July ’17 Income and Expenses

So it’s that time of the month yet again – how time flies! So how was July? There were no major, out of the ordinary things to shout about, so a fairly regular month in all senses – a number of work trips that meant I saved a small amount on my transport budget but in reality this was negligible.

Income

So as always I had my steady Salary drop into my bank account, always nice.  I don’t include any of my personal ISA dividends in my income statement, that’s just part of the growth of those portfolios. The income thrown off by my other half is included, although this month was very low (the third month always is). A little bit of a pain, but the rolling 3 month average from it still continues to tick up. This month I haven’t just thrown the income off the mortgage as we are saving up for a rather large bill that is going to be coming up – more on that in another post.

So, steady as she goes on income – very slowly creeping up.

Expenses

Item	Notes	Amount
Things I choose not to avoid*	Mortgage, Insurance, shared bills etc. – yes, we could move somewhere cheaper, not have insurance, reduce our bills a bit and so on, but we are where we are.	41%
Groceries	All the food and other stuff needed for home	2%
Alcohol for home	Home alcohol consumption only	2%
Bicycles / Car related	Any costs related to either the bikes or the car	0%
Alcohol Out	Generally, its the pub….	2%
Eating Out	I include purchased lunches in this as well as meals out etc.	3%
Other	My catch all for anything I may have missed….	5%
Holidays	Any spending related to holidays, flights etc.	0%
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)	45%

 

* 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.

Digging in

So, what to make of all of this? This is my joint highest savings rate of all time – I am super stoked about this given that I don’t feel I really hunkered down heavily for the month. The good thing is the savings rate, however the downside is that I did not get any more cash into my cash flow fund (CFF) which does worry me. I calm myself on this as I did take money out of the CFF, firstly to add into the Go T’ Pub ISA (more to follow in the GTP update), and secondly to round up the money that went into my other half’s ISA after I received my tax rebate. If I hadn’t done this then I would have got some into the CFF. This doesn’t really help me much now as I have so little in the savings pot, but…

I was trying not to buy booze for home, but we were running low on whisky and brandy and there were some offers on so I bought some…. and unfortunately drank it!

I also took a step back in preparing next months tracking spreadsheet and looked at what it may look like if everything went well – this should become my baseline but as I have never achieved it…. The answer? 47.2%. So could I one day hit 50%? I would like to think so!

So overall nothing too exceptional this month, although the “other” category was a bit higher than my normal, however this covered some train tickets to visit friends, some taxi’s (I know, right? Disgraceful!), my DIY disaster and my magazine subscription (MoneyWeek before you ask!).

Am I happy with the month? Actually no. Despite the high savings rate, I still worry that the CFF hasn’t really ticked up and so far hasn’t recovered since November’s hammering so I desperately need to do something on that this coming month.

And on that happy note…. I am off to the pub!

How was your July?

Shaking up the Portfolio and learning to count.

Following on from the “When to sell a stock” post, funnily enough, I have been on a mad selling spree in my actively managed portfolio!

This all started after I was playing around and working out the CAGR for a number of my stocks, when I realised something didn’t feel quite right with the overall picture of my portfolio. I redid the numbers and realised that when I had originally setup my annual tracker, I must either have been VERY tired, or rather very tipsy.

Being an idiot.

My calculations for my percentage returns actually divided my increase in value by my final ending figure, rather than the initial figure plus contributions! Whilst it is annoying that I made such a basic mathematical error, the plus side is that I made the error in my favour – I under reported. I have gone back and corrected last years figures – the tracking of the FTSE etc. was all calculated correctly (which is why no-one shouted I guess!) so only a couple of minor errors on the actual portfolios where I had copied and pasted the errors where I had added sheets. A valuable lesson learnt. To save you from the hassle of scrolling through however, the bottom line was that my actively managed performance was not the reported 30.9% as I claimed, but was in fact a staggering 44.7%.

Yup – taking my starting value and contributions, my returns added a further 44.7% to my portfolio. This was partly what made me sell off some of my shares to drive my balance back towards more into trackers – there are some huge shifts in values in there which could easily go wrong again (just look at AZN today – that hurt!).

I plan to use all the funds that I have raised from the sales, the dividends I have received since my last investment and put that all into a single tracker to help slowly rebalance my portfolio. The sooner I can rebalance, the sooner I can start buying individual shares again within my tolerances 🙂

Number Crunching

So, what has been sold, and what were the returns? Please note that the returns include the cost of fees (so book cost includes all transactional fees (dividend reinvestment, dealing charges, stamp duty etc.), and the end value was calculated on what I got credited to my account after the sale (i.e. after paying dealing charges).

