RVF Portfolio - Damaged goods.

[AJC5001]

So about half of a very small selection (mostly three actually) of growth/TR investments was swapped for income generating stocks. You are quite right, it was a stupid thing in hindsight to do. We all have 20:20 hindsight. It's basically lost me around £100k in capital this year. Ouch.

RVF

What would you have gained/lost if you hadn't made the swap?

Adrian

[tikunetih]

without apportioning any blame at all here, pressure from spouse for income generating investments. So about half of a very small selection (mostly three actually) of growth/TR investments was swapped for income generating stocks.

Bad luck.

Perhaps have said spouse write out 100 times: "Money is fungible".

[mao44]

It seemed sensible to move about half my growth/TR portfolio into typical UK income stocks ahead of retirement.

Why? (Genuine non provocative question)

Was it just an easier way to receive a higher running income or some other motive? I might be the outlier here but I wouldn't see changing "strategy" as sensible. Wondering what your motivation was, and maybe what others think.

Basically yes, as you suggested, and without apportioning any blame at all here, pressure from spouse for income generating investments. So about half of a very small selection (mostly three actually) of growth/TR investments was swapped for income generating stocks. You are quite right, it was a stupid thing in hindsight to do. We all have 20:20 hindsight. It's basically lost me around £100k in capital this year. Ouch.

RVF

Have you sold the aforementioned stocks? If not, all is not lost!

[MaraMan]

Good luck with it, I am sure with time it will be repaired. I also learned a painful lesson. I held too many income shares which got decimated, but I also held some growth shares (SMT, FS, MONKS, Amazon) which provided some balance, but not enough. Anyway I restructured most of the ISA portfolio and reduced dramatically the income shares and moved mostly into growth. Anyway to cut a short story shorter earlier this week we celebrated as our portfolio value is now above where it started the year, in fact its up by 2% overall, despite the SIPP being in drawdown and still taking the remaining yield on the ISA. The SIPP lead the way with a 13% gain this year, but as you can tell the ISA lagged behind as this was where the income shares were (the SIPP is larger than the ISA).

I reduced my holdings in Amazon at it's peak and sold a third of my SMT holding as it had become disproportionately large, these made good contributions to the SIPP performance.

Anyway all the best
MM

[Howard]

Not quite as deep red on the portfolio balance sheet. And the last few days have been kinder to my portfolio. Since I retired at the end of July, I have been able to commit some new money to the portfolio. Including an approx £4,000 transfer in of AVC from an ex-Equitable Life plan, and an ISA subscription. Altogether, approx £33,000 new money has been thrown into the damaged goods portfolio repair plan. Even so, the portfolio is still £46,000 below it's highest valuation earlier this year. There's bound to be more bumps in the road, Brexit, US election, pandemic etc. But as long as my Plan C part time consulting work continues for a while longer, and hopefully an improved market, I look forward to being back where I started in time. It's been a very painful lesson learned this year, but the plan continues to work. And that's the purpose of this thread, have a plan, stick to it, adjust it to reflect the changing landscape, don't give up.

RVF

I read your posts today and am glad that you (and the market) have substantially repaired your portfolio. And your plan C looks brilliant! Congratulations.

Surprisingly, I experienced the opposite when I retired in 2001. My portfolio then was dominated by growth companies and growth investment trusts. The damage the market drop caused to my portfolio seemed huge. Many investments went to 10% of their value in less than a year and I “lost” an amount similar to the value of an average house at the time. (Some may remember Logica, Misys, Baltimore, Trafficmaster, Telewest, Vodafone and the other culprits! )

From memory, the companies that suffered less and recovered well were utilities, food, beverages, healthcare, tobacco etc. The "essentials" of life with regular turnover not affected by the economic cycle.

Ironically the experience in 2000/01 changed my approach and I moved a significant portion of my portfolio away from growth shares and bought more income generating stocks and quite a few of Luniversal’s “basket of seven” income ITs.

Whilst a few of my income shares have dropped a lot recently, they paid such good dividends over the last 17 or 18 years that they paid for themselves some time ago! And some HYP shares like IGG have done amazingly well, others like National Grid, Pennon, Unilever, Reckitt, Diageo, United Utilities, Intercontinental Hotels and even Tesco haven’t done badly over the 15 years or so since I bought them. Of course, I too hold Lloyds Bank and one or two other shockers.

