Idling away an hour on the long weekend, I found myself examining whether my mental model of how I invest is actually honest.
In particular I have an investment philosophy of holding for the long term, of buying (not selling). Is that true? How often do I in fact sell things?
My philosophy is to minimise fees wherever possible. But it is also to reinvest dividends manually, not automatically, so that I can rebalance as I go – rather than ‘high buying high, and low reinvesting little’. Moreover, my minimum amount for a trade in Mrs FvL’s account is only £1000 – the amount of cash that must accumulate before we reinvest it. So my philosophy leads to me making plenty of transactions, for which Mrs FvL pays full price. Does this lead to high trading expenses?
To answer my own questions I did the following analysis:
- I looked only at Mrs FvL’s portfolio history. I manage her portfolio using the same investment philosophy, but in a simpler/cleaner way, as my own. I track all of her transactions in one place, unlike my own funds. And though her asset allocation is slightly different (lower weight USA, more domestic bias), this shouldn’t materially affect a transaction analysis.
- I looked at the last tax year – i.e. the 12 months to 5 April 2019. This was a year in which I moved significant funds into Mrs FvL’s accounts, so there was more money to invest than normal – more than just dividends.
Mrs FvL’s portfolio has around 80 unique holdings in it. This is fewer than the ~200 in my portfolio, but is nonetheless highly diversified. Half of the value is in passive ETFs/index funds. The largest holding (an Australian Equity ETF) is about 8% of the total value, the biggest single stock is about 3%, and the smallest holding is worth about £2k.
Here is what I found:
Continue reading “Holding up the mirror to my own trading behaviour”
FIRE v London 