Dividends reinvested in the same security were not added to the total value, but dividends not reinvested (i.e. cash thrown off that I spent on something else, was). I also calculated the return for the FTSE-100 over that period (although excluding dividends, so we will have to assume approximately 3%) to provide a comparison. It’s been pretty steady over the years, and for the last 3 years the FTSE-100 over that period was 4.6% (or 7.6% if you add dividends).

Sale Item #1

First to bite the bullet – HSBC. I’ve held the shares for 3 years now since I first bought them, and they have been a good steady performer. I will miss the quarterly dividends which have been steadily ticking up over the years. I sold out at just over £7.50 per share, which over the 3 years gave a CAGR of 24.2%. Not at all bad – I will chalk that as a win!

Sale Item #2

Next to go was MIDD. I was going to use this as my tracker of choice for mid-caps, but when Monevator recently posted on the charges, I realised I was paying 0.4% but could pick a Vanguard fund for 0.1% – I decided to switch, no two ways about it! I originally purchased the morning the Brexit result came through when there was panic on the streets. I sold out at just £19 per share, giving me a CAGR of 23.1% over the year. I can live with that!

Sale Item #3

Next up was MRW. This was purchased about 3 years ago as I looked at the underlying business and the usual arguments on the ownership of their stores etc. but with the ongoing grocery wars, Amazon entering the fray I have decided not to wait for my number to come up, but cash in while I am ahead. I sold out at just over £2.40 giving me a CAGR of 14.5%. Not anything great there but still not too bad – certainly beats a savings account!

Sale Item #4

Lastly, I sold in my BLT that I purchased a couple of years ago. I cashed out at just over £13.60 per share. I’ve been contemplating cashing in as the price does fluctuate a lot, but thought why the heck not. A total CAGR of 25.9% over 2 years so not really too shabby.

Now what?

The outcome of all of this is that I now have a fairly large chunk of cash to deploy into the market. As I am planning on buying trackers, and I shouldn’t be trying to time the market, I know I now need to purchase my required trackers within the next couple of weeks, so watch this space!

 

 

How to know when to Sell a Stock

So the best wisdom (as far as I am concerned anyway!) is the buy and hold approach, if you can. Build up enough equity to live off the income thrown off by the capital and enjoy the rest of your life. Easy to say, very hard to actually do. If you are mostly in trackers, then buy and hold becomes easier although you will still need a very large amount of capital, but what if, like me, you are drawn to the buy and sell of individual stocks? [Disclaimer: I wouldn’t recommend it :)]

For my Go T’ Pub ISA, my aim is to simply throw capital at the VWRL (for now, I may add bonds in the future) and watch the income slowly add up as it gets thrown off, there is no need to be trying to time my buying and selling, I should only ever be adding (via regular monthly contributions) or using the yield. I’ve seen a great psychological difference to me in this approach, in that I really don’t care about it – I don’t check it hourly / daily etc. and I actually feel quite free about it! It is what it is, and it is outside of my control.

For those of you who have followed my actively managed ISA will know, however, that for me I can’t resist trying to beat the market. I am trying to get more into trackers, but I just can’t help myself trying to play the great trader (and we all know how badly that should end). My trackers do well, but how do I know when to sell an individual stock? Note I am excluding trackers and Investment Trusts and only thinking of directly held, individual shares.

A lot of commentary out there says to put a trailing stop loss at 20%, but if you believed enough in the first place to buy it, short of major catastrophe, what has changed? It seems sensible to put something like this in place (I don’t), but then do you buy back in? Do you shiver every time you see that company mentioned? Do you quickly flip past the financial sections of your paper / website / tv show?

I’ll be honest. When it comes to selling, I have made some monumental f**k ups. I lost my nerve, so for example on Aviva I bought in watched the shares slump, collected the dividends and then as soon as it was in profit, I sold out. It has of course since continued to go up.

With RB I bought in after their old CEO resigned and the share price dropped. I cashed in with over 10% gain in something like a month or two and felt very proud of myself. Its more than doubled in price since then, never mind the dividends. Whoops.