My attitude after 2000 was to ignore advice to have a concentrated portfolio. I am probably far too diversified with over 100 holdings (and vastly more if one takes into account the contents of ITs and OEICs). This may mean that my portfolio has not grown as fast as it might. But it has appreciated at around 8% a year (after tax) and it is much less volatile than a more concentrated portfolio. It is currently down 5% from its all-time high.

My conclusion is that it is not a good idea to completely leave the income sector. It may have its day again. The bit of the HYP approach I like is “strategic ignorance”. Too many investors claim they can predict which company is better run than another - and remembering their posts it’s often instructive to see how wrong the predictions were.

And of course, Covid comes along and shows that none of us could predict the future!

One lucky decision of both of us was to invest in Fundsmith. Terry rightly predicted that companies supplying essentials would be survivors. So far he’s right and his fund has grown to be my biggest investment.

So hopefully you may find that in a few years time your portfolio hiccup will be just that!

And do make the most of your retirement!

regards

Howard

[Dod101]

Just like growth shares, some income shares have done quite well. It is a matter of getting a balance and not being too committed to one or the other or for that matter being too ambitious with either. All very boring.

I would assume that with his 100 plus holdings Howard has got it pretty well sussed but I suspect he has got a version of a tracker. Might be cheaper just to buy one. He cannot possibly monitor all 100 plus holdings.

Dod

[Howard]

Just like growth shares, some income shares have done quite well. It is a matter of getting a balance and not being too committed to one or the other or for that matter being too ambitious with either. All very boring.

I would assume that with his 100 plus holdings Howard has got it pretty well sussed but I suspect he has got a version of a tracker. Might be cheaper just to buy one. He cannot possibly monitor all 100 plus holdings.

Dod

You are right I can't monitor all my holdings.

I do have them all in a portfolio tool on the web so I can look at their progress and have sorted them roughly into different styles (eg my SIPP used to be mainly income holdings, but I'm now moving towards total return because eventually it will be an IHT free gift to one of my children).

I keep trying to find reasons to consolidate by selling a few shares and increasing holdings in ETFs which give international exposure. The problem is that the shares I sell often go up afterwards! For example I had a fairly significant holding in AstraZeneca. Read an article by Terry Smith who criticised their accounting methods and said their profits were overstated a couple of years ago. So I sold and they have not looked back since!

Looking ahead, hopefully Reallyveryfoolish will soon find his portfolio has grown significantly and he then has to think about how he will pass it on to the next generation. But that's another thread!

regards

How

[Dod101]

I have a mere 31 holdings and frankly tend not to pay much attention to Terry Smith although there is no gainsaying that he has done very well with Fundsmith and to a latter extent Smithson. I hold the latter. TS is too dogmatic for me to be entirely comfortable with his views.

I tend to respect and read what James Anderson of Scottish Mortgage and Nick Train have to say although I do not often follow their choices. Anderson is more of a 'theme' man anyway whereas Nick Train is very much a stockpicker.

My priority in investing is for income but I hold few out and out HYP shares and those I do hold I am mostly selling down. The shares I hold for growth I top slice when I can and put them in to modest dividend growing shares and I do not mind whether individual shares or ITs but I hold no ETFs or OEICs.

I have not touched my SIPP in terms of drawdown for at least a couple of years not so much for the benefits of IHT savings as simply that I tend to use it as last resort income because I do not like paying tax if I can avoid it.

Dod

[richfool]

Good luck with it, I am sure with time it will be repaired. I also learned a painful lesson. I held too many income shares which got decimated, but I also held some growth shares (SMT, FS, MONKS, Amazon) which provided some balance, but not enough. Anyway I restructured most of the ISA portfolio and reduced dramatically the income shares and moved mostly into growth. Anyway to cut a short story shorter earlier this week we celebrated as our portfolio value is now above where it started the year, in fact its up by 2% overall, despite the SIPP being in drawdown and still taking the remaining yield on the ISA. The SIPP lead the way with a 13% gain this year, but as you can tell the ISA lagged behind as this was where the income shares were (the SIPP is larger than the ISA).

I reduced my holdings in Amazon at it's peak and sold a third of my SMT holding as it had become disproportionately large, these made good contributions to the SIPP performance.

