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Meconopsis, I think the thread deserves a new title.
Well, that was a shocker – Berkshire’s holdings. Sadly, I think many private investors have a similar profile to their holdings, but probably not with Apple at the top. Going by the boards of some stocks I follow for amusement; the headliners would be stocks 99 out of 100 investors have never heard of. In Buffett's defense, while Apple might not have the near term growth expectations of Nvidia, for example, I think Apple is likely to be around 20 years from now - another Coca Cola - I wouldn't be so sure of Nvidia.
As I’ve transitioned from a position with employment income and investment income into retirement, diversification has been on my mind. A conventional route in retirement would be an allocation to bonds and annuities. Not for me but appropriate for many investors.
Frequently, over the decades of my investment career I’ve looked at bonds. I love numbers and have played out various scenarios with ladder structures around bond interest and duration to pay a reliable income stream, but ultimately rejected them on the basis equities prevail over the longer term.
Last year, a family member with a very low investment risk threshold asked me for advice. (Many years ago, I completed 3 FCA certificates, so I know the importance of client assessment.) Knowing he doesn’t have any dependents, or close family, I suggested he consider annuities. He chose not to, but the exercise prompted me to look at LGEN. I saw a company paying close to 10% dividend yield with an expectation the dividend would grow at 5% over the following 2 years. I noticed that many other UK companies had also entered the high yield sphere. Previously, I’d been more focused on growth plays. While I maintain that a good growth stock will likely produce a higher total return than LGEN paying 10% growing at above inflation, I chose to move a large part of my portfolio into the high yield sphere.
While I’m still tweaking my strategy, my thinking is that the dividend payers cover more than my income requirements, which allows me to invest the excess back into my preferred growth stocks and a bit back into the high dividend sphere to enhance the inflation proofing of my dividend income. (I think that explains it)
I also see this as a good point to be in UK stocks. Whether it’s Brexit, Covid government policy or whatever, I feel the stagnation in share pricing may be coming towards the end and as interest rates drop – I think towards 3% - the high yield sphere will be more attractive. The dividend yield on LGEN might fall towards 6% but we’d see a corresponding appreciation in the capital returns.
* When I invested in LGEN last year my portfolio application (Microsoft Money) threw up an investment I made in LGEN in July 2008, at 51p. Highlights the chaos of the period and the case for not over trading - I sold the holding a few months later, probably trading into something going the other way.
Another point on my strategy.
Having been through the mill with several market crashes, my hope is that the dividend income streams will be impacted to a lesser degree and duration than the capital values. I also have insurance in the form of cash.
I've heard the case for holding growth funds and selling to release income as required. I manage four pension funds for family members, with three in drawdown. They are all invested in funds and investment trusts, because I took a decision not to invest their pensions into individual shares. I can handle a 50% hit to equity, but prefer the protection of a 3rd party investment professional to explaining such a market fallout to a family member.
But it leaves me with the problem of deciding when and how much of the growth funds I need to sell down to cover monthly income requirements. Much easier if the natural dividend income exceeds income requirements but their funds don't allow me the luxury. The following link describes a strategy that might be of interest to others with the problem.
aaii.com/journal/article/10681-optimizing-retirement-withdrawals-using-the-level3-strategy?printerfriendly=true#
Correction, got the wrong year.
It was July 2009, at 51p.
Londoner,
I didn't come back on a couple of your points...
You mentioned that you look after investments for four family members....
Up to around nine years ago, I was looking after around twenty investment accounts for family and friends who had followed me into the Game of Strictly Bricks but who'd kinda got stuck like rabbits in the headlights due to the trauma of the credit crunch....
But then I thought to start writing the Strictly Bricks blog ~ which the computer-savvy son of a good friend set up for me ~ and everyone can now manage their own stuff...
And thank goodness for that ~ I enjoy writing the blog, but spending many hours a week trading for everyone was way too much and I've now been able to let go of that job.
With regards to being whacked by the market, my losses have been different to yours....
1987, I was in an actively managed fund and, from memory, that was a hit of around 25%.
