Every month I calculate my investment portfolio’s returns to date. I’ve been tracking the portfolio in detail since the end of 2012. With 2015 now complete I now have three years of returns to examine.
December was an extraordinary month for me because during the month I bought a house. On 1 December this wasn’t anticipated at all. By 22 December I had exchanged and stumped up a hefty six figure deposit – all paid for by liquidating my investment portfolio. During the month the UK stock market (the blue line UKX below) in particular fell 7%, which goes to show why you should never use the equity markets as a savings account.
The graph above shows the four key asset classes (UK equities UKX, UK gilts IGLT, US equities INX, and US bonds AGG) over the last six weeks. The two vertical pink lines represent Friday 11 December, when I reached verbal agreement to buy the Dream Home, and Monday 21 December when I wired my deposit over. Fortunately, between those two dates I gambled (no other word for it) that the UK stock market would rebound upwards, and almost completedly avoided liquidating UK equities. Thank goodness, given that the market did subsequently almost completely recover its December 14th losses, even if I would hardly call this a traditional Santa rally.
At the time of writing I have now liquidated about 20% of my investment portfolio. I am now pretty much through the psychological pain barrier of selling so many assets and am just focused on assembling funds in time to complete on four weeks’ time.
My returns in the month were slightly negative, down 0.7%. These returns are calculated after unitising the portfolio. This means in effect treating the portfolio as a single stock, of which I have just sold a bunch; selling doesn’t per se reduce the price of the stock. The markets I’m exposed to fell, on a weighted basis, 1.2% in the month. Bonds and equities all fell, in all my key geographies except Australia, so I don’t feel too bad that my portfolio fell by a bit.
For the year 2015 as a whole, I’m up about 4.7%. The markets that I’m in rose 2.2% for the year, so I outperformed by a small but significant margin. I’m pretty happy with this. In the UK 2015 was the year of the small-caps, which I wasn’t really in, and outside the UK the place to be was in continental Europe – which went up 11.5% and which, even at only an 11% weighting, was a significant contributor for me.
I now have 36 properly tracked months. With December down slightly, I’ve just dipped below 10% per annum. I’m still OK with 9.9% over a three year basis – this is still a gain of a third in three years, which will do me. 2015 as a year was not so good, with a return of only 4.7% – but compared to cash (even the racy versions like Zopa/Funding Circle) this isn’t too shabby either. Going forward I will continue to show the last 3 year performance as well as the returns since 1/1/2013.
FIRE v London 
Hi FvL
Always interesting to compare oneself with ‘peers’ and benchmarks. I’m not sure if you remember but back at the mid-year point you were up 13.7% and I was licking my wounds at 5.7%. I’m still waiting for a couple of dividend laggards to pay up but I expect to end the year at about 0.8% vs your very impressive 4.7%. So it looks like you’re carrying more portfolio (be interesting to compare notes during a real bear…) volatility but it still doesn’t stop me having to walk away with my tail between my legs.
Happy new year to you and I hope the new home meets all your expectations through 2016.
RIT
LikeLike
Hello RIT
I’m really grateful for your data to compare against – thank you.
Be careful that the 4.7% and the 13.7% are not comparable measures. To the end of May ’15 I was up about 13.7% annualised since 1/1/13. The reality is that the first few months of 2013, in which I went up 12% in five months, gave this analysis a lift which has taken ages to wear off. My annualised number now, over 36 months, is about 10% even though my last twelve months performance was only 4.7%. So my annualised number has dropped from 13.7% to 10%.
You are right though that in principle I am carrying more risk (though look out for my upcoming post, as I think I need to address this as I take on leverage). I really like the Sharpe ratio as a way of stripping out risk levels; I think Sharpe is the best single measure for comparing the relative performance of different portfolios. I update mine every month on my returns page. Do you have any idea what your monthly Sharpe ratio is?
LikeLike