Saturday, 29 December 2018

Portfolio Review - End 2018

Well time marches on relentlessly and this is now my 6th end of year review since starting my blog in 2013.

It's been quite a year...Brexit, Trump, climate change, Novichok, plastic in our seas, cave rescue in Thailand, the ups and downs of the markets and me officially becoming a pensioner...I've been practicing rattling my walking stick along the public railings...

Now with my monthly flow of pension from the DWP, my focus is changing as I no longer need my portfolio to generate income. The revised plan will now re-focus on growth. I was particularly intrigued by some research by Bessembinder which seems to suggest the outperformance of equities over bonds is generated by just 4% of the market and over half of all equities returned less than government bonds over a 90 year period. (Article from June)

Climate Change

In October, I was reminded of the dire threats to the environment with the latest IPCC report calling for a limit of 1.5C on global warming. 

However unsatisfactory the Brexit outcome might be, it is nothing of consequence compared to the devastating effects of global warming. Yes, many will have enjoyed the long hot Summer this year...4 months of t-shirt and shorts weather from May to September.. but at the same time they cannot have missed the news of extensive wildfires, floods, hurricanes and droughts around the globe.

The past 4 years have been the hottest on record and the Met Office have forecast temperatures in the UK could be 4 degrees warmer on average by 2070.

At the COP24 conference in Poland earlier this month, Sir David Attenborough said:
"Right now, we are facing a man-made disaster of global scale... our greatest threat in thousands of years. Climate change. If we don't take action, the collapse of our civilisations and the extinction of much of the natural world is on the horizon."

A week previous we had a brief response on the subject from President Trump:

"I don't believe it"

The patterns seem to get more severe and unpredictable each passing year and I fear the movers and shakers are showing little concern and sleepwalking into the abyss. How many more warnings do the global community require before we start to take this issue seriously?

I am not sure why this is not yet breaking through. Maybe as a species we are unable to translate the warnings into how we are likely to be impacted but we do make long term plans - marriage, saving for house purchase, bringing up our children, saving for retirement. However there are many positive signs and I have been encouraged by the direct actions of Extinction Rebellion in recent months and wish them well in their efforts to raise more awareness and move this issue up the political agenda.

As I said in one of the subsequent posts, if I become aware of a threat I have a responsibility to do something. At that time I decided to make some adjustments to my portfolio to bring on board a few ethical/green funds which I believe are attempting to address some of the big issues raised by climate change.

I think my lifestyle is fairly low impact - for the UK at least - and registers 6.8 tonnes of annual carbon emissions on the WWF scale - lower than the UK average and could do a bit better - but I want to do more to align my investments. The UN has warned that today's generation are the last that can prevent a catastrophic warming as well as the first to be suffering from early impacts. There are one billion people from developing countries who are least responsible for climate change but are most vulnerable to its effects.

This surely is the most important issue facing the global community.


What can I say? This omni-shambles was the subject of a couple of lengthy posts - Brexit Fudge in July and Another Fine Mess Olly in November.

I imagine the feeling of betrayal will be long-lasting if MPs fail to deliver on Brexit but we still have a little time. The deliberations on the deal will resume on 9th January with a vote the following week. I imagine in the absence of any significant changes, that the deal will be rejected and we are then left with the prospects of some sort of managed no deal or another referendum or revoking Article 50. My money is on the no deal option but after the past year, absolutely nothing this government came up with would surprise me.


As long-term readers will know, I am a big follower of sport and this has been a vintage year. The highlight for me was the 5th test at the Oval and the retirement of England cricket legend Sir Alastair Cook. He scored a century in his final innings to round off a wonderful career which included 33 test match centuries and over 12,000 runs at an average of 45.4.

In the same match, Jimmy Anderson overtook Glen McGrath to become the leading fast-bowler wicket taker of all time.

Against all predictions England reached the semi-finals of the World Cup in Russia having won a penalty shoot-out along the way. The country was starting to believe "It's Coming Home..." sadly they couldn't quite get past Croatia losing in extra time. My consolation was that I had placed money on France at the start of the tournament.

In the world of cycling, Geraint Thomas OBE was inspirational winning the Tour De France and I was delighted to see him secure his SPOTY award last week. On the track, I was saddened to hear that double Olympic champion Kristina Vogel suffered a horrific crash in training which severed her spinal chord and left her paralysed. She talked about this and coming to terms with her new situation in this interview which I found very moving.


