Thursday 2 January 2014

End 2013 Portfolio Review

Following on from my half year review at the end of June, I have just reviewed my portfolios - sipp drawdown and ISA - for the past year to the end of December.

My portfolio is allocated between fixed interest (40%) and equities (60%), which in turn are divided between individual shares and (mostly) investment trusts.

Since the start of 2013, the FTSE 100 is up 14.4%  at 6,749 - if we add on say a further 3.4% for dividends paid, this will give a ballpark figure of around 17.8% total return for the full                                                                                year.


My portfolio of individual shares have been a little mixed, providing a total return of 12.0% over the 12 month period. The better performers have been Reckitt & Benckiser (27.2%),  Sainsbury (14.9%), GlaxoSmithKline (26.4%) and Abbey Protection (18.1%).

2013 has not been a good year for mining and resources shares - BHP Billiton has recovered a little in recent months but remains well down over the year(-8.8%). Others that have struggled to make much progress during the year are Imperial Tobacco down 1.1%, BSkyB up 1.1% and Unilever up 0.1%.

Additions to my portfolio acquired during the past 6 months are not included in the above. Many have got off to a decent start since purchase - Next up 9%, easyJet up 8% and Sage Group up 8%.

As I said in a previous post, I regret the sale of DS Smith and RPC Group earlier in the year - both have put on gains in excess of 30% during the second half of the year since the sale.

Total income on shares over the period is 3.9%. Collectively, dividends have increased by an average of 10.5% - the highest increases have come from Dialight 35%, AMEC 19.6%, BSkyB 18.1%, Unilever 15.4% and NEXT 16.6%. The shares with the lowest increases were Tesco 0.0%, Billiton 3.6%, Sainsbury 3.7% and Carillion 5.4%

Investment Trusts

Most of the trusts have recovered the ground lost earlier in the year. The total return for the year was 15.1%.

The best return came from smaller companies specialist Aberforth with 61.2% and which has been leading the pack all year. Others continuing to provide solid returns are Law Debenture (27.7%), Temple Bar (28.1%), Bankers (29.1%), Edinburgh (23.7%) and City of London (24.1%). The only trusts that has struggled for me have been Aberdeen Asian Income (-17%) since purchase earlier this year, the other Asia-focussed trusts Henderson Far East (+4.0%), Schroder Oriental (+1.9%) and Murray International (+4.7%) which has pulled back during the second half.

Income yield from the trusts portfolio has been steady at 4.0%. Most trusts have continued to bolster income reserves this year and therefore the collective increase in dividends has been just 4.7%. The highest increases were Schroder Oriental 9.5%, Murray International 9.4% and Aberforth 7.2%. The lowest increases came from Dunedin Income 0.9%, New City High Yield 2.2% and Dunedin Smaller Companies 3.0%

Fixed Interest

Following the problems with the Co-op Bank in May which affected capital values over the 2nd quarter, I am pleased to report that my PIBS and preference shares have seen a strong performance during the second half of the year. Total return for the 12 months was 12% including income of  6.9%.

The best performance came from Skipton BS PIBS which provided a return of 33% which more than compensated for the loss arising from the smaller Co-op holding.

As a whole, the portfolio has advanced 13.3% over the past  year including the payment of 5.0% income. Bearing in mind that 40% of the portfolio is represented by PIBS and fixed income securities, I am reasonably happy with this.

Learning Points

I believe successful investing, whether for income or growth, does not need to be complicated. You don’t need to be an expert when it comes to selecting shares but it helps to avoid unnecessary mistakes - or at least keep them to a minimum.  In the words of Warren Buffett: “you only have to do a very few things right in your life as long as you don’t do too many things wrong”
Over the past year, my main mistakes have been the premature sale of just 2 shares that then went on to make significant gains - DS Smith and RPC Group. Both were sold in June and the proceeds recycled into Vanguard All World High Dividend ETF.

I need to be a little more patient with the shares I have purchased and maybe do a little less monitoring of share prices.

As ever, I would be interested to hear how others have done over the past 12 months - leave a comment if you keep track of your portfolio.

Finally, Happy New Year to all and good luck with your investing for the coming year!


