The plan is to maintain a rough split of 60% equities from which to generate a rising income which should hopefully keep pace with inflation. This element of my portfolio is comprised of a ‘basket’ of investment trusts. All trusts have managed above inflation dividend increases over the three years. In this regard, the drawdown sipp is an index-linked annuity substitute.
The non-equity part of the portfolio consists of the New City High Yield trust and a rather large dollop of PIBS from Coventry BS which is due to mature next June.
At this point last year, the total return for the portfolio was 32.6% which meant that over just two very good years, the value of the portfolio had grown to its original starting valuation prior to taking the 25% tax-free lump sum payment.
Over the past year, the returns have been more mixed and the performance of some of the investment trusts have been more muted as share price premiums have reduced. Once again there have been no changes to the portfolio. As readers of my blog will know, this is a big contrast to my individual shares portfolio!
As can be seen from the end column, I have calculated the 3 yr average annualised return (including income) for each of my investments. Sometimes it can be a little misleading focussing on the income yield alone whereas what really matters over the longer term is total return - capital appreciation + income combined.
My holding in smaller companies specialist Aberforth continues to perform well with an average return of over 29% p.a. in each of the past three years. The larger trusts, Edinburgh and City of London have been very solid however I have been a little disappointed with a few of my Aberdeen stabled ITs over the past couple of years - the two Murrays, and Aberdeen Asia Income.
The total return including income after 3 years is 43.8% which is very satisfactory.
Here is the portfolio (not actual amounts but roughly reflecting weighting for each holding)
|SIPP Portfolio to June 2015|
(click to enlarge)
|I like June!|