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FF and PP portfolio reviews

A helpful place to also put any annual reports etc, of your own portfolios
dspp
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FF and PP portfolio reviews

#44109

Postby dspp » April 6th, 2017, 3:22 pm

Two portfolio reviews which make for an interesting contrast. Both are half HYPish but there are interesting differences in the non-HYP halves.

*************************
Portfolio review – (FF) – Year to end March 2017

Purpose & Context
This is a portfolio for a friend (FF) which we run together, and is deliberately cautious. They have a chunk in some bond products, plus quite a large mortgage free property, but a low-paying job, and several years to retirement. The aim is for this FF portfolio to ultimately yield an income equivalent to the job and to be a substitute for the pension that they do not have.
Platform & Charges
Everything is held in Interactive Investor (II) at a cost of £80/year. The free trades are sufficient for most purposes in this portfolio. Almost nothing happens all year long. I’ve relaxed to taking a one-per-year dump from the II platform into spreadsheets and calculating one end-year comparison spreadsheet so as to minimise time on admin.
Strategy
The first tranches that came in were put into 30-35 HYP-selected shares. Thereafter additional capital and/or dividends has mostly gone into four Vanguard index trackers so as to provide wider diversification, and more growth upside, and as a comparison. Two recent additions (HUR and CAK) were of less than a half holding in total and are purely for ‘play’ purposes as FF also looks over my shoulder to see what I am doing in the PP portfolio, and as a result wants a smidge of excitement inside the FF portfolio.
Holdings
HYP holdings (34) of one or two chunks summing to 43%:
ASHMORE GROUP; ABERDEEN ASSET MANAGEMENT; AMEC FOSTER WHEELER; BANCO SANTANDER SA; BERKELEY GROUP HOLDINGS; BHP BILLITON; BP; BRITISH AMERICAN TOBACCO; CARILLION; CENTRICA; FENNER; GLAXOSMITHKLINE; HSBC HOLDINGS; IMPERIAL BRANDS; KCOM GROUP; KIER GROUP; LANCASHIRE HOLDINGS LTD; LEGAL & GENERAL GROUP; MORRISON (WM) SUPERMARKETS; NATIONAL GRID; NATIONAL GRID; NEX GROUP; PAYPOINT; PEARSON; PENNON GROUP; RIO TINTO; ROYAL DUTCH SHELL; SEVERN TRENT; SOUTH32 LTD; SSE; STANDARD CHARTERED; TATE & LYLE; TP ICAP; VODAFONE GROUP
Index funds summing to 57%:
VANGUARD FTSE 100 UCITS ETF; VANGUARD FTSE ALL WORLD UCITS ETF; VANGUARD FTSE DEV ASIAPAC XJPN UCITS ETF; VANGUARD FTSE DEV EUROPE EXUK UCITS ETF
Sauce of less than 1% in total in the rounding errors:
HURRICANE ENERGY; PATISSERIE HOLDINGS
Capital
Some capital was added this year as a bond matured of 18% of total value, creating a certain amount of dividend lag. Excluding the addition of capital the portfolio value rose by 28% of the start year value compared with 16% rise in the FTSE-100. Apart from the general FTSE response to the GBP devaluation on Brexit vote the most significant rises were VAPX and BAT and almost everything else balanced out risers vs fallers.
Income
Last year income was a dividend yield averaged at 4.9% of average value through the year. This year dividend yield was 4.6% of average value through the year. Dividends are now at two-thirds of income from the day job.
Corporate Actions & Tinkering
The Hurricane and PatVal holdings are just a plaything representing less than half a HYP chunk. PREMIER FARNELL was a corporate action liberating cash on a takeover – interestingly I had not put it in my own PP folio that was created a year later due to my own concerns about the business: it seems the market has a way of curing ills. The TP ICAP merger went through and was held.
Tax
The ISA allowance was filled up at the start of the year with the highest yielding shares, leaving no room for corporate actions. However given that there are 30+ shares the chance of any one corporate action creating a CGT problem was most unlikely and so this was thought to be the better strategy, and it has succeeded. Roughly 30% is now in an ISA-shelter.
Conclusion
Overall this continues to perform. It has been at least as steady as the FTSE and is now far more diversified. The huge dividend lag of the first year is now well behind. I am comfortable balancing the HYP with the index funds and both are delivering. We both sleep at night and it is low maintenance. Most quarters there is just enough activity for dividends to use up the free trading allocation from II and I am happy with their service. Lastly I am happy that my friend can run the FF folio without me if it were ever necessary.

***************

Portfolio review – (PP) – Year to end March 2017

Purpose & Context
This is a portfolio for myself (dsPP) which has a conservative core and a less conservative fringe where I am prepared to take a position in areas where I believe I have a better understanding over the medium term. I still have a mortgage and in time will have a DB pension, but my day job is at the unreliable but interesting consultancy / owner end of the spectrum and so the portfolio may need to deliver in an unpredictable timescale.
Platform & Charges
Everything is held in Interactive Investor (II) at a cost of £80/year. Some additional trading fees are incurred. I’ve relaxed to taking a one-per-year dump from the II platform into spreadsheets and calculating one end-year comparison spreadsheet so as to minimise time on admin.
Strategy
The first tranches that came in were put into 30-35 HYP-selected shares. Thereafter additional capital and/or dividends was mostly going into four Vanguard index trackers so as to provide wider diversification, and more growth upside, and as a comparison. However when oil prices fell a few years ago I put about one-third of the portfolio into RDSB as I felt the market had over-corrected. The profit from that position which I held for about a year was then mentally made available for other similar opportunities and is now in Hurricane which is a minor oil exploration company, so the PP folio is now .
Holdings
HYP holdings (32) of one or two chunks summing to 52%:
ASHMORE GROUP; ABERDEEN ASSET MANAGEMENT; AMEC FOSTER WHEELER; BANCO SANTANDER SA; BERKELEY GROUP HOLDINGS; BHP BILLITON; BRITISH AMERICAN TOBACCO; CARILLION; CENTRICA; FENNER; GLAXOSMITHKLINE; HSBC HOLDINGS; IMPERIAL BRANDS; KCOM GROUP; KIER GROUP; LANCASHIRE HOLDINGS LTD; LEGAL & GENERAL GROUP; MORRISON (WM) SUPERMARKETS; NATIONAL GRID; NATIONAL GRID; NEX GROUP; PAYPOINT; PEARSON; PENNON GROUP; RIO TINTO; SEVERN TRENT; SOUTH32 LTD; SSE; STANDARD CHARTERED; TATE & LYLE; TP ICAP; VODAFONE GROUP
Index funds summing to 12%:
VANGUARD FTSE 100 UCITS ETF; VANGUARD FTSE ALL WORLD UCITS ETF; VANGUARD FTSE DEV ASIAPAC XJPN UCITS ETF; VANGUARD FTSE DEV EUROPE EXUK UCITS ETF
Major oils of 23%:
BP; ROYAL DUTCH SHELL; = 23% (note the valuations of these are excluded from the HYP values above, i.e. no double-dipping)
Minor oils of 13%:
HURRICANE ENERGY
Capital
No capital was added this year but about £7k was withdrawn to complete a project on the house – about the same as the dividends yielded. Hopefully that is the last of the house needs for a long time, and it yields even better in house terms as it is for a lodger. The portfolio value rose by 32.8% of the start year value compared with 16% rise in the FTSE-100. Apart from the general FTSE response to the GBP devaluation on Brexit vote the most significant rises were RDSB and VAPX and BAT and almost everything else balanced out risers vs fallers. The BP inclusion is a very recent one simply to use up some CGT without reducing major oil exposure, i.e. some RDSB was sold into BP because the RDSB position succeeded much better than I had hoped.
Income
Last year income was a dividend yield averaged at 2.7% of average value through the year due to dividend lag from when it was set up. This year dividend yield was 5.6% of average value through the year. Dividends are now at two-thirds of the bread-and-water income required if all else fails !
Corporate Actions & Tinkering
Having some index funds makes life easier when some cash needs liberating, which is one less decision at times like those.
The TP ICAP – NEX merger went through and was held. I sold some StanChart to fund into Hurricane inside my ISA. In due course, I expect I will buy back into StanChart though when remains to be seen.
Tax
I realised that the RDSB position, if it succeeded, would create a CGT problem and so I had about half inside the ISA and half outside it. This proved to be not enough so late in the year I banked some CGT winnings into BP in my trading account. Also inside the ISA I sold some RDSB and bought almost all of my HUR exposure inside the ISA.
Roughly 25% is now in an ISA-shelter.
Conclusion
Overall much better than I had expected – I took the decision to put 25% into major oils and saw that grow to a third or more at which point I top-sliced some into the Hurricane play. It has been better than the FTSE-100 and is now far more diversified. The huge dividend lag of the first year is now one year behind. I am comfortable balancing the HYP with the index funds and in due course will buy more index funds either if new capital becomes available or when I unwind the major oils position. I want more Asia-Pacific-India-Brazil exposure in my indexes but it will take time to build. I must not draw out any dividends this year.

regards, dspp

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Re: FF and PP portfolio reviews

#44120

Postby mswjr » April 6th, 2017, 3:56 pm

That was a very informative read, thank you.

