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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