I’ve tried to start putting a number on the stock I purchase, at the time of purchase, that I will sell at – that way when I hit the number I shouldn’t have any emotional ties to it, but can take the profit and run. After all I was happy at the time why wouldn’t I be now?  This goes against the run the winners philosophy and I seem to have a track record of selling out too early. I do need some form of mechanism to say when to sell out if I will however. The shares like RDSB and BP I don’t intend to sell for now, so I have no number. The higher risk (HMG, BMS, BOD etc.) items I will sell when I get a good profit (I have already cashed in about 60% of my HMG profits) – for some I have a figure in mind, others I don’t.

I have also not sold when I should – I have bought in on a number of “distressed” items (Northern Rock anyone?) on the hope of turning a quick profit, only to watch the entire holdings disappear. This is one of the real challenges with individual stock holdings, the volatility is huge as is the risk. This is why you really, REALLY shouldn’t try trading and for most people stick to just trackers.

So how do I now know when to sell? The short answer is, I don’t. This is one of the drivers behind why I am slowly rebalancing my actively managed ISA to have more trackers and Investment Trusts in to balance out the volatility.

For each stock I do still revisit them as fundamentals will change over time (for example, over a few years more investments in the company come online and increase revenue and profit) and see if I should change my target. One of the major problems I have however is greed. As I see the numbers going up and the profits going up, when it gets to my price point I wonder how much further it will go up and should I hang on for more money. I still haven’t got the right answer!

The flip side is then also when stocks drop – can you hang on, should you hang on? I purchased BMS on what I thought was a good price. They then missed targets and the price dropped further. If I had put in a stop loss then I would have cashed in loss, now they are slowly coming back up and into profit. I nearly bought more after the dip, but resisted.

Investing in individual shares is high risk and you really need to DYOR. The main thing is to try and take the emotion out of it. Select your stock, work out what you think a good price for that stock is, and wait. I have a variety of calculations to tell me what I think the target sale price should be, and then I can put that number in. When it hits it – I (should) sell out. Let’s see.

How do you cope with the emotions of individual stocks? Or do you just stick to trackers?

Why do I have so many different investment pots?

So FirePlanter recently asked why my selection of portfolios was so varied and setup the way it was, and so as I started to reply I realised it would take more than just a reply in the comments to explain it all, and hence the post! If you want to see the spread and what is in there then you can look at the portfolio page. If you want to know how my cash positions are held, you can read that here.

Over the years, each time I have changed company, I have joined a new pension scheme. As I leave a place, the pension then gets transferred into my Private Pension which my IFA manages. The only exception to this is my very small defined benefit pension which should kick in when I am 60, giving me approximately £1,000 per year.

So that covers the pensions – my private and then the company one. Now onto the ISAs, the fun part!

ISA 1

So this is an actively managed by my IFA. A while ago I realised that I had quite a lot of cash ISAs, and this pulled in two of my Cash ISAs into a single pot, and managed by my IFA. I haven’t put in any further contributions, and these were only transferred in the 2015/16 tax year (I need to hunt out exact dates for my benefit) when the FTSE-100 took a big dive. It’s ticking up steadily now after the crash. This was done before I really started to have faith in my ability to invest or make rational decisions. Will I move it in the future? Maybe, maybe not.

ISA 2

So this is another actively managed set of portfolios by my IFA on this one, however this ISA is in my other half’s name. This is complicated as it has several sub portfolios within it. Yes, we could have just thrown everything in to say a LifeStrategy fund, however this is also trying to bring my other half onboard with the FI idea (she is up for FI, but not for the work to get it as yet). By doing this I am also able to demonstrate the increasing pot of cash and the increasing cash flow coming in.

Sub portfolio 1 – House fund.

So we both contribute to this portfolio, but split based on the percentage of ownership we put into the house (so I put in significantly more). We have built up a cash buffer for any major works that need to be done on the house just in case, but the interest rates are terrible, and so I wanted to make the most of the growth potential and tax benefits and on the grounds that if it is more than our buffer I will dip into my emergency funds to cover it. The funds this invest in are all growth funds, and hopefully by the time we need it then we should have a very substantial amount of money in there. Our home is a new build and we have another good few years of the 10 year guarantee left, so I am really not expecting anything to come up, and hence I can afford to take the risk. I may start putting another £5 or £10 into the cash reserves once I am more comfortable with my budget.

Sub portfolio 2 – joint savings

So we contribute evenly to this portfolio, and the aim is that this will provide income into the joint account to pay our bills when we retire. I was a little naughty when I set this part up as I didn’t tell my other half I was doing it (the funds come from the joint account) as I know she would probably have resisted. I think she is aware that we are contributing, but not 100% certain! This means we are both putting in a bit of money to into the funds and will provide us with an extra boost to the income. The funds are being invested in Acc. units of income funds (i.e. the income generated is reinvested, so the size will grow).