2000, I was in cash, waiting for the crash that overall stock market price earnings ratios told me was most likely coming.... I'd spent hours and hours down at Southampton library in 1998 researching old FTs on microfiche to get that information together, and then I came across Robert Shiller's book "Irrational Exuberance" which could have saved me all the bother ~ but there you go, no big deal really, seeing as I still got the right investing outcome by sitting it out in cash until March 2000...
2008...? 50% loss....? As Crocodile Dundee might have said "That's not a knife..!" I lost around 75% from start to finish, so that was effectively 50% then another 50% off that....
Yes ~ it was all emotionally, psychologically and financially rather painful.
And, as you've implied, a Corporal Jones moment...
2020, I was fortunate enough to swerve that one... I clearly remember that I'd read an article by Ambrose Evans-Pritchard in the Telegraph on Valentine's Day while out in Spain describing the coming covid tsunami... like his name, Ambrose is a rather flowery writer, and I don't find myself agreeing with him on much ~ and that's when I can get to grips with what he's on about...
But I remember thinking at the time "Blo.dy hell, he's right on this...!" and though it took a bit of a delay to build up a head of steam to take action, by the end of February I was largely out of shares (all in house builders) and into cash and Index-linked gilts (the latter did ultimately let me down to some degree but that's another story...) and the upshot was that I made just under 20% that year.
Since then, 2022 was the bad boy ~ that was a 37% loss, which I've now almost, though not completely, recovered...
But, all in all, investing just in house builder shares defo ain't for the faint-hearted, is it...? 😊
So now, at least for the time being, I've become an investing wuss and am 75% (and maybe 80% by the end of today... I'm thinking about it...?) in the big insurance boys with the remainder in Bellway.
Strictly
Some interesting points around differing investment strategies and outcomes. I've been investing for 25+ years. I decided to retire early in 2018 and use my investments for income. It's only really since that point that I've started to keep detailed analysis of my portfolio's performance.
I'm pretty much always fully invested and since 2019 my total calendar year returns are as follows:
2019 +21%
2020 +1%
2021 +17%
2022 -10%
2023 +11%
2024 (ytd) +8%
Probably 2019 I was 30% dividend paying assets and 70% global equity funds
Today 17% dividend paying assets 83% and global equity funds of which 20% are tracker etfs
Good luck all!
Morning folks
Hello strictly, glad you have moved over to the sector. I believe a wise move. Sold Bdev at the start of the year, RDW on the day of the merger announcement & BWY on the day before results. Only holding TW at the moment!
Zac, I too took early retirement in 2020 and spent a year extending the family home. With the additional time available to me I decided to give this game a more serious go. Only hold individual shares, no funds.
2022 -3.03%
2023 39.64%
YTD 24.12%
I stated at the end of last year this was my worse performing share last year. This year, it’s bottom but two. Only Wimps & EZY below. IAG & NWG way out in front.
Holding here for the dividend as it plays a large part in my, hopeful 17.4% average return per year. Sitting on a little more cash than usual with the HB sales although doubled my holding on EZY the other day @£5.09
My managed (Fidelity) portfolio is at 7.89% YTD
Ps Zac
Best performing funds in the portfolio are, YTD:
CT American fund 9.69%
Fidelity Japan fund 7.99%
Invesco Asian (uk) Z 10.07%
Invesco Global Emerging markets 11.71%
Jupiter Merian North American Equity 11.8%
Crossley - DO you stick with those funds and weightings?
Couple of other funds worth looking at if you're looking to diversify:
Aviva Pensions Rathbone Global Opportunities S6
Aviva Pensions HSBC Islamic Global Equity Index S6
I've had a portion of my pension portfolio invested in them for years.