It was all going so well until October but the sharp downturn over the past few weeks has seen my portfolio return a loss for the year. This is not unexpected, I have been half expecting the downturn for some's what the markets do. Now is a good time to evaluate asset allocation!

I decided to review my whole investing strategy as my state pension kicked in earlier this year. I no longer require my investments for income and have therefore moved towards growth and also to increase my global index funds. I have also moved a portion of my portfolio into 'green' investments and plan to increase this over the coming year.

My Allocation end December 2018
(click to enlarge)

Over the year I have therefore replaced most of my income-generating funds. However for the time being I still hold on to a few of the original investment trusts - Aberforth Smaller Companies, City of London and Finsbury Growth and Income.

In August the BofE raised interest rates to 0.75%...the highest level since 2009. My saving rate with the Coventry was increased by 0.15% to 1.4% which is still not great and below the current rate of inflation. Had I relied solely on savings interest for the past decade my standard of living would have been severely compromised and I doubt if I could have afforded to retire early.

Portfolio Returns

I have just completed a review of my actual investment portfolios - sipp flexi drawdown and ISAs - for the full year to 28th December.

The FTSE 100 started 2018 at 7,688 - and has gradually declined to finish the year down 954 points closing at 6,734 or -12.4% - if we add back in say a further 3.8% for dividends paid, this will give a ballpark total return figure of -8.6% for the full year. The second line FTSE 250 has lost 13.5% and the FTSE All Share index is down -9.5% for the year.

My Vanguard Lifestrategy 60 fund is a diverse mix of global equities and bonds and provide a good benchmark for a balanced global portfolio. The fund is down -3.0% over the past year.

Investment Trusts & Funds

Over the 12 month period, I purchased a further holding in Scottish Mortgage for my ISA. I have also added Mid Wynd, Polar Cap Technology and Edinburgh Worldwide. I have also added Impax Env. Markets, newly launched Smithson, Baillie Gifford Managed fund and also their Positive Change fund.

The better returns for the year came from Finsbury Growth & Income (again) up 0.2%, Capital Gearing up 3.4% and the best performer Scottish Mortgage +4.9%. The trusts that has struggled for me this past year have been Aberforth Smaller -10%, City of London -8.2% and Tritax Big Box -6.7%.

The total return for my basket of trusts over the year was -3.5%.

Index Funds

Over the past year I have added VLS 60 to my new ISA with Vanguard Investor, also HSBC Global Strategy and Baillie Gifford Managed.

The contribution from my index collectives has seen a modest fall over the year with a total return of -1.6%.

Fixed Interest

As ever, the fixed interest sector has provided a steady and predictable income of 5.1% however the capital has taken a hit with a sharp decline of 15% for my Lloyds Preference shares. The total return is -3.1% for the year. 

Most of my income generating FI funds are no longer required and have been sold.

The Complete Basket

As a whole, the portfolio has delivered a total return of -2.7% over the past  year. Here's my portfolio returns covering the past decade since the big crash of 2008. 

2009 37.2%
2010   9.9%
2011  -3.0%
2012 15.5%
2013 13.3%, 
2014   5.4%, 
2015   2.7%  
2016 11.4%
2017 11.3%
2018  -2.7%
(click to enlarge)

A sum of £1,000 at the start of 2009 has grown to £2,500 and an average annualised return over the past 10 years of 9.6%. This has enabled me to take my 4% income each year since moving to early retirement in 2008 and leaving some held back to build reserves. Of course, the figures are enhanced by the large bounce in returns for 2009 following the market turmoil of late 2008 and early 2009

Most Popular Posts

The most popular this year have been:

1. Sipp Drawdown Yr 6 Update
2. Vanguard LS 60 - Year 3 Update
4. Investing for Grandchildren
5. Equities Outperform Bonds
6. Brexit Fudge


In these times of low interest rates and corresponding low returns from cash deposits, for a little more risk, an average annualised return of almost 10% over the past decade is for me very acceptable. Return on my investments have been positive in 8 of the past 10 years and fairly modest reductions for the 2 down years.