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FF and PP portfolio reviews

#129372

Postby dspp » April 1st, 2018, 9:50 pm

Two portfolio reviews, both pretty much run by me. They show how different circumstances can reasonably yield different portfolio approaches. Also they show how HYP can be used within a wider strategy. I guess they also show whether I should give up the day job.

*********

Portfolio review – (FF) – Year to end March 2018
NB. I’ve updated my portfolio tracking spreadsheets so as to be able to put a sanitised summary table view here for the first time. In the course of that I’ve automated things such that numbers shown may not precisely match old portfolio reviews.

Purpose & Context
This is a portfolio for a friend (FF) which we run together, and is deliberately cautious. The aim is for this FF portfolio to ultimately yield an income equivalent to the job and to be a substitute for the pension that they do not have. They have quite a large mortgage free property, but a low-paying job, and maybe five years to retirement, i.e. there is little or no opportunity to refill the pension pot. They started the year with a fair chunk in some bond products that matured in the year.

Platform & Charges
Everything is held in Interactive Investor (II) at a cost of (now) £90/year. The free trades are sufficient for most purposes in this portfolio. Almost nothing happens all year long except for a bout of B&B at year-start into the ISA, and then maybe one trade per quarter to mop up dividends. I’ve relaxed to taking a one-per-year dump from the II platform into spreadsheets and calculating one end-year comparison spreadsheet so as to minimise time on admin.

Strategy
Originally the first tranches that came in were put into 35 HYP-selected shares. Thereafter additional capital and/or dividends has mostly gone into four globally diversified Vanguard passive index trackers so as to provide wider diversification, and more growth upside, and as a comparison. Two more recent additions (HUR and CAK) are now allocated to a higher risk portfolio. Cash generated is ordinarily reinvested quite rapidly.

Holdings

HYP holdings (now 33) of one or two chunks each, no additions in year, now 28% of total.
ASHMORE GROUP; STANDARD LIFE ABERDEEN; AMEC FOSTER WHEELER; BANCO SANTANDER SA; BERKELEY GROUP HOLDINGS; BHP BILLITON; BP; BRITISH AMERICAN TOBACCO; CARILLION; CENTRICA; FENNER; GLAXOSMITHKLINE; HSBC HOLDINGS; IMPERIAL BRANDS; KCOM GROUP; KIER GROUP; LANCASHIRE HOLDINGS LTD; LEGAL & GENERAL GROUP; MORRISON (WM) SUPERMARKETS; NATIONAL GRID; NATIONAL GRID; NEX GROUP; PAYPOINT; PEARSON; PENNON GROUP; RIO TINTO; ROYAL DUTCH SHELL; SEVERN TRENT; SOUTH32 LTD; SSE; STANDARD CHARTERED; TATE & LYLE; TP ICAP; VODAFONE GROUP; WOOD GROUP

Globally diversified passive index tracker funds summing to 70%:
VANGUARD FTSE 100 UCITS ETF; VANGUARD FTSE ALL WORLD UCITS ETF; VANGUARD FTSE DEV ASIAPAC XJPN UCITS ETF; VANGUARD FTSE DEV EUROPE EXUK UCITS ETF

Higher risk sauce of 2% in total in the rounding errors:
HURRICANE ENERGY; PATISSERIE HOLDINGS (CAKE)

Capital
Some capital was added this year as a bond matured of 29% of total value, creating a certain amount of dividend lag. Excluding new funds, the portfolio capital value barely changed (up 0.5%) compared with a 3.8% fall in the FTSE-100. The internal ups and downs approximately matched the FTSE-100, but the final result was flattered by the +3.8% of dividends.

Income
Last year income was a dividend yield averaged at 4.6% of average value through the year. This year dividend yield was 3.8% of average value through the year with noticeable dividend lag. In cash terms dividends are now approaching the income from the day job, but that does not allow for the need to generate an inflation protection cushion.

Corporate Actions & Tinkering
CARILLION failed completely in the year, held to the end, a bad call by me though in my defence most of the damage was done at times when I was travelling & very busy. FENNER is in the course of being taken over at year end but is still held as in an ISA so no need to prejudge for CGT purposes. STANDARD LIFE and ABERDEEN merged and were held. AMEC were taken over by WOOD GROUP and held.
The new funds (from a bond), and most of the dividends, were put into the various index trackers to bring them into rough balance, i.e. VWRL increased so as to improve US and non-EU exposure in relative terms.
The HURRICANE and PatVal (CAKE) holdings were both topped up to a full chunk each.

Tax
The ISA allowance was filled up at the start of the year by B&B’ing the highest yielding shares, leaving no room for corporate actions. However given that there are 30+ shares the chance of any one corporate action creating a CGT problem was most unlikely and so this was thought to be the better strategy, and it has again succeeded (the alternative being the end-year dash to B&ISA).

Conclusion
Overall this continues to perform. It has been approximately as steady as the FTSE and is now far more diversified. There was a significant dividend lag this year, but there is unlikely to be any fresh funds in the future. I am very comfortable seeing the HYP at only 28% of the overall value and with the index funds now dominating, and both are delivering. (I am very mindful of the limitations of the HYP strategy). With this mix of strategies we both sleep at night and it is low maintenance. Objectively there is probably now insufficient exposure to higher risk items, but equally there is no bond allocation (though in this instance the bond equivalence is the large property in FF’s wider context).

Most quarters there is just enough activity for dividends to use up the free trading allocation from II and I am happy with their service; and for this portfolio the changes II made to the charging structure have resulted in lower overall fees (as unused free-trade-credits can now be banked between quarters).

Projections show that this portfolio could allow for retirement now but without adequate protection against inflation, or in five years’ time with inflation-protection. Lastly I am happy that my friend can run the FF folio without me if it were ever necessary.

TABULATED RESULTS OF FF-FOLIO

METRICS                             | y/e 01/04/2015 | y/e 01/04/2016 | y/e 31/03/2017 | y/e 31/03/2018 | mean
| | | | |
additional funds in versus end year | 98.9% | 45.3% | 18.2% | 28.8% |
funds released versus end year | 0.0% | -1.6% | 0.0% | -0.4% |
net new funds versus end year | 98.9% | 43.7% | 18.2% | 28.4% |
| | | | |
dividend yield on start year | na | 6.1% | 5.8% | 4.5% |
dividend yield on end year | 0.1% | 3.7% | 3.5% | 3.2% |
mean dividend yield | na | 4.9% | 4.6% | 3.8% | 4.5%
| | | | |
capital change on end year (TR') | 1.1% | -4.6% | 21.5% | 0.4% |
capital change on start year (TR') | 1.1% | -4.4% | 28.0% | 0.6% |
mean capital change (TR') | 1.1% | -4.5% | 24.8% | 0.5% | 5.5%
| | | | |
INDICES | y/e 01/04/2015 | y/e 01/04/2016 | y/e 31/03/2017 | y/e 31/03/2018 | mean
FTSE-100 at start period | 6,566 | 6,855 | 6,146 | 7,322 |
FTSE-100 at end period | 6,855 | 6,146 | 7,322 | 7,056 |
change on year | 4.2% | -11.5% | 16.1% | -3.8% | 1.2%
yield % | ??? | ??? | ??? | 4.09% |
TR % | ??? | ??? | ??? | ??? |
| | | | |
FTSE-all share at start period | 3,532 | 3,701 | 3,379 | 3,984 |
FTSE-all share at end period | 3,701 | 3,379 | 3,984 | 3,894 |
change on year | 4.6% | -9.5% | 15.2% | -2.3% | 2.0%
| | | | |
EUR per GBP | € 1.37 | € 1.26 | € 1.17 | € 1.14 |
USD per GBP | $1.48 | $1.44 | $1.25 | $1.40 |
change on start year (vs EUR) | | -8.1% | -7.4% | -2.7% |
change on start year (vs USD) | | -2.9% | -13.1% | 12.3% |
| | | | |
| | | | |
ALLOCATIONS | y/e 01/04/2015 | y/e 01/04/2016 | y/e 31/03/2017 | y/e 31/03/2018 |
| | | | |
| | | | |
| % | % | % | % |
HYP shares: | 100% | 59% | 41% | 28% |
| | | | |
Diversified index trackers: | | | | |
VUKE | 0% | 15% | 18% | 15% |
VWRL | 0% | 0% | 3% | 19% |
VAPX | 0% | 12% | 19% | 18% |
VERX | 0% | 14% | 18% | 18% |
subtotal | 66% | 40% | 58% | 70% |
| | | | |
Higher risk growth: | | | | |
CAKE | 0.0% | 0.0% | 0.5% | 1.1% |
HUR | 0.0% | 0.0% | 0.4% | 1.1% |
subtotal | 0.0% | 0.0% | 0.9% | 2.2% |
| | | | |
Cyclical plays: | | | | |
| 0.0% | 0.0% | 0.0% | 0.0% |
subtotal | 0.0% | 0.0% | 0.0% | 0.0% |
| | | | |
Cash: | 0.0% | 0.6% | 0.3% | 0.4% |
| | | | |
Total value at end year: | 100.0% | 100.0% | 100.0% | 100.0% |



*********************************************************************************************************

Portfolio review – (DS”PP”) – Year to end March 2018
NB. I’ve updated my portfolio tracking spreadsheets so as to be able to put a sanitised summary table view here for the first time. In the course of that I’ve automated things such that numbers shown may not precisely match old portfolio reviews. There may be the odd error.