Sub portfolio 3 – my pay rises!

So I decided the best way to make the most of my pay rises was to invest this into my other half’s ISA. This started back in 2015, and every time I get a pay rise (be it from a job move or just a regular pay rise), the entire pay rise, all 100% net increase, goes into these funds. All my tax refunds that I get back from HMRC also go into this portfolio which gives it a boost. The aim is that these funds will pay all of our joint bills when we retire. The funds invested in are Income producing units, that pay out into a different joint account. Is it ideal to take money out of the tax efficient wrapper? Not really, however the funds can then either go off the mortgage (as they have done more recently) or if there is a one off expense or similar I can use it for that – it gives me an extra cash flow without needing a job 🙂

When we both retire, portfolios 2 and 3 will be merged into a single portfolio and pay out to cover all of our bills – hopefully with a little extra to reinvest.

ISA 3 – Actively Managed ISA

So this is the ISA I manage myself via TD Direct. It has grown over the years and is now reasonably significant, however I am trying to rebalance it to increase my trackers holding so that I worry less about volatility and individual shares. I accept that I think this will affect the performance, but I don’t mind given the size – peace of mind is priceless. I will continue to play around with this but I am not planning on adding any new funds for the next few years. This came about from my original ISA investments back in 2007 with an IFA, and then through other providers who are no longer in existence and further contributions. I do love the (lack of) fees that TD charge me (as I hold only 1 minute fund – I just got my latest fee bill – 70p!), but I wait to see what the purchase by Interactive Investor does to the approach. I took the view that once money goes into this account, it will not come out again until I retire, so treating it as a pension.

ISA 4 – Go T’ Pub ISA

I set this up specifically to diversify my other ISA holdings from my IFA and TD Direct, just in case there was a problem with any of those. This means that I will plug away money into VWRL. I am also treating this more as a savings vehicle than a pension, so I have told myself that if I wish to, I can withdraw the income. Why spend the income from an ISA rather than just invest less? I want to replace my salary with re-earned income, and the best way to do this for me is to build up the total capital as fast as possible, and so that is keeping the high level of initial input. This forces me to contribute a set amount each month and I always think twice before taking money out. This really is my psychological side – and I realised one benefit today as I transferred an extra £20 in as I realised this would let me buy an extra share!

I am struggling with the budget at the minute I have to be honest, I am not really building up anything in the cash flow fund, which means I know that skiing next year is going to be a challenge (“What?!” I hear you cry – a holiday before you are FI? Are you mad?!}) but let’s see what happens.

So there you go – quite a few pots but very easy to track. Have you balanced your portfolios over providers?

Breathing new life into garden furniture

So if, like me, you consume FIRE or related blogs as fast as some people eat hot dogs, then you will see the usual threads of frugality, do it yourself and how to eat for just 25p a month (ok a slight exaggeration). I am always amazed at the level of DIY some people go to.

Well, I am here to break that mold. Or should that be mould? Who knows. Well I have to tell you, I hate DIY. It’s not that I just don’t fancy it, or am too lazy, I just really, really hate it. I struggle to think of anything worse than it – I prefer going to work or shopping (and that is saying something) than doing DIY.

To give you an idea of just how much I hate it, I paid someone to put shelves up for me. Doesn’t that go against the principle of FIRE? Nope, not for me. It’s about focusing your effort on what makes you happy, even on the journey. Have I mentioned how much I hate DIY?

This weekend I decided I needed to redo the garden furniture – its early 1950’s metal and is starting to show its age a little. Basically it needs stripping down, rust treating and then repainting. I suspect most of the FIRE brigade out there would lap up this opportunity – and I will be honest, I am truly envious of TFS’s ability with DIY – just look at the shelving he did (for the life of me I can’t find the link but I am sure he will share!). But I know I am terrible at it, and I hate it. What could be so tricky in stripping down to the metal and repainting? The route was a wire brush first, then wire wool, then sandpaper and finally the pressure washer. Then the rust treatment. Then the repainting. Simple right?

I took 3 months off between jobs once, and made myself strip down the stairs, sand, varnish etc. and I loathed every minute of it. The only reason I stuck at it was because I wasn’t earning and so had no excuse. I loathed it and swore I wouldn’t do it again.

So, how did I try and motivate myself to do the furniture? Well apart from the fact it would have cost me hundreds of pounds to get someone else to do it (I think), versus getting more stuff than I probably needed from B&Q. I had no excuse not to (ok I could have made one), so I thought I would try and do it. I will be taking some of the stuff back to B&Q as I appear to have slightly over purchased stuff.