The move to index funds provides more global diversity and in particular the equity/bond balance provided by the LS funds provides less volatility and more stability. This core stability provides a little more freedom to take on board a little more risk with my tech funds such as Scottish Mortgage and Mid Wynd and also introduce some investments which focus on the environment.

I am gravitating towards an allocation which I hope will continue to provide a reasonable level of return without too much volatility. I will continue to add to my 'green' section of the portfolio when I get my head around the challenges of climate change but I remain mindful of the words of Ben Graham 'The investors chief problem...even his worst likely to be himself'.

Be patient, stay in the game and keep it simple....

Finally, thanks to all for dropping by during the past year and wishing everyone all good things in 2019 - especially good health. I certainly think it's going to be interesting.

As always, if you keep track of portfolio returns, feel free to leave a comment and share with others how your investments have fared over the past year.


  1. I think that most of us will have negative returns this year, since September markets have been pretty brutal... I have added two IT in my portfolio (EDIN and CTY), it's a form of investment that I did not consider before and thanks to you I did some more research and started a small position. Have a great 2019! Ciao ciao

    1. Stal,

      Yes, especially equity-heavy portfolios...but this is just a snapshot over just a single year and to have any real meaning I think it needs to be evaluated over the longer periods such as 10 or 20 years to eliminate luck and other factors.

      I hope your UK income trusts can deliver what you need. They are certainly looking good value for seekers of natural income at this point!

      Likewise, all best wishes to you in 2019 which from memory is a special year?

  2. Well done over the past decade!
    Keep up the good work - I enjoy your site.

    1. Thanks steveal. I will keep it going as I enjoy recording the journey and always good to hear positive feedback from time to time!

  3. Welcome to pensionerhood (is that a word?) I must have preceded you by around a year.

    I am a very recent entrant to investments – hence my close following of this blog and others. It isn't that I didn't have an investment strategy before, but I put my equity investments into the AVC scheme of my work DB pension and cash savings into the "overpayment reserve" option of our mortgage. (The AVCs only had a limited range of funds, but the fees charged were completely outweighed by the effective 66% interest from tax relief at my marginal rate as long as I stayed within the 25% tax free pension lump sum; the mortgage overpayment allowed me to have a cash emergency fund available but get an effective interest higher than any savings account). So just over a year ago I suddenly found myself with that pension lump sum, less paying off the mortgage balance, to invest. Having realised I was excessively agonising over the proportions of UK and worldwide equities and bonds in my AVCs, like you I saw the attraction of LifeStrategy as an already diversified solution and that is all I have bought. So it is great to have your 7-year perspective that 2018's feeble performance is part of a more respectable longer term trend.

    Of the rest of your comments ... I agree that following the Tour de France was a 2018 highlight, and to some extent cricket though its departure from TV means that I no longer follow Test cricket as closely as I once did. Climate change is something worryingly sidelined by politicians; UK politicians never look further ahead than the next general election and Trump's strategic planning is probably directed over minutes rather than decades or centuries. As a (retired) scientist myself it seem overwhelmingly demonstrated that there is global warming at a rate geological historians tell us is unprecedented; clearly it correlates with the recent (on geological timescales) increase in atmospheric CO2, and while proof of causality isn't technically established it seems reckless not to do what is in our power to mitigate potential catastrophic consequences. From an evolutionary perspective life will no doubt adapt, but I do have a personal interest in humans who may well suffer disproportionately.

    I have commented previously on Brexit, but it has completely destroyed any faith in government and politicians working for our greater good rather than their own very short-term point scoring.


    1. Jonathan,

      If grandfatherhood is a word then I am sure Susie will allow pensionerhood!

      The VLS range were introduced in 2011 and all have a respectable average return since inception. I settled on the VLS60 in 2015 as a replacement for some of my actively managed investments and have been happy with it so far. Of course, the recent performance has reflected the downturn in the markets generally.

      Interesting to get the views of a retired scientist on climate change. As you say, even if the evidence is not 100% conclusive on causation, it's better to do whatever we can to mitigate the potential chaos and like you, I have 5 grandchildren all under the age of 10 so have to do whatever I can for their future. I am hoping 2019 will be a turning point for the global community.

  4. Happy New Year, DIY!

    I've continued to enjoy reading (and learning from) your blog - there aren't many retirees like yourself talking about investments and although I'm still years from my own retirement, I still like know what I need to prepare for in the future.