Purpose & Context
This is a portfolio for myself which has a conservative core and a less conservative fringe where I am prepared to take a position in areas where I believe I have a better understanding over the medium term. I still have a mortgage and in time will have a DB pension (not huge, but it exists). My day job is at the very unreliable but highly interesting consultancy / owner end of the spectrum and so the portfolio may need to deliver in an unpredictable timescale.

Platform & Charges
Everything is held in Interactive Investor (II) at a cost of £90/year. Some additional trading fees are incurred as I try to juggle CGT exposure versus dividend taxation. I’ve relaxed to taking a one-per-year dump from the II platform into spreadsheets and calculating one end-year comparison spreadsheet so as to minimise time on admin.

Strategy
Initially the first tranches that came in were put into 35 HYP-selected shares. Thereafter additional capital and/or dividends first went into four Vanguard index trackers so as to provide wider diversification, and more growth upside, and as a comparison. However when oil prices fell a few years ago I put about one-third of the portfolio into RDSB as I felt the market had over-corrected which can be termed a medium term cyclical play. Some of the RDSB had to be shuffled into BP (who I don’t rate equally) to mop up the CGT allowance. The profit from that position which I held for about a year was then mentally made available for other similar opportunities and is now in Hurricane which is a minor oil exploration company and is definitely high risk. Since then I further studied HUR and progressively invested as a medium term play. My other commitments prevent me from paying the attention necessary to trade short term, so I have to pursue medium term opportunities like these. Longer term the aim is to end up with something looking more like the FF-folio structure.

Holdings

HYP holdings (now reduced to 30) of one or two chunks summing to 43%
[note I am now putting the RDSB and BP into a ‘cyclical’ chunk so as to make tracking easier]
ASHMORE GROUP; STANDARD LIFE ABERDEEN; AMEC FOSTER WHEELER; BANCO SANTANDER SA; BERKELEY GROUP HOLDINGS; BHP BILLITON; [BP]; BRITISH AMERICAN TOBACCO; CARILLION; CENTRICA; FENNER; GLAXOSMITHKLINE; HSBC HOLDINGS; IMPERIAL BRANDS; KCOM GROUP; KIER GROUP; LANCASHIRE HOLDINGS LTD; LEGAL & GENERAL GROUP; MORRISON (WM) SUPERMARKETS; NATIONAL GRID; NEX GROUP; PAYPOINT; PEARSON; PENNON GROUP; RIO TINTO; [ROYAL DUTCH SHELL]; SEVERN TRENT; SOUTH32 LTD; SSE; STANDARD CHARTERED; TATE & LYLE; TP ICAP; VODAFONE GROUP; WOOD GROUP

Globally diversified passive index tracker funds summing to 11%:
VANGUARD FTSE 100 UCITS ETF; VANGUARD FTSE ALL WORLD UCITS ETF; VANGUARD FTSE DEV ASIAPAC XJPN UCITS ETF; VANGUARD FTSE DEV EUROPE EXUK UCITS ETF

Cyclical play on major oils of 21%:
BP; ROYAL DUTCH SHELL (note the valuations of these are excluded from the HYP values above, i.e. no double-dipping)

High risk minor oils of 25%:
HURRICANE ENERGY (note this is very high risk, please do not blindly copy me)

Capital
I managed to get a bit of capital into the portfolio, about 6% net. The portfolio value fell 2% compared with a 3.8% fall in the FTSE-100, but of course this is flattered by 4% of reinvested dividends, i.e. the true fall is 6% and is worse than the FTSE. Most of this fall can be attributed to HUR falling below the average cost, and as a result of the very high exposure to HUR the portfolio is now somewhat unstable (it has moved between about +15% and -15% in what has been a fairly steady market). The HYP shares roughly balanced out, and the two cyclical major oils rose to balance some (but not all) the HUR losses.

Income
Last year income was a dividend yield averaged 5.5% and this year achieved 4.0%, thereby highlighting the opportunity cost of being in HUR which pays no dividend. Dividends are at two-thirds of the bread-and-water income required if all else fails !

Corporate Actions & Tinkering
CARILLION failed completely in the year, held to the end, a bad call by me though in my defence most of the damage was done at times when I was travelling & very busy. FENNER is in the course of being taken over at year end but was sold in March for CGT purposes. STANDARD LIFE and ABERDEEN merged and were held. AMEC were taken over by WOOD GROUP and held. Some STANCHART was repurchased during a rebalance.
A lot of shuffling went on at various times as funds came in or went out (it was not a straightforward year) and that tended to dictate when HUR purchases took place. In turn that caused lots of juggling to place as much of this exposure within the ISA, and en passant balance up the four trackers. All told that was quite a lot of costly trading activity I’d rather have avoided.

Tax
Most of the BP, RDSB, and HUR exposure is within an ISA. That however meant that FENNER was outside the ISA and so I sold this year and offset various losses, mostly with CARILLION.

Conclusion
About as volatile as I had expected. Clearly I have two substantial positions running; one on the oil price cycle; and the other on a high-risk oil exploration play. Anybody who is blindly copying me out there on the internet needs to go and take a cold-shower, as I could exit my positions at any moment (even at a loss) and without saying anything and you would be none-the-wiser. For the time being however I am prepared to let both positions play out. This is overall a very high-risk portfolio, even if it is dressed to deceive with low-risk trimmings of a HYP and the index trackers.

TABULATED RESULTS OF PP-FOLIO

METRICS                             | y/e 01/04/2015 | y/e 01/04/2016 | y/e 31/03/2017 | y/e 31/03/2018 | mean 
| | | | |
additional funds in versus end year | | 104.7% | 0.0% | 16.9% |
funds released versus end year | | -4.2% | -3.7% | -10.9% |
net new funds versus end year | | 100.4% | -3.7% | 6.0% |
| | | | |
dividend yield on start year | na | na | 6.1% | 4.1% |
dividend yield on end year | na | 2.7% | 4.9% | 3.9% |
mean dividend yield | na | na | 5.5% | 4.0% | 4.8%
| | | | |
capital change on end year (TR') | na | -4.7% | 20.1% | -2.2% |
capital change on start year (TR') | na | -0.4% | 32.8% | -2.1% |
mean capital change (TR') | na | -2.5% | 26.5% | -2.2% | 7.3%
| | | | |
INDICES | y/e 01/04/2015 | y/e 01/04/2016 | y/e 31/03/2017 | y/e 31/03/2018 | mean
FTSE-100 at start period | 6,566 | 6,855 | 6,146 | 7,322 |
FTSE-100 at end period | 6,855 | 6,146 | 7,322 | 7,056 |
change on year | 4.22% | -11.54% | 16.06% | -3.77% | 1.2%
yield % | ??? | ??? | ??? | 4.09% |
TR % | ??? | ??? | ??? | ??? |
| | | | |
FTSE-all share at start period | 3,532 | 3,701 | 3,379 | 3,984 |
FTSE-all share at end period | 3,701 | 3,379 | 3,984 | 3,894 |
change on year | 4.6% | -9.5% | 15.2% | -2.3% | 2.0%
| | | | |
EUR per GBP | € 1.37 | € 1.26 | € 1.17 | € 1.14 |
USD per GBP | $1.48 | $1.44 | $1.25 | $1.40 |
change on start year (vs EUR) | | -8.1% | -7.4% | -2.7% | -6.1%
change on start year (vs USD) | | -2.9% | -13.1% | 12.3% | -1.3%
| | | | |
ALLOCATIONS | y/e 01/04/2015 | y/e 01/04/2016 | y/e 31/03/2017 | y/e 31/03/2018 |
| | | | |
| | | | |
| % | % | % | % |
HYP shares: | | 56% | 51% | 43% |
| | | | |
Diversified index trackers: | | | | |
VUKE | | 13% | 10% | 5% |
VWRL | | 0% | 0% | 2% |
VAPX | | 0% | 1% | 2% |
VERX | | 2% | 2% | 2% |
subtotal | | 15% | 13% | 11% |
| | | | |
Higher risk growth: | | | | |
CAKE | | 0.0% | 0.0% | 0.0% |
HUR | | 0.0% | 13.1% | 25.4% |
subtotal | | 0.0% | 13.1% | 25.4% |
| | | | |
Cyclical plays: | | | | |
| | 28.4% | 22.6% | 20.8% |
subtotal | | 28.4% | 22.6% | 20.8% |
| | | | |
Cash: | | 1.0% | 0.0% | 0.3% |
| | | | |
Total value at end year: | | 100.0% | 100.0% | 100.0% |

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Re: FF and PP portfolio reviews

#217075

Postby dspp » April 24th, 2019, 6:43 pm

Two portfolio reviews as per previous years. Each portfolio is for a separate person, one of whom is me, DSPP. Note that the two people have very different circumstances as explained in the text, which is why two substantially different portfolios are created. There is no "one-size-fits-all" solution in these matters in my opinion and that is why I deliberate post these two portfolios together for comparison.

(NB. In y/e March 2018 I updated my portfolio tracking spreadsheets so as to be able to put a sanitised summary table view together for the first time. In the course of that I’ve automated things such that numbers shown may not precisely match 2017 & older portfolio reviews. There may be the odd minor error.)