Once again, I remember how much I hate it. Next time I will save harder and pay someone else to do it. So, I found a way to make it more fun. Beer. Made all the sweeter by the fact I had a £10 off voucher from Majestic. Ok I had to spend £50 to cash it in, but you know what? That does get me a lot of beer…. although I suspect I may go there to often as I was given a free beer to take away to try. Ooops.

That’s right, what could possibly go wrong with a combination of beer and DIY? 🙂 To avoid invalidating my insurance, or concerning my employer, I am not going to disclose how many of each of these I had,nor what time I started drinking them 🙂 To note this was only consumed whilst stripping down the paint, not trying to paint.

Beer #1 – Curious Brew

So this is a beer made by Chapel Down winery and I got given a bottle for free (a sign that I spend too much in my local off licence!). A nice light beer, not a huge amount of flavour for me, but a light, chilled beer, and not at all offensive. Would I buy it? I have to say, no. It’s quite nice, but not anything to write home about. It meant a relatively easy start to the day to go with the wire brushing which is surprisingly hard work. Or I am a bit unfit, or a combination of the two.

Price: Unknown (it was free)

Strength: 4.7%

Beer #2 – Peroni

Ok, so I am a little bit embarrassed about this one, but it was chilled and in the fridge already cold whilst I waited for the other beers to cool down. It’s a lager. That’s about all I can say, not much really, not any great flavour but cool and refreshing and on a hot day with a bit of sweat it went down surprisingly quickly. As is typical with lager it’s fizzy – so bending over and moving around painting and drinking fizzy beer is not the best combination.

Price: Unknown – I bought it a while ago

Strength: 5.1%

Beer #3 – Spankers IPA.

This is a cracking little beer from London(ish) – Kingston. I find it a lovely hoppy beer, almost citrus in taste, and on a hot day, absolutely fabulous. I find this a really refreshing beer, although I find IPA a fairly loose term for it, I would actually really recommend this one. For a full flavoursome beer I really enjoy this one and I shall no doubt keep a few of these in for the future. It’s a bit on the stronger side, so not really a suitable “session beer”, more for one or two chilled ones in the evening.

Price: £2.50 per bottle

Strength: 6%

Beer #4 – Einstok IPA

So, on the remote chance that I have any followers from Iceland, I apologise for the spelling and lack of correct accents on this one! Their USP is that they use fresh Icelandic water, filtered through the rocks there to give it a full and flavoursome beer with a clear crisp taste. If you believe marketing. Well, it was actually a very light and refreshing beer – again, not that flavoursome but for a hot summers day, not at all bad! Scarily it really didn’t taste as strong as it was – if you had asked me I would have guessed maximum around 4% – 4.4%.

Price: £2.00 per bottle

Strength: 5.6%

Beer #5 – Salish Sea IPA

So more of a wild card here. A beer I know nothing about, but went on the recommendation to try it. For me, this was a bit of a non beer – no real great strong flavours almost a typical lager! Surprisingly cloudy which this beer, to the point I wondered if there was something wrong with it. Of course this meant that I had to have a second just in case. That was the same. A slight taste on the tongue but in no time at all it disappears. I wouldn’t bother again, especially at that price, although one heck of a kick at that strength!

Price: £2.50 per can

Strength: 6.4%

Beer 6 – Hogstar Lager

So I have to be honest, I do have a soft spot for the Hogsback Brewery, as I used to live near it. This is an unpasteurised lager and so another that was a bit out of the normal for me. It’s a lovely clear lager, with a gentle fizz – a bit of an odd after taste that I can’t quite put my finger on (nothing to do with the volume I have drunk…) so I will have to try it again!

Price: £1.95 per can

Strength: 4.5%

Conclusion.

So I have a couple of simple conclusions.

1. I will continue to pay someone to do the horrible DIY stuff for me
2. I prefer beer to DIY 🙂
3. I hate DIY
4. Beer “best sellers” are the like of Stella, Carlsberg etc. when they are on sale in supermarkets at an equivalent of a pound per can for a much larger can can be good value
5. I really hate DIY
6. Whilst I tip my hat to Weenie and others for doing their own homebrew, I tried it once and it was a disaster (can I claim homebrew is also DIY?), and having moved, I have not got anywhere suitable to try and rebrew to try again
7. I need to learn how to get wordpress to wrap text around images