My Personal Actively Managed ISA

So I am used to being asked by some of my friends who know I enjoy “stocks and shares” about recommendations and thoughts, as well as bouncing ideas off each other. I continue to shout my disclaimer that I am not involved in the Financial Services, I am not a Financial Advisor, and you should always Do Your Own Research. I do however enjoy bouncing the ideas around but there you go!

Right, enough on the disclaimers, onto the meaty stuff! When I first started out doing this I had no clue and no rules or target allocation or what my portfolio should look like. I started it firstly as a bit of fun, and secondly, looking at all the funds they all seemed to contain the same top 10 stocks. Why pay them for holding them when I could hold them myself?!

I had no idea about ETF’s, no idea about Bond / Stock allocation, risk tolerance (although I am willing to take on what they class as “aggressive” – so over the top risk I am happy with as you will see from some of my stock selection!).

So what does trigger me to purchase? There are a few key things that will trigger me to buy:

  1. Too much cash sitting in my ISA Trading account. Once I get to a set amount I will start looking for something that seems good value and buy it – I just can’t help myself!
  2. Bad News. This really is a high risk and should certainly not be recommended for most people, however its worked well for me so far on average, but please do remember this can be a VERY easy way to lose money (I did on Northern Rock)

On the bad news side of things, my desire is to hang on to some cash so I can take advantage of it, but it doesn’t always work (I didn’t have any when the Costa Concordia sank, or I would have bought Carnival then). I did ok out of RB when Bart Becht stepped down. I bought in, held for a month or so and sold out with a 10% profit (post fees). In retrospect I should have held longer and I would have been even better off, but this comes down to me being happy with that profit. As with my caveat above, I have also lost money – Northern Rock the biggest that made me lose my entire holding there!

If I am really deeply honest, I don’t have a fixed rule even now. I am trying to get more structure into it, especially as its grown to a reasonable size now (I’m not yet an ISA millionaire sadly). So my latest thinking, that will no doubt change over time, is:

  • 30% in ETF / Trackers
  • 30% in Investment Trusts
  • 30% in “Self Select Shares Portfolio”
  • 10% in “High Risk” – AIM shares or other random things that grab my attention 🙂

At present I am some way off this – I am heavily overweight in “Self Select” and “High Risk”, however I don’t want to sell these, so I will simply look to increase other holdings to get to the above target. I do however firmly believe that this will reduce my overall performance in this ISA, but should also reduce my overall volatility.

I will be doing a number of posts on what I have bought over the years, and I will update my Portfolio page to cover what is in as I unveil the portfolio, and add to it.

The portfolio itself probably won’t change very much over the coming years, as from the new tax year all my subscriptions will be going into another provider to spread the risk, so it will only be reinvested dividends.

I would add that this really isn’t a great way for most people to invest – if I knew then what I know now would I do anything different? Probably. Why only probably? Like many, I love to dabble and try and pick out good investments – however its also good to have a stable base which I do think the Trackers help provide. This means you can have a steady tick in of income to help build the base, and reduce the impact of potential dividend cuts on the overall portfolio whilst still having your fun. So have your cake and eat it…

What about you – do you have a set allocation that you track and stick to? Or do you like to dabble?

November 2016 Performance

Ok folks, so this is the moment you have all be waiting for, to see how things are going?!

The month has ended, and so it’s time to take stock of the performance across all of my holdings, and compare it to the usual index of choice. This enables me to see how I am doing. I calculate this by taking the value of the portfolio at the end of last month, add on any contributions for the month, and that was my starting value. End value is the value at the end of the reporting period. Simples 🙂 (I will one day learn how to put smiley faces in wordpress, but give me time!)

So without further ado, below is the overall performance of each of my various portfolios.

Portfolio Perf. Income Notes
Company Pension -2.83% 0% No income generated as all funds are in growth or reinvested.
Personal Pension -1.60% 0% No income generated as all funds are in growth or reinvested.
ISA 1 -1.71% 0% No income generated as all funds are in growth or reinvested
ISA 2 -2.46% 0.17% The performance does not include the income that was paid out into my account.
ISA 3 -4.22% 0% Although dividends are paid out, they remain in the ISA wrapper, and will get reinvested for growth. The performance figure includes both the Capital growth, and also income received which will get reinvested. I do keep a graph demonstrating the contributions vs. Portfolio value over time, the question is would people be interested in seeing this? Not great, but that’s what you get with volatility
ISA 4 N/A N/A N/A – not yet set up, so will only start from the new tax year
FTSE-100 -2.45% This excludes any dividends
FTSE-250 0.01% This excludes any dividends
FTSE-All -2.01% This excludes any dividends
S&P 500 3.65% This excludes any dividends
Dow Jones 5.71% This excludes any dividends

 

So what does all of this tell us, apart from I have too much time on my hands to fill out the various spreadsheets? Well, it isn’t the start I would like for the blog, seems like its all doom and gloom here! I am actually not that disheartened by it all to be honest – so far this year overall I am doing ok – and remember folks, 1 month is nothing in the journey to FI – if anything it means I will buy things slightly cheaper the next month, the question will be how it pans out over the coming years. If I had bought a FTSE-100 tracker I would only have been better off than my personal portfolio, and my company pension. Well, nothing I can do about the company pension as they don’t offer any tracker funds, so only a slight under performance, but then given that the company puts in more than I do, I guess I am still up. On my managed ISA side, yes its disappointing. But if I look back and compare this for the tax year, it’s been a highly volatile time. Seems when the market drops I take a slightly heavier hit, but when it goes up I do very well indeed.