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Portfolio review – (FF) – Year to end March 2019

Purpose & Context
This is a portfolio for a friend (FF) which we run together, and is deliberately cautious. The aim is for this FF portfolio to ultimately yield an income equivalent to the job and to be a substitute for the pension that they do not have. They have quite a large mortgage-free property, but a low-paying job, and maybe three or four years to retirement, i.e. there is little or no opportunity to refill the pension pot if an error of judgement is made.

Platform & Charges
Everything is held in Interactive Investor (II) at a cost of £90/year. The II charge structure is about to change and increase, but that is not material for this portfolio. The free trades are sufficient for most purposes in this portfolio. Almost nothing happens all year long except for a bout of B&B at year-start into the ISA, and then maybe one trade per quarter to mop up dividends. At the end of the year I dump from the II platform into spreadsheets and calculate one end-year comparison spreadsheet so as to minimise time on admin, with no other active record keeping. II’s service has been fine in respect of this portfolio this year.

Strategy
Originally (2015) the first tranches that came in were put into 35 HYP-selected shares. Thereafter additional capital (2016-2018) and/or dividends has mostly gone into four globally diversified Vanguard passive index trackers so as to provide wider diversification, and more growth upside, and as a comparison. Last year two more recent additions (HUR and CAK) were allocated to a higher risk portfolio, joined this year by TSLA. The higher risk segment was in recognition of the overall underweighting of risk, plus the steady de-risking of the overall path-to-retirement which includes some aspects that are not covered here. Cash generated is ordinarily reinvested quite rapidly, normally in the same quarter.

Holdings
HYP holdings (originally 35, now down from 33 to 32) of one or two chunks each, no additions in year, now 24% of total.
ASHMORE GROUP; STANDARD LIFE ABERDEEN; BANCO SANTANDER SA; BERKELEY GROUP HOLDINGS; BHP BILLITON; BP; BRITISH AMERICAN TOBACCO; CENTRICA; FENNER (X); GLAXOSMITHKLINE; HSBC HOLDINGS; IMPERIAL BRANDS; KCOM GROUP; KIER GROUP; LANCASHIRE HOLDINGS LTD; LEGAL & GENERAL GROUP; MORRISON (WM) SUPERMARKETS; NATIONAL GRID; NATIONAL GRID; (NEX GROUP > CME GROUP); PAYPOINT; PEARSON; PENNON GROUP; RIO TINTO; ROYAL DUTCH SHELL; SEVERN TRENT; SOUTH32 LTD; SSE; STANDARD CHARTERED; TATE & LYLE; TP ICAP; VODAFONE GROUP; WOOD GROUP

Four globally diversified passive index tracker funds summing to 71%:
VANGUARD FTSE 100 UCITS ETF; VANGUARD FTSE ALL WORLD UCITS ETF; VANGUARD FTSE DEV ASIAPAC XJPN UCITS ETF; VANGUARD FTSE DEV EUROPE EXUK UCITS ETF

Higher risk sauce of 4% in total in the rounding errors (was 2%):
HURRICANE ENERGY (HUR); PATISSERIE HOLDINGS (CAKE) (X); TESLA (TSLA)

Capital & Income
No capital was added this year. Approximately 1.9% of capital was withdrawn for urgent property maintenance, taken from a bit of cash at that moment and mostly from some VWRL sold. Adjusting for capital changes, the portfolio capital value went up by 2.3% compared with a 3.1% increase in the FTSE-100.

Last year income was a dividend yield averaged at 3.8% of average value through the year (vs FTSE-100 of 4.0%), and this year dividend yield was 2.1% of average value through the year (vs FTSE-100 of 4.1%).

Total Return
Last year Total Return on average yearly value* (TR’) was 0.5% and this year it was 4.4%. In comparison FTSE-100 TR was 0.2% last year and 7.2% this year.

In cash terms total returns are now approaching the income from the day job, but so far there is not quite enough inflation protection & sequence-of-returns protection.

It is noticeable that the portfolio TR’ is slightly more smoothed than the FTSE-100 and I think this is partially explained by the GBP/USD rate movement. Overall so far this FF portfolio is delivering an average 5-year TR of 5.2% versus a FTSE-100 TR for the same period of 5.0%.

*Strictly speaking this should be unitised to give a true TR, but I use averaged value in year to give a very close approximation, hence my use of the symbol TR’.

Corporate Actions & Tinkering
FENNER was taken over for cash, held inside the ISA account so no CGT consequences. NEX GROUP was taken over by CME GROUP for a mixture of cash and stock, and both taken as offered, this was in the trading account. Both were healthy gains on modest amounts.

KIER and CENTRICA are both giving cause for concern, but both have been left alone.

HURRICANE was topped up with some of the FENNER proceeds. The balance of FENNER (approx) opened a position in TESLA based upon its overall investment case, though not without considerable thought due to the level of risk and the somewhat flaky management. No change was made to the Patisserie Valerie (CAKE) holding which then completely unexpectedly failed due to what appears so far to have been fraud. The decision was made not to subscribe to the class action lawsuit operated by Teacher Stern as it was considered that the £500 entry fee is unjustified. This – and the previous year’s failure of Carillion – are in my opinion failures of the auditors & directors to do their duty correctly on behalf of shareholders and I am (sadly, once again) disappointed in this but left with no effective path of action except to diversify if a low-risk strategy is the goal.

Tax
The ISA allowance was filled up at the start of the year by B&B’ing the highest yielding shares, leaving no room for corporate actions. However given that there are 30+ shares the chance of any one corporate action creating a CGT problem was most unlikely and so this was thought to be the better strategy, and it has again succeeded (the alternative being the end-year dash to B&ISA).

Conclusion
Overall this continues to perform. It is insignificantly ahead of the FTSE and is now far more diversified, and that diversification appears to be giving it helpful stability versus the FTSE in TR terms. I remain comfortable seeing the HYP at only 24% of the overall value and with the index funds now dominating, and both are delivering. (I stress again that I am very mindful of the limitations of the HYP strategy). The judicious introduction of some higher risk shares is proceeding, but the total collapse of CAKE once again reminds that the most important objective to a person with limited income is return of capital, not return on capital. However taking no risk is not only impossible but counter-productive. Again this overall strategy blend is delivering so far; and we both sleep at night and it is low maintenance. Qualitatively there is probably now sufficient exposure to higher risk items, although this is too concentrated as it is in only two stocks and that may get some attention in time. Conversely there is no bond or equivalent allocation (though in this instance the bond equivalence is the large property in FF’s wider context) and this will likely receive further thought in coming years.

Doing the year-end admin is an hour or so, and maybe a few hours of thought in the year at specific decision points. Writing this up based on the previous year’s template takes another hour or so.

Projections show that this portfolio could allow for retirement now but without adequate protection against inflation, or in four years’ time with some inflation-protection. Lastly I am happy that my friend can run the FF folio without me if it were ever necessary, and increasingly that is the norm.

Tabulated Results - FF portfolio

METRICS                             | y/e 01/04/2015 | y/e 01/04/2016 | y/e 31/03/2017 | y/e 31/03/2018 | y/e 31/03/2019 | mean 
| | | | | |
additional funds in versus end year | 98.9% | 45.3% | 18.2% | 28.8% | 0.0% |
funds released versus end year | 0.0% | -1.6% | 0.0% | -0.4% | -1.9% |
net new funds versus end year | 98.9% | 43.7% | 18.2% | 28.4% | -1.9% |
| | | | | |
dividend yield on start year | na | 6.1% | 5.8% | 4.5% | 2.2% |
dividend yield on end year | 0.1% | 3.7% | 3.5% | 3.2% | 2.1% |
mean dividend yield | na | 4.9% | 4.6% | 3.8% | 2.1% | 4.5%
| | | | | |
capital change on end year (TR') | 1.1% | -4.6% | 21.5% | 0.4% | 4.0% |
capital change on start year (TR') | 1.1% | -4.4% | 28.0% | 0.6% | 4.7% |
mean capital change (TR') | 1.1% | -4.5% | 24.8% | 0.5% | 4.4% | 5.2%
| | | | | |
INDICES | y/e 01/04/2015 | y/e 01/04/2016 | y/e 31/03/2017 | y/e 31/03/2018 | y/e 31/03/2019 | mean
| | | | | |
FTSE-100 at end period | 6,833 | 6,146 | 7,322 | 7,056 | 7,279 |
FTSE-100 change on year | 2.0% | -11.2% | 16.1% | -3.8% | 3.1% | 1.2%
FTSE-100 TR at end period | 5,215 | 4,872 | 6,037 | 6,049 | 6,515 |
FTSE-100 TR change on year | 5.4% | -7.0% | 19.3% | 0.2% | 7.2% | 5.0%
FTSE-100 dividend yield on year | 3.4% | 4.1% | 3.2% | 4.0% | 4.1% | 3.8%
| | | | | |
EUR per GBP | € 1.37 | € 1.26 | € 1.17 | € 1.14 | € 1.16 |
USD per GBP | $1.48 | $1.44 | $1.25 | $1.40 | $1.30 |
change on start year (vs EUR) | | -8.1% | -7.4% | -2.7% | 1.9% |
change on start year (vs USD) | | -2.9% | -13.1% | 12.3% | -7.3% |
| | | | | |
ALLOCATIONS | y/e 01/04/2015 | y/e 01/04/2016 | y/e 31/03/2017 | y/e 31/03/2018 | y/e 31/03/2019 | trend
| | | | | |
| % | % | % | % | % |
HYP shares: | 100% | 59% | 41% | 28% | 24% |
| | | | | |
Diversified index trackers: | | | | | |
VUKE | | 15% | 18% | 15% | 15% |
VWRL | | | 3% | 19% | 19% |
VAPX | | 12% | 19% | 18% | 19% |
VERX | | 14% | 18% | 18% | 18% |
subtotal | 66% | 40% | 58% | 70% | 71% |
| | | | | |
Higher risk growth: | | | | | |
CAKE | | | 0.5% | 1.1% | 0.0% |
TSLA | | | | | 0.7% |
HUR | | | 0.4% | 1.1% | 3.1% |
subtotal | 0.0% | 0.0% | 0.9% | 2.2% | 3.8% |
| | | | | |
Cyclical plays: | | | | | |
| 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
subtotal | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
| | | | | |
Cash: | 0.0% | 0.6% | 0.3% | 0.4% | 1.5% |
| | | | | |
Total value at end year: | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% |