    Interesting that you have turned towards the envrionment and greener investments, as this is something I'm sure that I will gravitate towards too.

    All the best for 2019

    1. Thanks weenie and likewise wishing you all the best for the coming new year. The markets seem to be reflecting the unpredictability of the changing climate and weather patterns at present.

      Good luck with your investing and with setting and achieving your new targets for the year!

  5. Thanks for sharing your investment returns openly. There are lots of people that give investment advice, but not so many that openly demonstrate what they have done with their own money.

    I think one of your closing lines is very important "Be patient, stay in the game and keep it simple...."

    I got in to investing around 2000 thanks to my father. You may be interested to see the actual annual returns below for the family’s investments in unit trusts/OEICs – earlier on there were some investments in investment trusts, but now it is purely in funds, with some switching once or twice per year - not a great deal of work is put in to managing the investments. Even with the bad years ( bubble and financial crisis) the returns are good. The equity curve looks even better due to pound cost averaging in the early years and not having taken out any capital.

    I always refer back to this investment history when there is market turmoil. Good luck in 2019!

    2001 -17.5%
    2002 -20.1%
    2003 +17.7%
    2004 +19.8%
    2005 +28.9%
    2006 +7.1%
    2007 +8.8%
    2008 -34.1%
    2009 +32.4%
    2010 +27.0%
    2011 -6.8%
    2012 +18.8%
    2013 +25.3%
    2014 +7.6%
    2015 +8.2%
    2016 +19.2%
    2017 +20.0%
    2018 -7.9%

    1. Thanks for sharing your record over the past 20 years! The returns look excellent and I am guessing you have quite a high equity allocation but your strategy is working. Feel free to post more on how you achieve the returns if you wish, I and I am sure others would be interested.

      In any event, good luck with your journey.

    2. Hi. Yes, you are right, it is high equity - 100% equity in fact (OEICS/Unit Trusts). I am more than 20 years away from retiring, so I don't feel I need to change that yet.

      The strategy is not exactly deep or complicated.

      I hold a watchlist of about 35 funds - covering geographical areas (UK, Europe, US, Asia/Emerging, China etc and a couple of specialist funds) and include anything from small cap, large cap, income funds. They have all been good performers over time - although they all go through good and bad patches. This I also keep as a proxy for the main indices (FTSE, DAX, etc) in addition to following the main indices.

      I record fund/index/currency values at the end of every week, not so much to obsess over on a weekly basis but to track performance over time and to keep in touch with the markets. I don't like online portfolios, so I use a spreadsheet. Doesn't take me long to gather the prices every week and then I can plot whatever chart I want when it comes to reviewing the investments 2 or 3 times per year.

      I have two "fantasy" portfolios too, one growth, one a bit more income oriented, to compare against the actual investment portfolio, too. All the information gathering lets me see if the main investment portfolio is lagging. I use Trustnet and the Hargreave Lansdown websites for charting comparisons - again to see if any funds are lagging their peers more than they should be and therefore if I need to switch out of them.

      I don't hold much in specialist funds - for instance I have a small percentage in a commodities fund and a small percentage in a China fund, but not enough to cause excessive volatility.

      I rebalance the investments geographically depending on where I think will do well in the next year. I'm afraid I have no recipe as to how to determine this. I just keep up to date with the news and current affairs. I used to be heavily in to reading articles, opinions, books, theories. I used to pore over the FT at the weekend and follow the likes of Nouriel Roubini etc, until I got to the point where I realised a lot of it was distracting and confusing me. I still read articles and opinions, as they can throw up interesting points of view and highlight something I forgot or overlooked. For the most part I now go with my gut instinct when making decisions, rather than anything quantitative. Over the last 5 years or so, I'd say I've been right more often than wrong. But I don't then go all in on one idea, I just rebalance the portfolio accordingly.

      My father's only inputs when investing were Ceefax (for market data), the weekend paper and Money Observer magazine. He was quite prescient in his forecasts. He was never able to explain it properly to me, and far better at it than I am. But it shows you don't need data overload.

      I also don't remove equity. It all stays invested. Otherwise you don't get the compound growth.

      Again, as you quite rightly said, be patient and stay in the game - it's the most important thing.