The Lemon Fool

My now traditional annual survey of how much folk here tinker with their portfolios. I am late this year however this means those who report their portfolios by calendar year 2021 or tax year 2021/22 are welcome to participate, and anonymously (although feel free to comment further here on your own numbers if you wish). I have also taken on board feedback from the late Gengulphus and daveh to adjust the bucket sizes.

As a reminder, this started off the back of a discussion over what was really meant by a "hold for eternity" strategy, see viewtopic.php?t=29595. The methodology I use to compute Portfolio Churn (or Turnover) is simple to do, described here see viewtopic.php?t=29595. For the avoidance of any doubt, the buys and sells transactions that you should count are those that you have initiated yourself by pressing the buy or sell button.

My own portfolio churn in 2021 was 19.6%, which was "upcycling" of non and low yield holdings at the start of the year in order to ratchet up overall portfolio income again in the wake of the Coronavirus dividend cuts.

So, How well do you follow the faith?

moorfield wrote:
For the avoidance of any doubt, the buys and sells transactions that you should count are those that you have initiated yourself by pressing the buy or sell button.

So, How well do you follow the faith?

For clarity - would you class once-per-year movements of unsheltered holdings into a tax-sheltered account as 'churn'?

Would you also class fairly regular new purchases from accumulated dividends through the year as 'churn'?

I personally wouldn't, as I'd class 'churn' more in relation to being 'personal decision-making acts', rather than more justified 'portfolio management' acts, but I just thought I'd ask because I suspect others might be wondering about similar distinctions...

Cheers,

Itsallaguess

Itsallaguess wrote:

moorfield wrote:
For the avoidance of any doubt, the buys and sells transactions that you should count are those that you have initiated yourself by pressing the buy or sell button.

So, How well do you follow the faith?

For clarity - would you class once-per-year movements of unsheltered holdings into a tax-sheltered account as 'churn'?

Would you also class fairly regular new purchases from accumulated dividends through the year as 'churn'?

I personally wouldn't, as I'd class 'churn' more in relation to being 'personal decision-making acts', rather than more justified 'portfolio management' acts, but I just thought I'd ask because I suspect others might be wondering about similar distinctions...

Cheers,

Itsallaguess

No and No.

Itsallaguess wrote:For clarity - would you class once-per-year movements of unsheltered holdings into a tax-sheltered account as 'churn'?

You have raised a good question here regarding portfolios held across multiple accounts (unless I'm mistaken). I think an exemption can be made in this case, ie. no, provided that amounts to what is effectively an in specie transfer of N shares of a holding between two accounts (unsheltered to sheltered in this case). However if you have sold N shares in one, transferred funds, and bought N+1 shares (or N-1 shares) in t'other, then you have effectively bought (or sold) 1 share of the holding within the portfolio, and that net transaction should be counted. Of course, if you have sold N shares, transferred funds, and bought M shares of a different holding, then you have churned all of that original holding and that should be counted also.
Thanks for raising this, I'll make a note to include it in the small print next year.

Would you also class fairly regular new purchases from accumulated dividends through the year as 'churn'?

No, provided that you are not also selling other (or the same) holdings within the portfolio.
The formula does recognize a few scenarios which are obviously not "churn", in fact zero:
- a "drawer" only withdrawing and spending all dividends, and/or reinvesting some of them, and not selling anything
- a "builder" only making contributions and including accumulated dividends buying/topping up regularly, and not selling anything
- someone deaccumulating, ie. selling holdings and withdrawing funds over time, and not buying anything
At the opposite end of the scale, if someone sells every holding and buys a completely new set of holdings without adding or withdrawing cash (moving from HYP to ITs, say), then they have churned 100% of their portfolio, clearly.


The question this metric is exploring is roughly where between 0 - 100% does not constitute investing on a Long Term Buy and Hold (LTBH) basis and over what time period. For example, can the poster who is consistently churning 19.6% of his portfolio each year credibly claim to be following a HYP approach to investing, in practice, or should he be invited to stop contributing to the board?

The aquisition of MRW was my churn. Otherwise, it would have been zero.

MDW1954

Only two, BHP and Admiral.
Both were trimming down the size of holdings in accordance with my usual HYPTUSS procedures.

Major churn in the sense of "I'm fed up with this share so I'm selling out and buying something else" - zero.

BTW, a "churn", in my view, can only start with a sale, otherwise it's just investing further capital.

Arb.

I voted less than 1%. In 2021 I sold for a pittance the Jackson shares Pru gave me , so that was my only voluntary sale and amounted to 0.078% churn. I did do a bed and ISA of the Pru shares prior to the Jackson shares as I thought the Jackson shares were going to be worth significantly more than they were which, as it was to be treated as a dividend, would have meant paying tax as it would have taken me above the £2000 dividend allowance. If you included the bed and ISA I'd be up to 2.3% churn.

In 2021 I top-sliced RMG (233% to 123% of median) and RDSB (186% to 120% of median). My patience eventually ran out with MKS, CNA, SGC, MARS, & MTO so I sold them and recycled the proceeds into dividend-paying shares.

Chris

I said 1-5%, but it's only a guess.

I'm still building my portfolio and had a fairly small holding of GSK - I decided that being left with 2 rump holdings from the demerger was (to me) worse than the churn of dumping GSK and selecting something else. I did consider topping up GSK, but reckon that both shares are unlikely to be HY.

I am reporting churn on the basis of shares sold by top-slicing during the financial year 2021-2. That was 1.13% of the year end value.

Reinvestment of those proceeds and reinvested dividends accounts for a further 6.01% of the portfolio year-end value, making a total of 7.14%, but I believe that you are looking for the lower value, which is how I voted.

TJH

I add new money each month, that any any recent dividends get's added to the portfolio most months. But doesn't count as churn.

The formula does recognize a few scenarios which are obviously not "churn", in fact zero:
- a "drawer" only withdrawing and spending all dividends, and/or reinvesting some of them, and not selling anything
- a "builder" only making contributions and including accumulated dividends buying/topping up regularly, and not selling anything

Like most years since the dividend tax came in I sold some unsheltered holdings and added that cash to the ISA at the start of the tax year. That's more tax planning than trading though to avoid paying dividend income tax and banking a capital gain to dodge that tax too.
I re-bought some of the specific sold holdings with the money moved into the ISA but not necessarily at the levels I sold and I bought some different holdings to those sold.
So it's churn but with a deduction.

You have raised a good question here regarding portfolios held across multiple accounts (unless I'm mistaken). I think an exemption can be made in this case, ie. no, provided that amounts to what is effectively an in specie transfer of N shares of a holding between two accounts (unsheltered to sheltered in this case). However if you have sold N shares in one, transferred funds, and bought N+1 shares (or N-1 shares) in t'other, then you have effectively bought (or sold) 1 share of the holding within the portfolio, and that net transaction should be counted. Of course, if you have sold N shares, transferred funds, and bought M shares of a different holding, then you have churned all of that original holding and that should be counted also.

As total sales were a few % of portfolio then I'm 1-5% churn. I consider myself to avoid unforced sales and without the tax consideration would have left the unsheltered holdings intact. Perhaps within the next few years I'll be sub 1% as all holdings will be in SIPPs or ISAs and ordinarily only corporate actions would make me a seller.

Bump. Still time to register your vote this will be open for a while yet ...

Still in building phase. Sold non-payers Marstons, Wood Grp and Centrica at various points in the last tax year. Topped up UKW and added ADM with the meagre proceeds plus accumulated divis.

EEM.

Thanks all for contributing to this.

The answer for last year is clear - 46% churned their portfolios by less than 1%, and the overwhelming majority by less than 5%.