*******************************************************************************************************************************
*******************************************************************************************************************************

Portfolio review – (“PP”) – Year to end March 2019

Purpose & Context
This is a portfolio for myself which has a conservative core and a less conservative fringe where I am prepared to take a position in areas where I believe I have a better understanding over the medium term. I still have a mortgage and in time will have a DB pension (not huge, but it exists) and am building a DC pension (growing slowly). My day job is at the very unreliable but highly interesting consultancy / owner end of the spectrum and so the portfolio may need to deliver in an unpredictable timescale.

Platform & Charges
Everything is held in Interactive Investor (II) at a cost of £90/year. Some additional trading fees are incurred as I try to juggle CGT exposure versus dividend taxation. I’ve relaxed to taking a one-per-year dump from the II platform into spreadsheets and calculating one end-year comparison spreadsheet so as to minimise time on admin.

Strategy
Initially the first tranches (early 2016) that came in were put into 35 HYP-selected shares. Thereafter additional capital and/or dividends first went into four Vanguard index trackers so as to provide wider diversification, and more growth upside, and as a comparison (2016). However when oil prices fell a few years ago (also 2016) I put about one-third of the portfolio into RDSB as I felt the market had over-corrected which can be termed a medium term cyclical play. Some of the RDSB had to be shuffled into BP (who I don’t rate equally) to mop up the CGT allowance. The profit from that position which I held for about a year was then mentally made available for other similar opportunities (2017) and went into Hurricane (HUR) which is a minor oil exploration company and is definitely high risk. Since then I further studied HUR and progressively invested as a medium term play (through 2018, 2019) as buying opportunities and funds have coincided bringing that to 35% of my portfolio and showing a useful profit. My other commitments prevent me from paying the attention necessary to trade short term, so I have to pursue medium term opportunities like these.

Late in 2018 I opened a small (2%) position in Tesla (TSLA) which I am doing because it is an interesting triple play (automotive, storage, autonomy) although with flaws. It is the first ‘cleantech/renewables’ growth share that I see at scale that has the large upside that interests me as an individual investor.

Early in 2018 I opened a small position in Petro Matad (MATD) which is a small oil exploration outfit in Mongolia. I reversed out of that at a small loss later in the year when I saw an exploration well result & accompanying share price activity, and conducted a post mortem on my initial investment decision. I remembered my rules for investing in minor oils and recalled that MATD transgressed almost all of them ! That is why in 30-years of working in the energy industry (including in oil & gas in far away places) the only minor oil I have ever bought is HUR (apart from briefly, MATD). Of course MATD could perform very well as it has some interesting acreage to explore.

My overall view on TSLA is that it could see a return of anywhere from 0x to 5x, but that there is a very slender chance of 10x. My overall view on HUR is it could see a return of anywhere from 0.5x to 10x, with 2-4x being most likely. Something that interests me in TSLA is that it is logically at worst uncorrelated, and at best inversely correlated, with my O&G shares. Both could lose all or much of their value in the downside case.

Longer term the aim is to end up with something looking more like the FF-folio structure but that will only happen if/when the HUR position unwinds.

Holdings
HYP holdings (now reduced to 28) of one or two chunks summing to 36%
ASHMORE GROUP; STANDARD LIFE ABERDEEN; BANCO SANTANDER SA; BERKELEY GROUP HOLDINGS; BHP BILLITON; BRITISH AMERICAN TOBACCO; CENTRICA; GLAXOSMITHKLINE; HSBC HOLDINGS; IMPERIAL BRANDS; KCOM GROUP; KIER GROUP; LANCASHIRE HOLDINGS LTD; LEGAL & GENERAL GROUP; MORRISON (WM) SUPERMARKETS; NATIONAL GRID; NEX GROUP > CME GROUP; PAYPOINT; PEARSON; PENNON GROUP; RIO TINTO; SEVERN TRENT; SOUTH32 LTD; SSE; STANDARD CHARTERED; TATE & LYLE; TP ICAP; VODAFONE GROUP; WOOD GROUP

Globally diversified passive index tracker funds summing to 7%:
VANGUARD FTSE 100 UCITS ETF; VANGUARD FTSE ALL WORLD UCITS ETF; VANGUARD FTSE DEV ASIAPAC XJPN UCITS ETF; VANGUARD FTSE DEV EUROPE EXUK UCITS ETF

Cyclical play on major oils of 20%:
BP; ROYAL DUTCH SHELL (note the valuations of these are excluded from the HYP values above, i.e. no double-dipping)

High risk minor oils of 35%:
HURRICANE ENERGY (note this is very high risk, please do not blindly copy me)

Higher risk technology
TSLA, Tesla, 2% (this could go bankrupt with little warning, be careful)

Capital & Income
This year (2019) there were no capital additions by me, and one minor withdrawal (0.5%). The portfolio value increased on a TR basis by 15.5% vs a FTSE 100 TR of 7.2%. The portfolio dividend yield reduced to 3.4% vs a 4.1% yield on the FTSE.

Most of the capital appreciation came from HUR with a smaller amount from major oils. The HYP shares roughly balanced out. For TSLA it is too early to see a trend and I was level on the year.

Income in (2017) dividend yield averaged 5.5%, in (2018) achieved 4.0%, and this year (2019) achieved 3.4%, thereby highlighting the opportunity cost of being in shares such as HUR which pay no dividend. Dividends are level as capital grows, and are at two-thirds of the bread-and-water income required if all else fails !

The four-year annual average portfolio TR is now 9.3% vs 5.0% for FTSE-100 TR.

Corporate Actions & Tinkering
FENNER was in the course of being taken over at year start but was sold beforehand in March 2018 for CGT purposes. NEX GROUP was taken over by CME GROUP for a mixture of cash and stock, and both taken as offered, this was in the trading account. Both were healthy gains on modest amounts.

A lot of shuffling went on at various times as dividends came and that and share price activity tended to dictate when HUR purchases took place. In turn that caused lots of juggling to place as much of this exposure is within the ISA, and en passant again balance up the four trackers. Once again that was quite a lot of costly trading activity I’d rather have avoided. But now (April 2019) all of HUR is within the ISA and hopefully the price won’t go low enough to warrant further buying.

Tax
Most of the BP, RDSB, and HUR exposure is within an ISA. After year-end (April 2019) the last chunk of HUR was moved into the ISA. There is now a very small amount in a SIPP.

Conclusion
Again as volatile as I had expected. Clearly I have two substantial positions running; one on the oil price cycle; and the other on a high-risk oil exploration play, plus a minor interest in high risk technology. My MATD excursion was an error that served to remind me of risk management fundamentals, fortunately with little harm done. Anybody who is blindly copying me out there on the internet needs to go and take a cold-shower, as I could exit my positions at any moment (even at a loss) and without saying anything and you would be none-the-wiser. For the time being however I am prepared to let both positions play out. This is overall a very high-risk portfolio, even if it is dressed to deceive with low-risk trimmings of a HYP and the index trackers.

