I like starting new traditions and feel a mid-year portfolio review is a good calendar addition. I’ve already got in and reviewed my goals for 2019, so now it’s time to deep dive into the money. Time to have a look at the portfolio and check it is helping me towards my long term goals.
What do I mean when I talk about my Investment Portfolio
Firstly, let’s make sure we are on the same page. When I say my investment portfolio, I am referring to the money I have invested in the stock market for long-term growth. For me, this is specifically my ISA, taxable investments and SIPP. I don’t have anything any more spicy than these.
I am not including any cash I hold as a slush fund, which varies between £5k-£30k usually. This slush fund is kept in a just below-inflation interest rate (yet still the best on offer) current account. I don’t have a specific emergency fund apart from this fund and a bit of money in my company.
In addition, I also don’t count a small pension which is ~£48k in my allocation, as most of it is effectively cash (it’s a very weird pension, which weathered the last crash well). My other main asset is the house that I live in; I don’t consider that asset to be in my investment portfolio, but for balance and disclosure it’s important to note it exists and has about £250k equity locked up in it.
My investor policy statement
So how do I approach investing? I’m a firm believer in buying low-cost tracker funds and holding them. I don’t want to support any fund managers and always aim for the best value for my money as detailed in why the bros scared me post.
To reduce charges I buy ETFs (exchange-traded funds) – I buy these rather than mutual funds as they cost less to hold in UK platforms on an ongoing basis. And if you have a sizeable taxable portfolio, they are easier to optimise for tax.
Each year I aim to fill my ISA, then add funds to my taxable account. From mid-2019 onwards I am no longer contributing to my SIPP as I feel this is nearly at my FIRE target.
So while I am bought into passive investing completely and buy passive funds, I do like some spice in my asset allocation.
Asset Class Allocation
As I am investing over a long horizon, I have an adventurous portfolio – I aim for 95% stocks and 5% bonds. Many would consider this cowboy territory, and more risk-averse people will no doubt recoil with horror.
Given my (as at July 2019) non-working situation you’d think I should review this? In reality, I am still happy with this approach given the crossroads I am at – I understand that if I take a sabbatical this gives me the best chance of growth and never having to work again. But it does come with the not insignificant downside of being high risk.
I divide my portfolio into the following assets classes in the table below. This also shows where I am now and my target percentage, alongside the delta how far away from them I am.
|Class||Value||%||Target %||Delta %|
|Small Cap Stocks||£27k||5.0||5.0||0|
Each month I share the country allocations and Top 10 holdings
Every month more granular details are shared in my net worth updates, along with some commentary and monthly thoughts on the good times and bad times. You can read these here:
Exact ETF’s held
If you really want the details – here are the exact ETF’s I hold, and which asset class I put them in. My choices are mainly driven by the ongoing charges, which I show here for reference, alongside being a reputable company at indexing. Blackrock (who iShares are part of) easily meets the bill. The final column Percentage shows the percentage of my portfolio this ETF makes up.
|iShares Core S&P 500 ETF USD Acc GBP||US Stocks||0.07||36.33|
|iShares Core MSCI EM IMI ETF USD Acc GBP||EM Stocks||0.18||22.00|
|iShares FTSE 100 ETF GBP Acc GBP||UK Stocks||0.07||14.19|
|SPDR MSCI World Small Cap ETF GBP||Small Cap Stocks||0.45||5.00|
|iShares £ Index-Lnkd Gilts ETF GBP Dist||Bonds||0.25||4.98|
|iShares Core MSCI Japan IMI ETF USD Acc GBP||Asia Stocks||0.20||4.61|
|iShares S&P SmallCap 600 ETF USD Dist GBP||Small Cap Stocks||0.40||4.02|
|iShares Core EURO STOXX 50 ETF EUR Acc GBP||Euro Stocks||0.10||3.82|
|iShares Core MSCI Pac ex-Jpn ETF USD Acc GBP||Asia Stocks||0.20||2.67|
|iShares EURO STOXX Small ETF EUR Dist GBP||Euro Stocks||0.40||2.38|
Squeezing those charges out
My funds themselves have a 0.15% average ongoing fee, which I feel is very reasonable. But truth be told, there are many more charges and costs than the ongoing fees that are clearly labelled.
A recent charge summary from my broker attempted to calculate all the other charges, and it was very interesting. As well as ongoing fees, it included more piecemeal and transaction-based charges such as dealing fees. Platform fees were also included which I have to pay. Additionally, fees that I don’t pay with the structure of my investments such as entry/exit fees and performance fees are also included.
One charge that I know exists with ETF’s, but rarely bother to consider, the bid-offer spread was also included for completeness. Now we are getting into the true nitty-gritty, and I’m glad they had to calculate it rather than me!
Now at the end, drumroll please ….. my overall charges are just 0.39% ….. which I’m to be honest, very happy with. It could have been much worse. And it does bring to mind that the 0.15% ongoing fee is just a starter.
Performance to July 2019
So we’ve covered the plan, the assets allocation and portfolio itself. What’s left to look at but the performance now? I’ve got some stats for your below, demonstrating the bull run marvellously.
By far the most interesting to me is the return analysis – demonstrating the sum is greater than the parts. What I mean by that is the risk of holding a mixed portfolio which is not directly correlated significantly reduces the overall risk. The standard deviation of the portfolio is less than the standard deviation of all the constituent ETF’s.
June 2018’s thoughts
I blogged about my overall portfolio last year, where I had this analysis.
Initially, this confirms I am still too heavily invested in the UK – the FTSE only has 100 stocks and they are far too dominant in my top 10 holdings list. Moreover, I am conflicted with the sin stock above. As a vehement anti-smoker, I struggle with making money from people’s addictions – yet BATS is riding high on the FTSE and doing well. Not to mention the heavy petro-chems in Shell and BP that also dominate the FTSE. And call it a personal preference, but I want to see more tech and forward-looking companies on my top 10. Hence upping my EM and US stocks feel like a good approach, as they are much more heavily weighted in tech than the UK market.
Well, what has changed over the year? Mainly following the plan from last year to reduce UK and increase emerging market exposure. Additionally, I have simplified my holdings down from 16 to 10 ETF’s. And also removed the property allocation, replacing with small-cap stocks. But apart from this simplification and change of 5% of the portfolio, I have not made any other deliberate changes. From someone who loves tinkering/refining – that is a big accomplishment.
To conclude, I am happy with my portfolio in 2019 and am not making any rash changes until both my sabbatical/working situation and the ongoing Brexit drama are fleshed out in significantly more detail.
Over to you
- What are your thoughts?
- Am I too much of a risk-taker?
- Do you openly share your portfolio – if so link me below, please 🙂