  1. Thank you for your interesting review. I just did my calculations, which are as follows.

    I have a leveraged (with mortgage debt) 100% equity portfolio. 6% is in funds, the rest is in UK listed individual shares. The summary below is for the individual shares only.

    I don't 'unitise', so the following numbers shown the performance of shares held at close of business on 31 December 2012. During the year I did not sell anything, but I did add shares to the portfolio. The shares added during the year are not included in the figures below. Performance is measured based on prices/income received between close of business on 31/12/2012 and 31/12/2013.

    actual yield on shares as valued on 31/12/2012 = 4.56%
    change in value of shares = +16.64%
    total return = 21.2%

    total return based on actual capital taking into account financing costs = 32.48%

    Clearly 2013 was a vintage year for the leveraged investor. Deep down I know I should divert the dividends and savings into paying down the debt, but I simply cannot bring myself to do so. Perhaps I'm an investment addict? Anyhow, I plan to top up on Imperial Tobacco, Anglo American, Centrica, Scottish and Southern and perhaps Unilever.

    A healthy and prosperous new year to you, and I hope that you keep up the blogging!

    1. Hi Brodes,

      Thanks for taking the time to post your results for the year. A return of over 20% is very good - I was wondering which shares have performed the best for you this past year?

      I guess it makes a lot of sense to borrow at low rates of interest but just beware a possible scenario of quickly rising interest rates and negative returns from equities. Not that I think this is very likely in the coming year.

      Good luck with your investing plans for 2014 - regarding your proposed top-ups, I would just double check you are comfortable with the debt position/ declining free cash flow on SSE. This was partly the reason I decided to sell last year.

      As for keeping up the blog, it will be shortly one year on from the first post. I will continue as long as I find it rewarding and as long as others find it helpful.

  2. The truth is that I don't pay much attention to the share price performance of the individual shares. If anything, it distracts from the overall portfolio performance. In my experience - the best approach is to ignore the news and never sell. In terms of percentage increase I expect the higher gainer was Tui Travel, which doubled. The highest gainer by value was probably BT, in which I have a significant holding, and which must have increased by at least 40% this year. Of course I keep all the contract notes etc for tax (capital gains) purposes. I just have not got around to entering the cost prices in my spreadsheet.

    I am really an income investor. My primary goal is to gather sufficient annual dividend income so that I cease to be reliant on paid employment - in other words financially independent. I am around 2/3 of the way there. Another three years of the grind should just about do it.

    I use gearing because I can borrow (currently) at 2.8%, and invest that in shares yielding around 3.5-6% and having an earnings yield of around 7-9%. In the short term that means I can pay my financing costs and keep the change for more investments. In the long run I expect some capital appreciation, although I acknowledge that it's a bumpy ride. I don't intend to sell shares to pay off the debt. Instead I will, at some point, decide to divert all dividends and monthly saving from salary into paying off the debt. Or perhaps an inheritance will arrive.

    I know what you mean about SSE's increasing debt and declining cash flow. The dividend has been rising, but earning have stayed about the same for the lest 5ish years, resulting in a low dividend cover of around 1.3. I'm going in with my eyes open. In my experience the best shares are the ones with the worst sentiment. The threat of a labour government has pushed down the price, so I'm willing to take the risk. The share is so unpopular that I can't say no. In any case, it will be no more that around 2.5% of my portfolio, so I am OK if the divi is slashed and the price tanks. This last year I've had a similar negative experience with FirstGroup - but I'm still up 20% overall. The portfolio effect in action.

    My 'journey' towards financial independence began when I started to read various personal finance blogs. I am from a background where it is important to have and spend lots. You know - two cars per household, 2 foreign holidays a year, 2 pets, expensive sporting equipment etc. I want security and freedom. My solution is to establish a dividend income covering a modest lifestyle, and then see what fun opportunities I can get involved in. Working and commuting for 11-12 hours a day crushes the creative spirit.

    Anyhow, the blogging community helped me wake up to the possibility of financial independence at an untraditionally early age. Lots of people seem to be doing it, so why not me! Your blog is a valuable practical contribution to that community. So keep it up!

    All the best