Tabulated Results - PP portfolio

METRICS                             | y/e 01/04/2015 | y/e 01/04/2016 | y/e 31/03/2017 | y/e 31/03/2018 | y/e 31/03/2019 | mean 
additional funds in versus end year | | 104.7% | 0.0% | 16.9% | 0.0% |
funds released versus end year | | -4.2% | -3.7% | -10.9% | -0.5% |
net new funds versus end year | | 100.4% | -3.7% | 6.0% | -0.5% |
| | | | | |
dividend yield on start year | | | 6.1% | 4.1% | 4.0% |
dividend yield on end year | | 2.7% | 4.9% | 3.9% | 3.4% |
mean dividend yield | na | na | 5.5% | 4.0% | 3.7% | 4.4%
| | | | | |
capital change on end year (TR') | | -4.7% | 20.1% | -2.2% | 14.2% |
capital change on start year (TR') | | -0.4% | 32.8% | -2.1% | 16.9% |
mean capital change (TR') | na | -2.5% | 26.5% | -2.2% | 15.5% | 9.3%
| | | | | |
INDICES | y/e 01/04/2015 | y/e 01/04/2016 | y/e 31/03/2017 | y/e 31/03/2018 | y/e 31/03/2019 | mean
FTSE-100 at end period | 6,833 | 6,146 | 7,322 | 7,056 | 7,279 |
FTSE-100 change on year | 2.0% | -11.2% | 16.1% | -3.8% | 3.1% | 1.2%
FTSE-100 TR at end period | 5,215 | 4,872 | 6,037 | 6,049 | 6,515 |
FTSE-100 TR change on year | 5.4% | -7.0% | 19.3% | 0.2% | 7.2% | 5.0%
FTSE-100 dividend yield on year | 3.4% | 4.1% | 3.2% | 4.0% | 4.1% | 3.8%
| | | | | |
EUR per GBP | € 1.37 | € 1.26 | € 1.17 | € 1.14 | € 1.16 |
USD per GBP | $1.48 | $1.44 | $1.25 | $1.40 | $1.30 |
change on start year (vs EUR) | | -8.1% | -7.4% | -2.7% | 1.9% | -4.1%
change on start year (vs USD) | | -2.9% | -13.1% | 12.3% | -7.3% | -2.8%
| | | | | |
ALLOCATIONS | y/e 01/04/2015 | y/e 01/04/2016 | y/e 31/03/2017 | y/e 31/03/2018 | y/e 31/03/2019 | trend
| | | | | |
| % | % | % | % | % |
HYP shares: | | 56% | 51% | 43% | 36% |
| | | | | |
Diversified index trackers: | | | | | |
VUKE | | 13% | 10% | 5% | 2% |
VWRL | | | | 2% | 2% |
VAPX | | | 1% | 2% | 2% |
VERX | | 2% | 2% | 2% | 2% |
subtotal | | 15% | 13% | 11% | 7% |
| | | | | |
Higher risk growth: | | | | | |
CAKE | | | | | |
TSLA | | | | | 2% |
HUR | | | 13% | 25% | 35% |
subtotal | | | 13% | 25% | 37% |
| | | | | |
Cyclical plays: | | | | | |
| | 28% | 23% | 21% | 20% |
subtotal | | 28% | 23% | 21% | 20% |
| | | | | |
Cash: | | 1.0% | 0.0% | 0.3% | 0.6% |
| | | | | |
Total value at end year: | | 100.0% | 100.0% | 100.0% | 100.0% |

TUK020
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Re: FF and PP portfolio reviews

#217159

Postby TUK020 » April 25th, 2019, 9:05 am

dspp wrote:
Purpose & Context
This is a portfolio for a friend (FF) which we run together, and is deliberately cautious. The aim is for this FF portfolio to ultimately yield an income equivalent to the job and to be a substitute for the pension that they do not have. They have quite a large mortgage free property, but a low-paying job, and maybe five years to retirement, i.e. there is little or no opportunity to refill the pension pot. They started the year with a fair chunk in some bond products that matured in the year.


A comment about the FF portfolio. In order to provide a regular, low risk pension income, what you need to be thinking about is not just a portfolio, but a "portfolio + cash buffer" to protect against sequence of returns risk.

If you friend is within a couple of years to retirement and draw-down from this portfolio, you should probably stop/reduce reinvesting dividends, and bank a portion into a buffer until you have 2 years worth of income sitting in cash, from which friend can draw their income.

dspp
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Re: FF and PP portfolio reviews

#217163

Postby dspp » April 25th, 2019, 9:31 am

TUK020 wrote:
dspp wrote:
Purpose & Context
This is a portfolio for a friend (FF) which we run together, and is deliberately cautious. The aim is for this FF portfolio to ultimately yield an income equivalent to the job and to be a substitute for the pension that they do not have. They have quite a large mortgage free property, but a low-paying job, and maybe five years to retirement, i.e. there is little or no opportunity to refill the pension pot. They started the year with a fair chunk in some bond products that matured in the year.


A comment about the FF portfolio. In order to provide a regular, low risk pension income, what you need to be thinking about is not just a portfolio, but a "portfolio + cash buffer" to protect against sequence of returns risk.

If you friend is within a couple of years to retirement and draw-down from this portfolio, you should probably stop/reduce reinvesting dividends, and bank a portion into a buffer until you have 2 years worth of income sitting in cash, from which friend can draw their income.


Thank you TUK. Something like that is the expected pathway. They have other factors to juggle and so the decision is not yet made. regards, dspp

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Re: FF and PP portfolio reviews

#218438

Postby StepOne » April 30th, 2019, 12:48 pm

dspp wrote:HYP holdings (originally 35, now down from 33 to 32) of one or two chunks each, no additions in year, now 24% of total.
ASHMORE GROUP; STANDARD LIFE ABERDEEN; BANCO SANTANDER SA; BERKELEY GROUP HOLDINGS; BHP BILLITON; BP; BRITISH AMERICAN TOBACCO; CENTRICA; FENNER (X); GLAXOSMITHKLINE; HSBC HOLDINGS; IMPERIAL BRANDS; KCOM GROUP; KIER GROUP; LANCASHIRE HOLDINGS LTD; LEGAL & GENERAL GROUP; MORRISON (WM) SUPERMARKETS; NATIONAL GRID; NATIONAL GRID; (NEX GROUP > CME GROUP); PAYPOINT; PEARSON; PENNON GROUP; RIO TINTO; ROYAL DUTCH SHELL; SEVERN TRENT; SOUTH32 LTD; SSE; STANDARD CHARTERED; TATE & LYLE; TP ICAP; VODAFONE GROUP; WOOD GROUP

Four globally diversified passive index tracker funds summing to 71%:
VANGUARD FTSE 100 UCITS ETF; VANGUARD FTSE ALL WORLD UCITS ETF; VANGUARD FTSE DEV ASIAPAC XJPN UCITS ETF; VANGUARD FTSE DEV EUROPE EXUK UCITS ETF


Hi dspp,

Just wondering why you bother with the FTSE 100 ETF given the amount you already have in the HYP which are mainly FTSE 100 shares?

I'm asking because I am in a similar position - HYP in ISAs, and a SIPP which is all trackers, approx 33% UK tracker which I am considering ditching and re-allocating to other regions.

Cheers,
StepOne

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Re: FF and PP portfolio reviews

#218451

Postby Itsallaguess » April 30th, 2019, 1:33 pm

TUK020 wrote:
In order to provide a regular, low risk pension income, what you need to be thinking about is not just a portfolio, but a "portfolio + cash buffer" to protect against sequence of returns risk.


Whilst this is an important factor in retirement planning, if the bulk of our income is expected to come from investment returns, the idea behind 'sequence of returns risk' is not often fully explained.

This site points out why this is important -

During your retirement years, if a high proportion of negative returns occur in the beginning years of your retirement, it will have a lasting negative effect and reduce the amount of income you can withdraw over your lifetime. This is called the sequence of returns risk.

When you're retired, you need to sell investments periodically to support your cash flow needs. If the negative returns occur first, you end up selling some holdings, and so you reduce the shares you own that are available to participate in the later-occurring positive returns.


https://www.thebalance.com/how-sequence-risk-affects-your-retirement-money-2388672

I'm sure dspp knows this already, but it's well worth a read for anyone else following this thread who's perhaps not familiar with the issue.

Cheers,

Itsallaguess

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Re: FF and PP portfolio reviews

#218490

Postby dspp » April 30th, 2019, 4:45 pm

StepOne wrote:
dspp wrote:HYP holdings (originally 35, now down from 33 to 32) of one or two chunks each, no additions in year, now 24% of total.
ASHMORE GROUP; STANDARD LIFE ABERDEEN; BANCO SANTANDER SA; BERKELEY GROUP HOLDINGS; BHP BILLITON; BP; BRITISH AMERICAN TOBACCO; CENTRICA; FENNER (X); GLAXOSMITHKLINE; HSBC HOLDINGS; IMPERIAL BRANDS; KCOM GROUP; KIER GROUP; LANCASHIRE HOLDINGS LTD; LEGAL & GENERAL GROUP; MORRISON (WM) SUPERMARKETS; NATIONAL GRID; NATIONAL GRID; (NEX GROUP > CME GROUP); PAYPOINT; PEARSON; PENNON GROUP; RIO TINTO; ROYAL DUTCH SHELL; SEVERN TRENT; SOUTH32 LTD; SSE; STANDARD CHARTERED; TATE & LYLE; TP ICAP; VODAFONE GROUP; WOOD GROUP

Four globally diversified passive index tracker funds summing to 71%:
VANGUARD FTSE 100 UCITS ETF; VANGUARD FTSE ALL WORLD UCITS ETF; VANGUARD FTSE DEV ASIAPAC XJPN UCITS ETF; VANGUARD FTSE DEV EUROPE EXUK UCITS ETF


Hi dspp,

Just wondering why you bother with the FTSE 100 ETF given the amount you already have in the HYP which are mainly FTSE 100 shares?

I'm asking because I am in a similar position - HYP in ISAs, and a SIPP which is all trackers, approx 33% UK tracker which I am considering ditching and re-allocating to other regions.

Cheers,
StepOne


The reason is that the overall FF portfolio seeks at this stage to balance yield and growth, and risk reduction. The HYP shares only pursue the yield part of the equation. The index trackers are somewhat biased towards growth. If the FF portfolio was purely a Total Return (TR) portfolio then it might indeed substitute VUKE completely for the HYP shares. That is in fact a longer term option that FF and I discuss. However risk reduction - via strategy diversification - is also a component. HYP is not the same as VUKE; there is a skew; and that skew may (will) vary over time as what constitutes FTSE100 changes with sentiment.

