The end of December 2020. Time to do my monthly review of my portfolio, but also time to do an annual review. It is the end of my eighth year of monthly tracking of my portfolio. And it’s the first year I’ve tracked that has a very serious market meltdown in it, triggered of course by the covid-19 pandemic.
While I am somewhat geeky unusual in the attention I pay to my portfolio, it is general good practice even for ‘normal people’ to review their finances and investments on an annual basis. In the spirit of trying to be helpful, I’m setting out in this post to tackle seven generic questions that I think all prudent investors should ask themselves at least annually, and where the answers suggest ways to optimise/enhance your outcomes.
A think tank of policy wonks and policy makers, the Wealth Tax Commission (WTC), has recently published its report/proposals into how the UK should implement a wealth tax – to fund the enormous sums HM Government has been spending to try to mitigate the covid-19 pandemic. This report has received a lot of well-deserved media comment. It is well written, fair minded, and full of useful research.
I’m sure most readers of my blog have seen some of the media stories, and you will certainly have views. As somebody who is close to the target’s bulls-eye, here are my views – as they stand in December 2020.
The key proposals are summarised in the table ES.1 below.
These data look a bit suspect to me. Apparently by 2030, one in four homes in London will be worth at least £1m; this is about 1m homes, so at the lower end of the table the figures look plausible. But at the top end, these figures look undercooked. The Sunday Times Rich List has 1000 people in it with assets of £120m+, and anecdotally it misses more people than it overestimates, so the idea that there are only 22,000 people with assets of £10m+ does not fit the power curve. My guess is that there are already at least 50k people in the UK worth £10m+. Whether they are all taxpayers or not is, I suppose, a question one should consider – but I am going to treat as off scope for this piece – as the idea that I should have assets confiscated so that other multimillionaires can avoid tax altogether feels absurd.
Anyway, for the purposes of this piece I am one of the wealthiest 22,000 taxpayers in the UK. I’m in the UK’s top 0.03%. I.e. Close to one percent of the one percent. Which is a shame, really, for the other 99.97%, but that is yet another topic. As the report itself says, “the available data for upper echelons of wealth (greater than £10 million per individual) is too thin to draw reliable conclusions”. I am not bragging, I am just processing the numbers.
As it happens the UK readers of my blog would also, mostly, be caught by these proposals. Around 50% of my UK readers already have investments, excluding home and pension, of over £500k (let alone the £250k used as a possible threshold). When you add in home and pension, my guess is that nearly all my readers are, or expect to be fairly soon, ‘wealthy’ as defined by this report – with around £500k-£1m+ of assets including home and pension.
I should also declare, by way of background, my income situation.
November saw the second national lockdown in England.
Most shops closed. All pubs/restaurants closed. Hair dressers closed. No social mixing indoors, and max 1 person to be met up with outside. Not a whole lot of fun. The weather has been relatively nice to us – it’s been damp and chilly, but not unrelentingly so. I’ve found some new parts of London.
At work, we assumed things would turn downwards – as business became harder to do. But in fact we were busy in November. Much busier than we expected.
Trump is now officially a loser. It feels hard to describe Biden as a winner – perhaps I know how Trump feels? – but it is certainly easy to describe Trump as a loser.
But the word of the month has been Vaccines. Both an expensive Pfizer/BioNTech one, and a ‘good enough, and easy enough, and cheap enough’ one from Oxford University/AstraZeneca. Suddenly the mood music has changed very much for the better.