Anyway all the best
MM

I too reduced my exposure to income focused IT's and increased my exposure to growth trusts earlier this year, primarily as a result of the Covid meltdown and the prospect of falling dividend yields and an increased emphasis on technology stocks. That included discarding a couple of UK IT's including Temple Bar, reducing JETI, adding to FGT and Mid Wynd, and adding new positions in: SMT, Monks, USA and BGEU. I have also since built up holdings in Asia Pacific trusts like JAGI, SOI and PHI.

Whilst I enjoyed having dividend Income to reinvest, and liked the idea of having a bird in the hand now, rather than waiting for the uncertainty of two in the bush later (which could easily be taken away), I realised that income wasn't essential to me, so why chase it.

Also, early in the meltdown I was unnerved by the dramatic fall s in the markets, and fearing Armageddon, I sold between a third and a half of a couple of my existing IT holdings on the way down, and then when things didn't sound so bad I managed to buy them back at an even lower price before the recovery got under way. E.g. I sold a proportion of JGGI @ £2.75 then bought them back @ £2.29 a week later. So currently JGGI is one of my best performers.

I do still hold a number of trusts for income and for diversity - e.g. infrastructure, renewables. Plus a gold miner.

[Dod101]

Losing money faster than I can add it again.

Considering what I have added to the portfolio since I retired and took on some part time work the outcome so far is dreadful. So far showing a loss on everything I have added to the pot except a little bit of gain on the small NG investment. But I am sticking at it and will be adding another chunk of money into the SIPP mid next week ***.

I suppose with pandemic, US election and brexit presently all bubbling away in the pot, investing now when it feels really uncomfortable to do so is good idea. There is no Plan D in any case.

*** Likely topping up HFEL again, I think. Then I have enough of that for now.

RVF

All you can do is accept that the markets are very volatile at present and the three factors you mention seem to be doing a good of stirring the pot. Let us hope that you and all of us are able to look back on these months as a great time to invest!

Dod

[Bouleversee]

Not quite a week and a half on from my last comment. And we have a new POTUS elect, some very good news on a COVID vaccine and the rising tide has lifted all boats today.

It's still a very very long haul for my Shell, Petrofac, Lloyds disasters but more recent purchases are looking a lot better today. The inhabitants of TLF are all a bit better off today than yesterday. Long may the upward momentum continue. I bet it won't though, not until we come out the other side of Brexit anyway.

RVF

Very nice to see some long overdue upward momentum at Petrofac this morning. And a bit of welcome support at Shell and Lloyds too.

RVF

Doesn't make much of an impression on my loss which is nearly 72%.

[Dod101]

Even Imperial Brands is up another 6% or so today.

Dod

[Bouleversee]

Good, though that won't make much impression either.

[Adamski]

...long overdue upward momentum at Petrofac this morning...Doesn't make much of an impression on my loss which is nearly 72%.

Reading this thread, reinforces my belief that better investing in selection of funds/ITs than individual shares as reduces risk of one stinker (although woodford is an obvs. exception). I sold and reallocated my UK shares/funds to Global in April and don't regret that.

[Bouleversee]

Yes, you are right, but it's too late for me. My money is already tied up in a lot of stinkers, with the odd star thrown in. Am now buying ITs when I can scrape up enough to make a purchase worth while. Just hoping that some of my previous stars will recover.

Global what?

[Adamski]

Global what?

Personal choice but for me core holding global trackers Fidelity index World P, or Vanguard World VWRL.

[Dod101]

All of this can be argued ad infinitum but you need to know firstly why you are investing, what are your aims? For me I need first and foremost income. There is an article in the IC last week telling us that dividends can be bad for your portfolio growth. That will strike a chord or three. Then of course they go on to say that total return strategies are a better way to generate income. They take the case of Adobe which apparently pays no dividends but you can generate your own income by selling 4% or whatever percentage you like each year and hey presto you have your income. That is all very well of course as long as your share has got a more or less upward projectory ( a bit like our very own Scottish Mortgage) This is an old argument and somehow if you are reliant on an income to live off (as I am) dividends appearing in my bank account without my doing anything are quite comforting. We cannot take 2020 as an example to prove anything though because everything has been out of kilter this year.