You will have to wait until the end of this tax year to see the overall performance!

 

Notes:

Company Pension: This consists of a number of actively managed funds – I don’t have any choice of trackers etc, but I will take the matching, that will more than cover the fees, and I will just live with it.

Personal Pension: This is managed by my FA and contains Actively Managed funds. I continue to contribute each month and the contribution is included in the performance – before my FA has taken their cut (e.g. if I put in £100, and they charged me £5, so only £95 went into the account, I would still class that as £100).

ISA 1: This is also managed by my FA, but no new contributions went in (nor planned).

ISA 2: This is also managed by my FA, however its slightly more complicated than that. There are 3 sub portfolios within, each of which have funds added each month, but each portfolio has different levels of contribution, different investment strategies and different targets. This means that the performance is a little trickier to compare given that I also take out one of the sub portfolios dividends rather than reinvest them. There is also between a 3 and 6 month time delay between new contributions and when the funds pay out, depending on the fund and where it is in the dividend cycle.

ISA 3: This is the ISA I manage myself, trying to time the market. The last contributions added to it will be this tax year, 2016 – 2017 until some of my other ISAs have grown to a similar size. All dividends will continue to be reinvested once they get to a sensible level to make the cost of dealing worthwhile. As the cash is included in my overall total it is included in overall performance, hence not separated out

ISA 4: This will be the Go T’ Pub ISA that is being held for now for reference, but will start from the new tax year in 2017 – 2018

November 2016 Income and Expenses

So, my very first report on my months expenses and income. I am so not looking forward to this, and you will see why below, but hey, best to be honest from the start and see how it is. I would like to say next month will be better but I know it wont, its Christmas, and we have a lot on in December – but that’s next month. I think this month can be summed up in two words.

EPIC FAIL

If I could work out how to make it flash red, I would have done that as well. So lets get into the details and see just how badly wrong things went.

Income.

So, the income front was steady with the same salary landing in my bank account as always. I don’t include any income generated by my savings vehicles that don’t go into my current accounts, so the only other item coming in was a very small tickle from my other half’s ISA – which went straight off the mortgage. There is something comforting about the same amount of cash hitting the bank each month!

Expenses.

So, this personal finance and Retire Early stuff… it’s spend less than you earn.

Right.

Ok.

Ooooops.

There were a number of large one off’s that came up in the month that I wasn’t expecting, but then this is exactly why I tuck away a small amount into an emergency fund, to cover these large unexpected one off’s. The amount column is the percentage of my monthly income I spent on the item(s).

Item Notes Amount
Things I choose not to avoid* Mortgage, Insurance, bills, travel card etc. – yes, we could move somewhere cheaper, not have insurance, reduce our bills a bit and so on, but we are where we are.

42%

Groceries All the food and other stuff needed for home – my spreadsheet still says Food for Home but that’s because I am too lazy to change everything

7%

Alcohol for home Home alcohol consumption only. Please don’t judge 🙂

12%

Bicycles / Car related Any costs related to either the bikes or the car (car insurance and MOT come out of the first item, of things I choose not to avoid, so generally its just the fuel)

0%

Alcohol Out Generally, its the pub…. but it could be wine at a restaurant if i do split the bill out

3%

Eating Out I include purchased lunches in this as well as meals out etc.

5%

Other My catch all for anything I may have missed….

101%

Holidays Any spending related to holidays, flights etc.

41%

Savings Anything left over! This includes money into ISAs, mortgage payments and non relief pension contributions. My company pension comes out before it hits my bank account so isn’t included, nor do I include the “top up” of money when my money goes into my personal pension (i.e. I put in £100, I register it as £100, not the £125 that gets credited in my pension). Its worth noting that my pension savings and other half’s ISA savings go regardless.

0%

* This covers a number of things that I would class as essential for me. Yes, I could move to somewhere cheaper to reduce the mortgage (which in turn would reduce the insurance I have to pay), yes I could reduce my bills by switching energy supplier etc. but it comes down to what I am happy with. There are a few other things in there that are classified as essential that others may object, and so I have just lumped it into there.

The Details

So what to make of all this? Firstly, the big “Other” number is not things I expect to have to shell out on again, for at least 10 years, if not longer – possibly ever. The Holiday spending was paying for an entire ski chalet for our group, so I will recoup this in other ways when I am away, so I think of it as a down payment on my holiday!

Both the alcohol (in and out from home) and the food are higher than average, but I tend to do “splurges” where I do big shops and stock the freezers up for food.

Technically my numbers show 0 saved, however this isn’t quite true. Regardless of spending, my direct debits go into my other half’s ISA, and my personal pension, but I like to report from a cash flow perspective, so in effect I took money out of my emergency fund to keep my investments adding up. It works for me, but not for everyone.

So, not really a great start to a personal finance blog, showing how I spent so much more than I earned but this is exactly why you should have some cash in the bag for an emergency. If that money hadn’t been put away we wouldn’t have been able to do it – or worse, taken an overdraft / credit card bill etc. to cover them.

According to my spreadsheet nothing has changed as I don’t include my emergency cash, so it’s quite nice that nothing changes!

One final note and a plus side for me is that the mortgage over payments are starting to bear some fruit. We took a 5 year fix, and if we were to remortgage on exactly the same terms (duration, interest etc.), then I have knocked my payments down to the next rounding point (i.e. £50 less per month). This shows what difference those little extra bits soon add up to.