Wednesday, 31 December 2014

End 2014 - Portfolio Review

As I get older, the time seems to speed up - this past year has gone by in a flash! Puts me in mind of a song by the late Sandy Denny 'Where Does the Time Go'.

Across the evening sky all the birds are leaving
But how can they know it's time for them to go?
Before the winter fire, I will still be dreaming
I have no thought of time

The early part of the year was partly spent writing my latest ebook DIY Income which was self-published in May - sales are slowly starting to build.

The other main event of this year was my house move in July - it takes a little while but slowly settling into my new surroundings (I think!).

Of course, a big surprise was the changes to personal pensions announced by the Chancellor in his Spring budget. This has certainly shaken up the pension annuity industry and has resulted in a radical rethink of my own drawdown plans from next April. This is partly also the result of a doubling of my SIPP charges with AJ Bell Youinvest.

The Chancellor also announced a significant increase in the ISA limits to £15,000 from July.

Turning to my portfolios and following on from my half year review at the end of June, I have just completed a review - sipp drawdown and ISA - for the full year to the end of December.

As many readers of this blog will know, my portfolio is allocated between fixed interest (40%) and equities (60%), which in turn are divided between individual shares and  investment trusts.

Since the start of 2014, the FTSE 100 is down 183 points -2.7%  closing at 6,566 - if we add on say a further 3.5% for dividends paid, this will give a ballpark figure of just 0.8% total return for the full year. Returns on capital have been just as difficult with savings accounts -  the Bank rate has remained at a record low of 0.5% and the savings rate on my instant access account with the Coventry is 1.5%, and on its cash ISA, 2.75% (4 yr tie in).


My resolution for 2014 was to try to become a little more patient with existing share holdings. There have been only a couple of sales - specialist LED lighting company Dialight was disposed in January following a further warning on profits and in March, I decided to take profits on Carillion and recycled the proceeds into a repurchase of engineer IMI Group.

Once the house situation became clearer in the Summer, I increased further the number of shares in my ISA portfolio in the second half. I have added brokers Charles Stanley and Hargreaves Lansdown and also spreadbetting company IG Index. Finally, during the downturn for commodity shares in December, I topped up my holding in BHP Billiton.

As last year, the individual shares have been mixed, providing a total return of 3.4% over the 12 month period. The better performers have been Reckitt & Benckiser (again) up 14.9% including the recent spin-off of Indivior,  retailer Next +23.8%, accounts software specialist Sage Group +27.2%, insurer Legal & General +23.8% and tobacco company Imperial +27.3% (all figures include dividends paid). The returns have been held back by the well documented dire performance of my two supermarket shares. Tesco is down 40% and has slashed its interim dividend, Sainsbury has fared a little better and is down only 30%. I topped up my holding in both at the end of September - a tad prematurely as the share prices continued to fall in October. I am hoping this sector will see some modest recovery over the coming year. (If the supermarkets are excluded, the total return figure would increase to 6.6% - hey ho!!)

Others that have struggled to make much progress during the year are one-stop commodities play, BHP Billiton (again), small caps Nichols -22% and Plastic Capital down -10%, oil sevices group Amec Foster -17.5% and large cap pharma GlaxoSmithKline -10% which has been under a cloud for most of the year following the bribery scandal in China.

Whilst the capital values of the individual share prices will always swing around - some have been very volatile this past few months - it is reassuring to see the predictable dividends rolling in month after month. Total income received on the shares - the main purpose of holding equities - over the period is 3.6%. Collectively, dividends have increased by an average of 13.0% over the year - the highest increases have come from Next 23%, Legal & General 22%, AMEC 15%, BSkyB 18.1%, and Unilever 15.4%. The shares with the lowest increases were Centrica 4.0%, Billiton 4.3%, Sainsbury 3.6%, Reckitt 2.2% and finally Tesco which cut its interim dividend by -75.0%.

Investment Trusts

Unlike shares which have been volatile, the trusts have had a relatively steady if unexciting year - just the way I like it! Over the 12 month period, I have topped up my holdings in Murray International, City of London (x2 April and Sept) and Edinburgh. Also I  added Invesco Income Growth to my ISA in June.

The benchmark for my basket of investment trusts portfolio is Vanguard All World High Yield ETF (VHYL). Over the past year this has seen a total return of 7.8% including 3.7% income. I am impressed with both income and capital return in my first full year of holding the ETF.

The total return for my basket of trusts over the year was just ahead of the shares portfolio at 3.6%.

The better returns came from Asia focussed trusts - Aberdeen Asian Inc., Schroder Oriental and Henderson Far East with 7.9%, 12.6% and 8.5% respectively, Edinburgh up 11.6% and fixed income specialist New City High Yield 6.4%   The only trust that has struggled for me this past year is Dunedin Smaller Companies (-17%) mainly due to a widening of the discount to NAV.

