My May 2016 portfolio returns

I’m cheating slightly, and capturing my May returns on the 29 May, during the UK’s holiday weekend.  This leaves out the last trading day of May, Tuesday 31/5.  In effect this means that 31/5 will become part of my June 16 returns, so it will catch up with me.

May has been pretty uneventful from an investment perspective.  The FTSE-100 index stayed at around 6300, and S&P remained close to 2100.

What else happened in May?

  • The Brexit referendum campaign started to feel like it is the Remainers’ to lose.  Certainly the economic argument feels settled. This leaves the sovereignty and immigration arguments still to play for, along with the foibles of random news events and turnout on the day.
  • At the time of writing nothing else of note appears to have happened in May, whatsoever.

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My April 2016 portfolio returns

April was the first month for me where the portfolio damage (and buying opportunities!) of August and December last year felt truly behind us.  The FTSE-100 index reached 6350, and S&P crossed 2100.

What else happened in April?

  • The Brexit referendum campaign seemed to swing slightly against the Brexiteers, coincidentally around the time President Obama was meeting Prince George in a bathrobe.
  • The Panama Papers scandal broke.  In which the UK’s PM was vilified for his father having been an investment manager and having done what UK tax authorities pushed investment managers to do for most of the last 50 years – he set up his structure in an internationally-compatible way.
  • The oil price rose to $45/barrel.  This is over a third up from a low in mid-January of $32.

In early April, I finally received the funds for a couple of illiquid assets which I sold some months ago.  Aside from a very small portion of these funds which Mrs FvL will ‘invest’ in furnishing the Dream Home, I’ve halved these proceeds: one half has reduced my margin loan and the other half has been added to my investment portfolio.  Accordingly I have slightly tweaked my target allocation – it has shifted from 100:50:-50 equity:bonds:cash to 100:45:-45, reflecting the slightly smaller debt load and a slight increase in the equity mix to mirror the drop in risk.

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How’s my $100m tax-free account developing?

About a year ago, I wrote a post explaining why there is apparently over a 10% chance that my & Mrs FvL’s tax-free ISA accounts top $100m in our lifetime.  This took the £330k lifetime ISA savings we’d amassed to date, assumed 1) we never dipped into the pot, 2) that we maintained an above average risk preference, and 3) that the UK tax rules remained unchanged.  About one year on, how are we faring?

The last year hasn’t gone very smoothly.  Our ISAs performance was about -5%.  This knocks a £330k pot by about £16k. This performance was worse than the market average, but not by much. The resource crash and the China/Asian downturn were starkly visible in our ISA portfolio, with BHP Billiton down 31%, BP down 13%, Henderson Asian Dividend UT down 16%, and HSBC down 23%.  Pearson, down 37%, certainly didn’t help either. Isolated gainers including iShares Euro High Yield Bonds (+10%), Zoopla (+40%) weren’t numerous enough to compensate.

We both moved the maximum permitted topup into our ISAs, of £15240 each.  Even though a £330k pot sounds like a lot, in fact it is small enough that a 5% drop in value is less than the amount we can top it up.  As the pot grows, eventually this won’t be true; a £1m pot dropping 5% would fall by £50k, which dwarfs an individual’s annual allowance.  But for now, by topping up our ISAs to the maximum allowed we grew the pot.

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