Morning tambo
They are in my fidelity managed portfolio. Assess every 12 months unless they want to change mid term. They are the better ytd performance figures from my 21 funds within the portfolio. I am not confident enough to take total control. I want five years of better performance between my S&S isa and my managed fund before I look into that. Still a lot of learning to do and I realise I will need to expand into funds if I do go down that route. Three years out of three that so far my isa (shares only) has outperformed my managed portfolio. See how it goes, it’s in fidelity’s highest risk category. I used to work for RR and quite a lot (120) retired on the same day. I monitor all portfolios taken out by some of the lads. Dolphin, Fidelity, psigma and various Royal London drawdown portfolios to name a few. Fidelity & RL have wiped the floor with all the others over the last three years, particularly in 2022 in RL’s case
Have a great weekend
strictly,
2020 – (out of housebuilders by the end of february! impeccable timing, with good fortune. i guess ambrose is now on your christmas list.
did he specifically say, get out of housebuilders, or all stocks?
all,
on covid, i could see the obvious risk to health, particularly amongst the elderly, but didn’t anticipate the over-reaction of governments, in shutting down the economy, closing schools and throwing out dosh with *** abandon – something we’re now paying for.
2008 - i remember reading an article a year before the 2008 financial crisis hit warning of the risks in the us housing market, but i didn’t anticipate the far-reaching consequences.
the problem for investors in anticipating the next crisis aligns with that adage, “economists have predicted six of the last three recessions”.
back to 2020 - it’s a useful exercise to look back at these market turns and consider what positions/holdings might be safer than others. while no crisis is the same, i think a look back to the covid crisis is useful because the damage was effectively done in a very short period, 16/2/2020 – 29/3/2020, providing a good comparison.
in that period my uk listed individual shareholding (13 stocks, with an aggregate 60% non-uk weighting) fell 35%. for comparison:
lgen -50%
bwy -55%
vmid -40% (i chose this because the ft250 index aligns closer to the uk market than the ft100)
mrc -55% (i chose this because it’s a popular uk investment trust, to represent the impact of the net asset value premium/discount)
legal & general equity income fund -39%.
though a small sample, i think it highlights the risk of a single shareholding. but what i find particularly interesting is the divergence of the investment trust, mrc, from the underlying index vmid. in a crisis the discount increases fast, and as the crisis passes the reduction in the discount is slow, but reliable – until the next crisis.
there isn’t a discount applied to the funds, but my preference is still for investment trusts over funds. while an individual investor might want to sit tight on their funds, if other investors panic, then the fund becomes a forced seller, liquefying stocks to redeem exiting investors. the investor sitting tight isn’t fully in control.
my comments here are not meant as advice, rather simply to encourage some thought around where and how you might want to be invested when the next crisis hits.
Missing capitals!
I don't know what happened there but I have a suspicion.
My AVG virus software forced an update this morning and since then my cookies have been cleared along with my passwords. Now Word has gone haywire. I wonder what other surprises the upgrade holds for me. I cancelled the auto renewal on the product, perhaps this is AVG's way of hitting back.
(If there are no capitals in this post then I'll need to dig deeper)
Londoner,
"2020 – (out of housebuilders by the end of february! impeccable timing, with good fortune. i guess ambrose is now on your christmas list.
did he specifically say, get out of housebuilders, or all stocks?"
.........................
Out of interest, I went back to that time in my blog, and this is what I wrote on the morning of 14th February 2020...
"So, reading Ambrose Evans-Pritchard in the Telegraph this morning, he’s reckoning maybe another three weeks to the above fork in the road…. that’s while we’re due to be still out here in Spain.
Most readers who write in like AEP’s articles, but reckon he’s a real doom monger, a persistent Chicken Little… so, he could well be talking b.llocks…. I really don’t know….. but even a stopped clock is right twice a day…"
.....................
of
So, I just googled for the article, and it didn't come up, but one did from AEP on 6th February that year and by that point he had already got the coronavirus bit well between his teeth.... see below, if you're interested, but it was a general APB (as opposed to AEP 😊) for stock markets, rather than being house builder, or any other sector, specific.
The article I've linked doesn't mention the three weeks' heads-up, so clearly he did write at least another article rather than my simply having got the dates wrong...
https://www.telegraph.co.uk/business/2020/02/05/chinas-coronavirus-not-remotely-control-world-economy-mounting2/
Anyway, I wish I could say that I shifted 100% out of shares straight off, but, being an investing wuss, I only initially moved 40% out and then later, after some soul-searching prevarication, moved about another 30% from memory.
But it was good to end up comfortably positive for the year ~ it partially made up for my monumental investing c.ck up in 2008 I mentioned in a previous comment here...
Strictly