Income yield from the trusts portfolio has been steady at 3.7%. 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 Aberdeen Asian 10.5%, 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

Total return for the 12 months was 10% including income of  6.5%. Once again - I think 3 years running, the best performing sector of my portfolio.

The best performance came from Skipton BS PIBS which provided a return of 18% and Lloyds Bank preference shares 17.4%.

The Complete Basket

As a whole, the portfolio has advanced 5.4% over the past  year including the payment of 4.5% income.

Just comparing my actual investment income received for 2013, I am pleased to see an increase of 12.2% for 2014. Some of this will, of course be due to the income from the new ISA contribution since last April. Bearing in mind that 40% of the portfolio is represented by PIBS and fixed income securities which provide no increase in income year-on-year, I am more than happy with this.

Learning Points

I am fairly happy with my efforts to curtail my trading this past year which was the main task I set for myself at this point last year.

Once again, the collective investment trusts have provided the better return compared to individual shares with less volatility - only 0.2% but this will be the 5th year that I have just fallen short of out-performing the professionals.

I will give a little more consideration to maybe increasing the balance between the two - possibly 70% or 75% collectives (currently 65%). I will also take a little more interest in the Vanguard ETF with a view to topping up - the only reservation is the lumpiness of distributions - I am never quite sure what I will receive until it arrives!

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, wishing all readers a happy, healthy and prosperous New Year!


  1. Hello and Happy New Year!

    That is a good result, presumably with fairly low volatility, given your FI? I just totted up my portfolio and it has returned 9.4% in total. It is virtually entirely equities though, so I expect to give it back fairly sharpish at the first downturn. I suspect my dollar-denominated holdings were a big help this year. Rolls Royce, on the other hand, is perplexing me. C'est la vie. Planning to keep your Indivior? It is going to be one of those irritating little stub holdings for me.

    1. Hi Ronan,

      Thanks for stopping by. Well done with your return for the year.

      I have not given much thought yet but will probably hang on to Indivior (who thought up that name!) in the hope it may become a target for one of the bigger players.

      RR I have looked at once or twice in recent times but have not been tempted so far - it is held by some of my investment trusts.

      All best wishes for a good result in the coming year.

  2. Hi DIY

    Happy New Year.

    Great round up of the year, very comprehensive and interesting to see how all the different asset classes have performed.

    Also interesting to see the performance of Next, I have kept thinking they are too expensive, only to see them keep going up, will have to have a serious look at them. As a real bummer, I remember talking to a colleague about Next when their share price was around 15p (1990 as I recall) although they had dropped from much higher as they were struggling with mail order at the time (how ironic as that is what is really driving their growth now).

    Best Wishes
    FI UK

    1. Hello FI and Happy New Year!

      Yes, Next had me waiting patiently for an entry point for around 2 yrs before I purchased my usual 'half' last October for just under £50.

      All best wishes with your investing and blog for the coming year! Seems to be a nice little community of UK investment bloggers sharing comments, ideas, approaches, aims - great!!

  3. Hi John

    Happy New Year!

    As you know I always like to compare my own performance to that of yourself given we have quite different portfolio's. Yourself with Unit Trusts, PIBS and some stocks compared to my Trackers, Index Linked Gilts and some stocks. I'm still waiting for some mutual fund laggards to stump up their end of 2014 dividends before I can calculate my exact returns but initial estimates suggest I'm going to be pretty close to yourself for 2014. You at 5.4% against my expected of 5.6%. My strategy is based around a long term average annual real portfolio performance of 4% after expenses. With the RPI at 2% I'm left with a real 2014 return of 3.6% so a little under performance in 2014. Let's see what 2015 holds.

    Agree with you on the growth of the UK personal finance blogger. It really is good to see. Back when I started in 2009 it was pretty lonely out there but it's now fast becoming a pretty powerful community.


    1. Hi RIT,

      A return of 5.6% from a basket of mainly passive trackers is very acceptable.

      I see you HYP shares are starting to build and these should make a handy contribution to returns as they build and as the time passes..

      Happy New Year and all good wishes in moving nearer to FI in 2015!

  4. Hi DIY and Happy New Year.

    As I was reading your post I realised I actually only have very imprecise figures for my portfolio performance this year (I think it's around 5.7% but I have no idea what the dividend input has been as I automatically reinvest). I rely on Trustnet to account performance for me which would be fine (I suppose?) if I hadn't had to enter my holdings as "lumps" without being able to give details of the fact some of them had been built up over several years prior. This has distorted their performance.

    This year should be different though and I have been working on my portfolio tracker to try and make it more meaningful. I'm not convinced I've got it right yet though and there are some things that Trustnet won't let me do - e.g. account for sales.

    Do you use a tracking tool or your own spreadsheet/s?

    1. Hello Cerridwen,

      Thanks for stopping by and Happy New Year!

      I use my own s/sheets to keep track of investments - nothing very complicated. If you look under my 'basics' tab you will see a couple of links to articles on keeping track of dividends/capital.

      Good luck with your investments and blogging in 2015!