Feb 2020: buy high….

I am about a week late writing this monthly update, and my what a week it’s been.

February was when the coronavirus (now called covid-19) began to impact the markets. My diary called it the ‘corona correction’. At the time of writing, on the 10th March, the February story already seems rather old, but here it goes in extreme brevity.

  • Beginning of February. I sold my house, pocketing over £1m cash.
  • Middle of February: I ‘slowly’ dripfed £1m cash into the market, matching my target allocation.
  • End of February: the market fell almost 10%. Doh.
  • (early March – my house money has all gone…. but that’s getting ahead of myself!)

More specifically, equities fell 6-9% on the month (and significantly more off the mid-month peaks). Bonds ticked upwards very slightly. And the pound fell slightly versus other major currencies.

Feb 2020 market & currency movements

The markets, weighted to my allocation, fell 5.8%. My (very slightly leveraged) portfolio fell 6.4%, even more than the market – reflecting me topping it up by >£1m mid month, at its peaks. That high plateau you see in the graph below almost exactly mirrors the time period over which I put my money to work. Sigh.

World equity markets – daily movements in February

The other thing February was notable for was my efforts to reduce my (taxable) complexity. I sold a number of holdings, in unsheltered accounts, replacing them with fewer, larger, mostly ETF holdings. And in my sheltered accounts (pension & ISAs), I sold a bunch of ETFs and bought individual securities – concentrating my active holdings in the (undisclosable) tax sheltered accounts, and reducing my number of (disclosable) tax holdings significantly.

My efforts fighting complexity were more successful, more quickly, than I would have first thought. I have reduced my total holdings to <150. My unwrapped (disclosable) holdings are almost below 100 – a reduction of 37 since the start of the year. And my number of small (<£20k) holdings has dropped to 35 (though the market’s falls are making this target harder to hit!).

Progress towards Q1 complexity targets

My portfolio is still complex (certainly too much so for @mathmo – see comment below), but progress is being made – and quickly.

I liked FireVLondon’s revelation on the road to Shipley Tax Office that complexity was a real cost like fees and taxes. I myself just a few weeks ago pinged my tax return off with just 10 lines of information to my accountant so his inventory of tax filing effort was eye-opening. I’d suggest the solution didn’t go nearly far enough in the face of active naughtiness — if the cost of complexity were properly measured, the knife would have cut much deeper.

(@mathmo comment about my Fighting Complexity blog, in Monevator’s Weekend Reading 14 Feb 2020)

At the end of February, I was almost 4% underweight equities, around 1% overweight in bonds, and 2.5% overweight cash. With hindsight, not terrible positioning for the March roller corona-ster.

Deltas from target allocation, as at 29 February 2020

3 thoughts on “Feb 2020: buy high….”

  1. I feel your pain as I effectively did exactly the same thing, just a few months previously.

    In absolute terms, my paper losses are pretty chunky. Thank god for Gilts (for now) though as they have certainly been the ying to the equity yang over the past few weeks.

    At least my mortgage has just become one third cheaper.

    Liked by 1 person

  2. Painful times for quite a few people at present. Luckily many of us have sufficient assets to (hopefully) weather the storm and perhaps take advantage of this “buying opportunity”. Luckily I’m still in the accumulation phase so I’ll do my best to keep calm and continue to invest where appropriate. If I was brave I’d take some equity out of my mortgage free properties and invest it. However, I think I’ll wait and see what happens next.

    Liked by 1 person

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