For me, about 2/3rds of my portfolio is income producing and the other third is growth. My idea is to top slice the growth shares from time to time and increase the income shares and that more or less works. The HYP style of income investing is fragile and can be dangerous though because the idea is to buy shares with the highest sustainable yield. That of course, as I know only too well, leads to chasing income, usually chasing high income and often that comes with little or no growth. The UK market has been particularly badly hit with this in recent years but one way round that is not to go for the highest available sustainable income. Firstly you are judging what is sustainable growth. What could be more sustainable income than the tobaccos (see Imperial Brands) and a big conservative oil company (See Shell) I hold both and share the pain. Then very high income is usually because the market is not confident that the dividend is sustainable. Ignore Mr Market at your peril. So.......... it means that we need to go for more modest yielding shares and that I have found works fairly well. I cite the likes of Unilever, 3i Infrastructure, Primary Health Properties, Segro and the like.

It has all been said before but it does not harm to repeat it I think.

Dod

[tjh290633]

The HYP style of income investing is fragile and can be dangerous though because the idea is to buy shares with the highest sustainable yield.

Dod

You use that word "highest". That is surely incorrect, because the shares with the highest yield may well be ruled out on other grounds.

I have 27 out of 36 shares (i.e. 75%) currently paying dividends. Of the 9 defaulters, several are likely to return to the list of dividend payers during the next 12 months. There are 17 dividends yet to be declared, of which two are definitely zeero. Currently the amount expected to be received is about 70% of 2019-20, but could be more. If we go back to 2009-10, the actual fall was about 45%, i.e. 55% of the previous year's income. This year 24 have been cancelled to date (and some reduced), compared with 22 in 09-10. Now were the cancellations among the shares with the highest yields?

In 2009-10 they were: Anglo-American, Lloyds TSB, Cattles, Rentokil, William Hill, Trinity Mirror, ITV, Taylor Wimpey, Yule Catto (now Synthomer), Premier Foods and Rexam. Two of those had rights issues and cancelled their dividend just for that occasion (WMH and REX). 7 of those have departed (AAL, CTT, RTO, TNI, YULC, PFD and REX) and in the current year the list is: DS Smith, IMI, Taylor Wimpey, British Land, Lloyds, Aviva, William Hill, Marstons, Marks & Spencer, Compass, Kingfisher and BT. 3 are included in the previous list (LLOY, TW. and WMH) .

If we look back to 3rd January this year, my highest yield shares from that list are TW. (9.57%), BT.A (7.95%), MARS (5,85%), LLOY (5.17%), MKS (5.14%) above my then median yield of 5.03%, the remainder being below the median, with CPG the lowest at 2.12%. Going back to the end of 2007, the last normal year before the fall, we find: LLOY (7.3%), RTO (6.54%), TW. (4.53%), PFD (3.02%) and REX (4.66%). The others I did not have at that stage.

My point is that some of the lower yielding shares have succumbed, not necessarily the highest.

TJH

[Dod101]

Yes but I was not writing particularly of shares that have cancelled dividends from Covid. I was writing about the danger of chasing income. As we know very well, often the very high yielders do not need Covid to put their dividend in danger, see my examples of Shell and Imperial this year, but there are plenty of other examples in recent years. Some high yielders are high yielders because the market perceived no growth in the business of course and they can be persistent high yielders for a long while.

Dod

[jackdaww]

All of this can be argued ad infinitum but you need to know firstly why you are investing, what are your aims? For me I need first and foremost income. There is an article in the IC last week telling us that dividends can be bad for your portfolio growth.


That will strike a chord or three. Then of course they go on to say that total return strategies are a better way to generate income. They take the case of Adobe which apparently pays no dividends but you can generate your own income by selling 4% or whatever percentage you like each year and hey presto you have your income. That is all very well of course as long as your share has got a more or less upward projectory ( a bit like our very own Scottish Mortgage) This is an old argument and somehow if you are reliant on an income to live off (as I am) dividends appearing in my bank account without my doing anything are quite comforting. We cannot take 2020 as an example to prove anything though because everything has been out of kilter this year.

For me, about 2/3rds of my portfolio is income producing and the other third is growth. My idea is to top slice the growth shares from time to time and increase the income shares and that more or less works. The HYP style of income investing is fragile and can be dangerous
Dod

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comforting it may be , but is it a sound investing argument?