Another factor (as well as yield vs cap growth vs sum=TR) in discussing if/when to exit a HYP chunk is the rate at which HYP shares drop out of the initial 35. Since this HYP is in effect in drawdown (because its divis go to index purchases) it never replenishes. The initial 35 picks have declined to 32, and a few of the remainders look shaky, plus KCOM is about to exit. At a loss rate (some positive exits, some less positive) of about one per year then over the course of a decade sectoral imbalances will build. If a side-effect of the HYP selection methodology is to increase risk of picking capital destroyers then this effect could happen faster than average for FTSE 100. I personally have serious concerns about some aspects of HYP if followed too incautiously, including this one.

In the beginning the objective was 1/3 HYP, 1/3 index; 1/3 IT. The last third may never happen. On this trajectory the first third may one day go, and it could become an all index outcome. That will - if it happens - mean zero strategy diversification. As yet we are unsure and we watch ourselves with interest. As you can see very little happens all year so it is a very slow game in the FF portfolio.

What are your thoughts ?

(yes I strongly recommend that people think through the sequence of returns issue that iag is highlighting)

regards, dspp

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Re: FF and PP portfolio reviews

#332460

Postby dspp » August 11th, 2020, 5:13 pm

Two portfolio reviews as per previous years. Each portfolio is for a separate person, one of whom is me, DSPP. Note that the two people have very different circumstances as explained in the text, which is why two substantially different portfolios are created. There is no "one-size-fits-all" solution in these matters in my opinion and that is why I deliberate post these two portfolios together for comparison. This year I have been snowed under and so not posted the reviews until now though I wrote them earlier in the year. Since then, in both portfolios, the HUR position has been exited as noted at the time on the HUR thread.

(NB. In y/e March 2018 I updated my portfolio tracking spreadsheets so as to be able to put a sanitised summary table view together for the first time. In the course of that I’ve automated things such that numbers shown may not precisely match 2017 & older portfolio reviews. There may be the odd minor error. I've spotted a glitch with TR' calculation but it is not high on my list to think about if there is a 'best' way to do that.)


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Portfolio review – (“DSPP”) – Year to end March 2020

Purpose & Context
This is a portfolio for myself which has a conservative core and a less conservative fringe where I am prepared to take a position for the medium term. I still have a mortgage and in time will have a DB pension (not huge, but it exists) and am building a DC pension (growing slowly). My day job is at the very unreliable but highly interesting consultancy / owner end of the spectrum and so the portfolio may need to deliver in an unpredictable timescale.

Platform & Charges
Everything is held in Interactive Investor (II) at a cost of £240/year which includes a SIPP. Some additional trading fees are incurred as I try to juggle CGT exposure versus dividend taxation. I take a one-per-year dump from the II platform into spreadsheets and calculating one end-year comparison spreadsheet so as to minimise time on admin. This year the II B&ISA process has been very slow.

Strategy
Longer term the aim is to end up with something looking more like the FF-folio structure but that will only happen if/when the riskier positions reach conclusions.

Holdings
HYP holdings were (now sold):
ASHMORE GROUP; STANDARD LIFE ABERDEEN; BANCO SANTANDER SA; BERKELEY GROUP HOLDINGS; BHP BILLITON; BRITISH AMERICAN TOBACCO; CENTRICA; GLAXOSMITHKLINE; HSBC HOLDINGS; IMPERIAL BRANDS; KCOM GROUP; KIER GROUP; LANCASHIRE HOLDINGS LTD; LEGAL & GENERAL GROUP; MORRISON (WM) SUPERMARKETS; NATIONAL GRID; NEX GROUP > CME GROUP; PAYPOINT; PEARSON; PENNON GROUP; RIO TINTO; SEVERN TRENT; SOUTH32 LTD; SSE; STANDARD CHARTERED; TATE & LYLE; TP ICAP; VODAFONE GROUP; WOOD GROUP

Globally diversified passive index tracker funds:
VANGUARD FTSE 100 UCITS ETF; VANGUARD FTSE ALL WORLD UCITS ETF; VANGUARD FTSE DEV ASIAPAC XJPN UCITS ETF; VANGUARD FTSE DEV EUROPE EXUK UCITS ETF

Cyclical play on major oils of :
BP; ROYAL DUTCH SHELL (note the valuations of these are excluded from the HYP values above, i.e. no double-dipping)

High risk minor oils :
HURRICANE ENERGY (note this is very high risk, please do not blindly copy me)
MATD (a rinky dink little oil company now trying to get a production permit in Mongolia)

Higher risk
TSLA, Tesla, (this could go bankrupt with little warning, be careful)
AIR, Airbus

Capital & Income
This year (2019/2020) approx 14% of capital additions was made vs start year, the result of transferring some DC pension into my SIPP. This year approx 3% of capital withdrawal occurred, taken from the trading account. The two were related, in a sense I was over-contributing to my pension hence the trading withdrawals.

Capital reduced by a stonking 45% in the course of the year. This is shared between three issues. Firstly bad results at HUR that took it from 56p to12p, without any trading by me, swinging from a 2x profit to a 2/3 loss with no trading. Secondly the three-way KSA vs Russia vs US-shale oil price war that took (e.g.) RDSB from 2500p to 1100p in the same period, as Brent went from $70/bbl to $20/bbl in the same time frame, again with no trading of my RDSB or BP. Thirdly the general and substantial global market downturn due to the coronavirus pandemic that took FTSE-100 from 7,279 to 5,316, again with no trading. A minor uplift occurred as a result of TSLA growing.

Income in (2019) dividend yield averaged 2.6%, vs 3.7% last year. This was reduced as the effect of shifting a chunk out of the higher yielding HYP shares into index trackers. It is also affected by the substantial allocation to HUR and TSLA that are not dividend paying. Dividends are at half of the bread-and-water income required if all else fails !

The five -year annual average portfolio TR is now -1.9% vs +0.4% for FTSE-100 TR.

Corporate Actions & Tinkering
The transfer in to the SIPP was allocated to the four index trackers. I looked at the DC pension fund’s asset allocation and it was very nearly exactly this after one had relabelled the various components, and so I concluded there was no particular reason not to make the transfer and allocate it in this way. Interestingly there was less than 1% allocation of the pension to bond/gold, as a consequence of my fairly long horizon before nominal retirement.

In April/May 2019 a small amount of TSLA was bought mopping up some spare cash from dividends, and KCOM was sold to buy a larger amount when TSLA had a brief downblip creating a bigger entry opportunity. The TSLA holding has an average price of about $240 and so is showing a 3x profit.

In August 2019 most of the HYP holdings were sold, replaced by increased holdings in the four index trackers, though underweighting VUKE. The reason was that the HYP holdings were skewed towards UK exposure and I felt that was a risk it was unnecessary to run in the context of Brexit. This was not directly a commentary by me on HYP as a strategy, as otherwise I was content to let evidence accumulate.

In October 2019 some very trivial spare cash was used to buy a small amount of MATD, which is now smaller.

In March 2020 some very trivial spare cash was used to buy a small amount of Airbus, which is now smaller.

Some shuffling went on at various times as dividends came and that and share price activity tended to dictate when TSLA purchases took place.

Re HUR I did not trade out of HUR in the course of the year, as on each occasion when there was a significant news item I was either travelling or snowed under at work, and did not mentally process the consequences and/or get to a situation where I could trade until after the market had already reacted. I did not set any stop losses because this is a very volatile share, with considerable trading games going on. I have concerns about the role of the bondholders in HUR: who they are, their information insight, and their strategies. At the moment from a reservoir perspective things are finely balanced, and that in turn creates a narrow success window financially for HUR to meet its regulatory and bond commitments. I continue to hold, but I think the CFO was sensible to leave when he did : he clearly had a good understanding of what was to come and the characters influencing decisions. I am very concerned re HUR’s selective information control.

Tax
The HUR is inside the ISA and so cannot create a CGT loss. The TSLA is outside the ISA and so is showing a profit. Oh bother.

Conclusion
Crikey, even more volatile than I had expected. Clearly I had two substantial positions running; one on the oil price cycle; and the other on a high-risk oil exploration play, both of which went bad. On the bright side my minor interest in high risk technology turned good. Even worse the general market downturn from the pandemic arrived. One item that has roughly worked as expected was the shift of a chunk from UK-biased HYP to global index trackers so as to reduce Brexit risk, and given the mild GBP decline that has (so far) worked.

For the time being I remain prepared to let all positions play out. This is overall a very high-risk portfolio, as events have shown.

NB. I’ve updated my portfolio tracking spreadsheets so as to be able to put a sanitised summary table view here for the first time. In the course of that I’ve automated things such that numbers shown may not precisely match old portfolio reviews. There may be the odd error.

DS 15 05 20

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********************************************************************

Portfolio review – (FF) – Year to end March 2020

Purpose & Context
This is a portfolio for a friend (FF) which we run together, and is deliberately cautious. The aim is for this FF portfolio to ultimately yield an income equivalent to the job and to be a substitute for the pension that they do not have. They have quite a large mortgage-free property, but a low-paying job, and maybe three or four years to retirement, i.e. there is little or no opportunity to refill the pension pot if an error of judgement is made.

Platform & Charges
Everything is held in Interactive Investor (II). The cost was £120/yr but with the addition of a SIPP that has increased to £240/yr. Almost nothing happens all year long except for a bout of B&B at year-start into the ISA, and then maybe one trade per quarter to mop up dividends. At the end of the year I dump from the II platform into spreadsheets and calculate one end-year comparison spreadsheet so as to minimise time on admin, with no other active record keeping. II’s service has been fine in respect of this portfolio this year, except that the B&ISA process has become unreasonably slow and opaque. The II consolidated tax certificate has improved.

