Category: Investing ideas

May ’26: Angelic timing

FIRE v London3 Comments

May was an enjoyable month. I kept reasonably busy, as well as doing a bit of travel around the UK. I visited King Charles’ Poundbury for the first time, as well as the south coast and the Cotswolds for a weekend.

Meanwhile, the news has been dominated by Trump’s Iran war, and in the UK Labour’s leadership dramas – now heightened with a forced by-election (“the most consequential in British history”) in Makerfield.

Markets in May

Tech stocks did well in May – both in the USA and in Asia (where silicon stocks are flying). My ‘international’ benchmark is half Asia/Pac and half Europe; Asia/Pac was up over 10%, while Europe rose ‘only’ 4%. Poor old tech-less UK and Australia equities rose only 0.7% and 0.4% respectively, though at least their bonds provided some consolation.

My portfolio buys a property

As I mentioned last month, I have been helping to complete on a property transaction – which went through in late May. I now co-own another property, sigh.

I had expected to borrow around £1m for this purchase, via my margin loan, but at the last minute I had a very welcome surprise: literally the Friday before the property transaction completed, an angel investment I made over 10 years ago was sold, netting me almost exactly £1m – entirely tax free (as it was made under the UK angel investing tax break EIS).

I have taken the opportunity to top up my ISAs to the £40k annual maximum and make a couple of significant charity donations too – something I try to do when I receive tax-free angel windfalls.

As a result my margin loan has expanded only slightly, and my total investment portfolio size has barely changed – and by among within the monthly volatility I experience. As a reminder – my investment portfolio excludes illiquid investments, so I do not count either properties nor angel investments within it – only investments in liquid, tradeable securities.

My interest costs (the pink columns in the chart below) are up due to the loan expansion, though my Loan-to-Value ratio (the solid green line) has not moved much (thanks to the >10% increase in the portfolio value over the last two months).

Having been long on cash before this property transaction, my portfolio has now returned almost to the target level of leverage. It is a little bit out of kilter on the geographic exposure though – with recent US gains making me overweight on US equities (and the US in general), and the takeover of a median UK holding for cash leaving me underweight on UK equities (and the UK/GBP too).

In the meantime my investment portfolio (that portion not being used to buy property) rose again in May. this time by 4.3%. Slightly less than the market-weighted benchmark which rose 5%, after an April in which my portfolio beat the market by over 1%.

Appendix: Press clippings

AI comes to FI

FIRE v London5 Comments

Rishi Sunak, the former UK prime minister and current Sunday Times journalist, observes that every CEO is talking about AI – so why aren’t political leaders? So it seems a good time to bring some AI into the world of FI blogging.

Large Language Models such as ChatGPT have been mesmerising, but it doesn’t take long playing with them to realise they are much better with Language than with Numbers. However with the latest models bringing more inference into their logic that is starting to change.

I’ve been playing with Claude and Gemini in the context of my portfolio and blog. They are proving genuinely useful. For reference, I am a paying customer of both – and am using Projects/Gems to partition my experimentation and (I believe) avoid uploading key financial data into their wider cloud/models.

Key tasks AI has proven useful for so far (UPDATED 21 Feb) include:

  • Take my 24/25 tax return and estimate my tax bill for the next financial year. Gemini notably better than Claude on this one.
  • Review a 24/25 tax return for errors. A HNW friend of mine found a £100k error in his accountant-prepared tax return using Claude.
  • Update dividend yields and TERs/OCFs in my master portfolio list. This is a task made for Claude.
  • Estimate the next set of dividends I can expect – based on a screenshot of my portfolio – good dopamine hit!
  • Disaster scenarios – examining the disaster scenarios my portfolio faces, and the warning signals for each

As a taster I’ve appended below what Claude said when I asked it what Warren Buffett/Charlie Munger would think of my portfolio.

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What’s the ideal level of leverage?

FIRE v London18 Comments

I’ve used portfolio leverage to help me buy two properties in the last 10 years.

To recap the most recent episode, very briefly, it goes as follows:

  1. In December 2021, I borrowed about 25% of my portfolio’s value to buy my Coastal Folly. I targeted reducing this to a 20% ‘loan-to-value’ (LTV) as soon as practicable.
  2. Only a few weeks later, Russia launched its full-scale invasion of the Ukraine. This disrupted the stock market, and energy markets. The energy market disruption led to a spike in inflation, which caused central banks to hike base rates. It also caused my LTV to go up, not down.
  3. I steadily paid off a bit of the loan, but the higher rates meant that my interest expenses went up 2.5x over the following 20 months.
  4. Since then however my portfolio has gained in value, and my loan has reduced, leaving it today at about 13% of the portfolio value. My interest costs are about 1.5x the January 2022 starting point, which is mildly annoying but very manageable.
  5. I’m left feeling firmly under control, with a relatively low level of risk. The two key risks that I need to consider are
    1. a hike in interest rates – which feels very unlikely
    2. a plummeting stock market – this feels a lot more likely, particularly in October 2025. But with my loan being only 12.5% of the portfolio value, even if the portfolio suddenly halved in value (a very rare and unlikely scenario) the loan would still amount to only 20% of the reduced portfolio value.

This leaves me wondering what the long term idealised level of leverage is for my portfolio.

Continue reading “What’s the ideal level of leverage?” →