My portfolio went up over 3% in January. But then came down again.
The same happened in February. I concluded the month feeling somewhat ‘humped’ by the market, twice. Hence my post about two-humped camels (Bactrian camels, as it turns out – ahem).
So as the end of March approached, with my portfolio again up about 3%, I kept expecting a correction. But as at the time of writing, no correction has yet occurred.
Meanwhile, the news in March seemed full of vaccines. The UK has now vaccinated over half its adults. The US, about a quarter. The EU, is bringing up the rear, with about half of that. The headlines were full of vaccine wars, blood clots, second doses, you name it.
The other key story in London was the horrible news about 30-something Sarah Everard who was abducted and killed on one of the popular green spaces, Clapham Common, by a stranger – a policeman no less. The story hit the headlines because of how rare this sort of stuff is these days. There are only around 20 women killed in the UK every year by strangers, which suggests 5 or fewer per year in London.
In terms of the markets, how different March 2021 was from March 2020. In March 2020, US/Australian equity markets dropped 20%. One year on, equities rose over 3% in the month. The USD gained a little versus the EURo. Otherwise, not a lot to report.
Regular readers will know that I run my portfolio on a slightly indebted basis, via a margin loan – with my target leverage being ‘-12%’ – i.e. for £112k of investments, I have £12k of borrowings, leaving me with a net worth of £100k.
I made a tiny tweak to my target allocation, near the end of March. This is because part of my approach here is having the psychological comfort of knowing that if I leave the portfolio on autopilot the dividend income alone will pay off the debt automatically. Yet with my recent portfolio simplification, I now have very few holdings that pay out EUR income – and those that I have are mostly not in the brokerage account that has the EUR margin loan. Most of my borrowings are in my domestic currency, GBP, where my leverage level is much higher than -12%; it is -8/29% (i.e. 28%), a level that UK dividends themselves are going to take a long time to repay. But plenty of my non-UK exposure is held in GBP-denominated securities, like Vanguard/iShares’ ETFs, which pay out dividends in GBP, so in practice I think I am within about 4 years of autopilot payback.
Before my tweak, the target borrowing of £12k would, ideally, be £8k of GBP borrowings, £2k of EUR borrowings, and £2k of USD borrowings. I have tweaked this slightly to shift the target slightly from EUR to USD, because my actual EUR-denominated holdings are now so low, so I receive very little EUR income, and I have far more USD holdings – admittedly including a lot of tech stocks that don’t pay dividends. So now my target borrowing, while remaining at -12%, is -1:-8:-3 EUR:GBP:USD.
With markets moving up almost 3%, my portfolio delivered a very similar result – in fact it was up 3.2% in the month. That marks the first concrete progress in the year so far, after the ‘camel back’ January and February.
We’re a few days away from my annual ISA topup, right at the start of the tax year. I’m going to take the opportunity of the new tax year to realise some more capital gains and rationalise the portfolio a bit further. In the meantime, my complexity/similar remains at about the same level as last month.
As we enter the UK’s next tax year, I remain modestly tactically overweight on cash (/underweight on my margin loan) and very mildly underweight on equities.