social events.

My average savings rate continues its downward trend  –  it’s now at 46%.  I accept that it’ll be impossible for me to achieve my end of year target of 50% – even 45% might be a stretch with the festive season coming up. I’ll keep going anyway.

This month’s income was boosted by £50 from rent received and £39.97 from TopCashback*.

I also chucked some more of my matched betting profits into some property crowdfunding via Property Moose*. The website has now introduced a secondary market so it is now possible to sell or buy ‘shares’ if you wish, although of course, if selling, these need to be purchased by other members of Property Moose.

Future Fund 

The falling sterling and buoyant markets continue to be good for my portfolio, which now stands at £86,509, a gain of 4.3% from last month.

Dividends and Other Income

Dividends received this month (which will be reinvested): Continue reading

Crowdfunding – Two Sides

Apart from setting up some direct debits for various charities, I’ve not withdrawn or used any of the profits that I’ve made via matched betting. I’ve just let the funds accumulate across my current account, my exchange accounts and the various gambling accounts.

In June, I finally invested £100 of the profits but I opted to do something different. theFIREstarter’s post reminded me of something that I had looked at previously but not gone for – I decided to invest a little in property crowdfunding.

Property crowdfunding “allows people to invest in buy-to-let properties without having to take on the additional responsibilities that come with being a landlord”. So says the blurb. Anyway, here’s a better explanation of what property crowdfunding is all about.

If I had a wedge of spare capital, I would probably be tempted to buy another little BTL property but I don’t, so property crowdfunding interested me when I first heard about it.

Some of the property crowdfunding websites required a minimum of £1000-£5000 investment but I went for Property Moose*, where the minimum investment is just £10.

propertymoos

So basically, you pick an available property from the website, invest your money with a load of other people to buy ‘shares’ in the property. When the property is tenanted, you start earning ‘monthly rental’ based on the number of shares you own.

Rental income seems to vary from around 5% – 7%. With Property Moose, most properties tend to be in the north/northwest, with only a few in London. Said properties tend to be ones which require renovation and you are able to see the progress of the renovations via photos posted on the website.  At the end of the fixed investment term (ranging from 1-3 years), the property is sold and proceeds are shared amongst the investors (subject to their share and less costs and expenses), although it appears that investors are able to vote to retain the property for a further year.

Property crowdfunding is not without its risks – I view it along the same lines as P2P  – still pretty new, regulated but not covered by the FSCS (Financial Services Compensation Scheme) so I’ll not be investing a huge amount in this.

Since that initial investment, I’ve chucked some more matched betting profits at Property Moose.  I think there’s still some life left in investing in property (yes, despite Brexit and the doom and gloom about property bubbles) so will be continuing to build on this investment bit by bit and will update with the rest of my portfolio.

Another Side to Crowdfunding

I came across Kiva a while ago but decided to revisit when I was looking for charities to support recently.

kiva

Kiva is a charity platform which aims to support people from poorer countries via crowdfunding loans. Deki is another platform, which I hope to have a look at again.

So how does it work? First, a borrower applies for a loan. Usually, loans are to start or grow a small business, used to go to school/further education or simply to be able to live in better conditions.

The loan, after it’s approved is crowdfunded by other lenders, in $25 increments.

Repayments of the loan are made on a monthly basis and such repayments can then either be withdrawn or used to fund other loans.

My first Kiva loan was to a woman from the Philippines who wanted to build a sanitary toilet for her family…. such things that we take for granted…

So, different sides to crowdfunding – I hope to make some money on the one side, and hope to help improve someone’s life a little on the other.

[*Referral Link – edited 16/09/16]

P2P – 2 Year Update

Following on from my last review, another 12 months have gone by so here’s an update on my peer-to-peer (P2P) lending.

P2P image

Around this time last year, my P2P portfolio stood at £2,098.15.

As at June 2016, it totalled £2,437.20.

£226.88 came from referrals and a bit of new investment (a whole £26.88!), so actual increase was £112.17 (5.3%).

This increase compares favourably to the 4.9% I achieved in 2015 as I continue to reinvest my money in loans with higher interest rates.

Here’s my P2P portfolio:

Funding Circle – £1,050.11
FundingKnight – £105.18
LandBay – £204.09
Lending Works – £355.55
RateSetter – £730.02

Defaults

In December, I suffered my first P2P loan default. Since then, there has been a second default. The above 5.3% increase includes both defaults (both of which were with Funding Circle). Most of my loans are very small and spread out (I have over 80 loans with Funding Circle), thus hopefully, minimising the impact of defaults.  Had I not had those defaults, I would have seen an increase of 6.4%.

Administration

P2P does have its risks. It’s not covered by the FSCS so there is the chance that you may not get all your money back should things go belly up.

In June, FundingKnight went into administration.  The first I heard about it was when I received an email stating that it had been acquired by a company called GLI Finance. I don’t have much loaned via FundingKnight but some lenders may indeed be trying to get their money back in a panic. I can see on the website that there are lots of loans on the secondary market and not a lot of new loans (if any). What I’m going to do is to withdraw repayments made and recycle them into one of my other P2P accounts – I’m not going to try to cancel down my loans or sell them.

This does mean that I’ll not really be keeping to my P2P diversification plan, but my funds will still be spread between the other accounts.

So, whilst I’m not currently intending to add any new funds, I will continue to reinvest and of course, will monitor my portfolio closely.