Strategy
Originally (2015) the first tranches that came in were put into 35 HYP-selected shares. Thereafter additional capital (2016-2018) and/or dividends has mostly gone into four globally diversified Vanguard passive index trackers so as to provide wider diversification, and more growth upside, and as a comparison. In 2018 additions (HUR and CAK) were allocated to a higher risk portfolio, joined in 2019 year by TSLA but exited by bankrupt CAK. The higher risk segment was in recognition of the overall underweighting of risk, plus the steady de-risking of the overall path-to-retirement which includes some aspects that are not covered here. Cash is ordinarily reinvested in the same quarter. This year (2019/20) the HYP positions were exited for Brexit risk management reasons.

Holdings

HYP holdings (were):
ASHMORE GROUP; STANDARD LIFE ABERDEEN; BANCO SANTANDER SA; BERKELEY GROUP HOLDINGS; BHP BILLITON; BP; BRITISH AMERICAN TOBACCO; CENTRICA; FENNER (X); GLAXOSMITHKLINE; HSBC HOLDINGS; IMPERIAL BRANDS; KCOM GROUP; KIER GROUP; LANCASHIRE HOLDINGS LTD; LEGAL & GENERAL GROUP; MORRISON (WM) SUPERMARKETS; NATIONAL GRID; NATIONAL GRID; (NEX GROUP > CME GROUP); PAYPOINT; PEARSON; PENNON GROUP; RIO TINTO; ROYAL DUTCH SHELL; SEVERN TRENT; SOUTH32 LTD; SSE; STANDARD CHARTERED; TATE & LYLE; TP ICAP; VODAFONE GROUP; WOOD GROUP

Four globally diversified passive index tracker funds :
VANGUARD FTSE 100 UCITS ETF; VANGUARD FTSE ALL WORLD UCITS ETF; VANGUARD FTSE DEV ASIAPAC XJPN UCITS ETF; VANGUARD FTSE DEV EUROPE EXUK UCITS ETF

Higher risk sauce of 2.6% in total in the rounding errors (was 3.8%):
HURRICANE ENERGY (HUR); TESLA (TSLA)

Capital, Income, and Total Return’
Approximately 17% was added by way of a SIPP transfer-in, spread evenly into the four index trackers. Approximately 1% was withdrawn from trading.
Adjusting for capital changes, the portfolio capital value went down by 21% compared with a 28% decrease in the FTSE-100. This is a direct consequence of the coronavirus pandemic, plus the simultaneous oil price war that has affected the oil stocks in the various indices.
Last year income was a dividend yield averaged at 2.1% year, and this year dividend yield was 2.2%.
Total Return on average yearly value* (TR’) was -21% versus FTSE-100 TR of -22%.
In cash terms total returns are now approaching the income from the day job, but so far there is not quite enough inflation protection & sequence-of-returns protection. A bond cushion is needed.
*Strictly speaking this should be unitised to give a true TR, but I use averaged value in year to give a very close approximation, hence my use of the symbol TR’.

Corporate Actions & Tinkering
In August 2019 most of the HYP holdings were sold, replaced by increased holdings in the four index trackers, though underweighting VUKE. The reason was that the HYP holdings were skewed towards UK exposure and we felt that was a risk it was unnecessary to run in the context of Brexit. This move was not directly a commentary on HYP as a strategy.

Overall this means VUKE is now at 2/3 the weighting of the VERX, VWRL, and VAPX holdings.

During the course of the year there were a couple of very minor top-ups of HUR and TSLA. The HUR performed badly, the TSA well. Neither are material to this portfolio.

The aim had been to commence some bond buying towards the end of the year, with the intention of building up a 1-2 year cushion. Probably using something like the Vanguard Global Bond Index. Coronavirus put that plan on hold, though we anticipate dipping the FF toe in the bond water soon.

Tax
The ISA allowance was filled up at the start of the year by B&B’ing. No corporate actions created a problem and now that the HYP have been exited this is unlikely to be a problem in the future.

Conclusion
Overall this continues to perform. It is insignificantly ahead of the FTSE and is now far more diversified, and that diversification appears to be giving it helpful stability versus the FTSE in TR terms. Exiting the HYP shares was for Brexit risk reasons, but considerable UK exposure remains though now more highly diversified. The very cautious nibbles of higher risk shares proceeds, but the outcome to date continues to remind that the most important objective to a person with limited income is return of capital, not return on capital. However taking no risk is not only impossible but counter-productive. The market crash triggered by the pandemic is of course worrying, but apart from the absence of the bonds the portfolio continues to deliver. We both sleep at night and it is low maintenance. It remains with no bond or equivalent allocation (though in this instance the bond equivalence is the large property in FF’s wider context) and this will likely receive further thought in coming years.

Doing the year-end admin is an hour or so, and maybe a few hours of thought in the year at specific decision points. Writing this up based on the previous year’s template takes another hour or so.
Projections show that this portfolio could allow for retirement now but without adequate protection against inflation, or in a few years’ time with some inflation-protection. Lastly I am happy that my friend can run the FF folio without me if it were ever necessary, and increasingly that is the norm.

(NB. Various minor spreadsheet changes mean numbers may not precisely match older reviews.)

DS 15 05 20

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Re: FF and PP portfolio reviews

#334878

Postby dspp » August 21st, 2020, 12:07 pm

Just a quick note for file as it is quite a significant milestone, though possibly quite a transient one.

My high risk pot was largely built from money that came out of oil majors, both dividend and capital appreciation. That in turn was ploughed into two high risk plays.

Firstly commencing in Dec 2016 and through until Dec 2018 a position was built in HUR, the small UK oil & gas exploration company. That position was exited in May 2020 at a significant loss, approx 80% down. It peaked at about 2x-3x up if I recall correctly

Secondly starting Oct 2018 and through until May 2019 a position was built in TSLA, the global electric vehicle & mobility & energy company.

What is notable is that yesterday (21-Aug-2020) the smaller TSLA stake had a closing shareprice of $2001, which is about 7x up. At that level the gains in TSLA now outweigh the losses in HUR.

Another way of looking at this is that for 3-1/2 years there has been considerable risk accepted for nil return. I am sure there are lessons to learn from that.

regards, dspp

[edit @ 12:14: The above is for the DSPP portfolio. The FF portfolio has a much smaller amount of these shares, not hugely material as I thought the FF portfolio ought not to go anywhere near that level of risk.]

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Re: FF and PP portfolio reviews

#334900

Postby Dod101 » August 21st, 2020, 1:44 pm

So long as dspp does not plan to retire soon this would make for an interesting portfolio. If it still 'may have to deliver in an unpredictable timescale' is it not time to calm things down a bit?

It is the very opposite of my portfolio but then I am retired and in my late 70's, but I was never as aggressive as he is.

Well done on Tesla though. I get my exposure via Scottish Mortgage.

Dod

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Re: FF and PP portfolio reviews

#374803

Postby dspp » January 8th, 2021, 3:49 pm

dspp wrote:Just a quick note for file as it is quite a significant milestone, though possibly quite a transient one.

My high risk pot was largely built from money that came out of oil majors, both dividend and capital appreciation. That in turn was ploughed into two high risk plays.

Firstly commencing in Dec 2016 and through until Dec 2018 a position was built in HUR, the small UK oil & gas exploration company. That position was exited in May 2020 at a significant loss, approx 80% down. It peaked at about 2x-3x up if I recall correctly

Secondly starting Oct 2018 and through until May 2019 a position was built in TSLA, the global electric vehicle & mobility & energy company.

What is notable is that yesterday (21-Aug-2020) the smaller TSLA stake had a closing shareprice of $2001, which is about 7x up. At that level the gains in TSLA now outweigh the losses in HUR.

Another way of looking at this is that for 3-1/2 years there has been considerable risk accepted for nil return. I am sure there are lessons to learn from that.

regards, dspp

[edit @ 12:14: The above is for the DSPP portfolio. The FF portfolio has a much smaller amount of these shares, not hugely material as I thought the FF portfolio ought not to go anywhere near that level of risk.]


UPDATE - ANOTHER SIGNIFICANT MILESTONE

Today (8-Jan-2021) the DSPP portfolio has reached the point where it is now sufficient to retire on and sustain a modest lifestyle and to meet my existing commitments, without affecting capital (I assume 5% sustainable yield), with things easing considerably in a few more years as they are satisfied (mortgage etc), i.e. this is the portfolio reaching the FIRE point. Clearly this is largely (but not entirely) as a result of the TSLA runup (now $860 = $4300 pre-split vs $240 avge purchase) which I think means I must be at about 17x or so. I have not sold any of them so they have increased from ~2% to ~40% or so of the portfolio. Whether holding on for dear life (HODL) is the wisest strategy is something one only ever knows in the rear view mirror, and it remains to be seen how this will play out and it might be a very transient apogee.

Similarly the much lesser % of TSLA in the FF portfolio has now brought that to its corresponding FIRE point at an equivalent modest lifestyle level, again without affecting capital (I assume 5% sustainable yield), however in this case the TSLA chunk is still a somewhat sensible % of the total.

regards, dspp


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