April 2019: we’re back on top of the world

FIRE v London1 Comment

April was a fairly remarkable month, for my portfolio at least.

Image result for photos top of the world london
Can we get any higher than this?

It hasn’t been widely remarked upon, but the US stock market regained its all-time high – completely reversing the brutal Q4 performance. UK stocks had a pretty good month too, albeit (as shown below) they remain some way off their summer 2018 levels.

USA, UK and Eurozone equity performance over 2 years (exc dividends)

April saw the market tide lift all the equity boats that I track. Bonds plodded forward too – at least in the UK and USA. So the only asset class I saw fall in April was Australian bonds, with an election campaign underway.

What these market averages don’t reveal is some remarkable movements within the markets.

Though my investment approach is fundamentally an ‘asset allocation’ approach, I have a couple of sub portfolios within my USA equities which follow particular strategies. This gives me visibility on a couple of particular investment styles. I’ve written before about how my High Yield Portfolio has sucked; these days it is a very small sub portfolio, and thank goodness – because its recent performance continues to suck and in April it dropped 1.1%.

Continue reading “April 2019: we’re back on top of the world” →

My ISA’s tax-free income: now over £20k

FIRE v London14 Comments

Time for an update on my ISA progression.

Regular readers will know that if I have a top tip for any UK investor, it’s this: make the most of the ISA tax break, and do it via Stocks & Shares ISAs. Note: definitely not Cash ISAs – saving tax on 1% interest isn’t the way to build your savings pot, whereas saving tax on 6-10% equity returns can make a real difference. 

The annual ISA allowance remains £20k per person. I have enough of my savings outside a tax-shelter that I move as much as I can into an ISA every year, for both me and Mrs FvL.  I’ve been posting updates annually about this (e.g. here). Touch wood, I am hoping to build my ISA pot into £millions over the next 30 years.  

In case you are wondering about whether pensions are a better way to save than ISAs, remember that pensions have a lifetime pot maximum of around £1m before unfriendly taxes apply.  If you are about 40 years old and planning to retire at about 70 (or 30, and aiming to retire at 60), then you start to approach the  level where your lifetime limit could bite with a pot as ‘small’ as £125k. In contrast there is no limit on how large your ISA pots can grow while remaining tax-free.  

We are starting to see more and more investors reach the £1m ISA milestone.  It appears there are about 500 such investors in the UK at the moment.  I’m not at £1m yet, but I am on track to reach it in a few years’ time, barring any change in government policy and/or market meltdown.

Last year saw disappointing market returns.  My own ISA fell slightly before income/contributions, and while Mrs FvL’s ISA rose a little it still left my overall ISA pots down in value before income and contributions.

Continue reading “My ISA’s tax-free income: now over £20k” →

Does this house really believe it should be included in the FIRE net worth?

FIRE v LondonLeave a comment

I had some fun this week teaming up with Mr YFG to debate whether your primary home is one of your FIRE assets or not.

The great housing FIRE debate

Or did I? The mighty Monevator was kind enough to host the post and the comments following the post are excellent, and flesh out the debate brilliantly. And as they highlight, everybody’s milage will vary. In particular, one needs to be careful to define whether the net worth calculation is the FIRE net worth calculation.

One of the things I enjoyed about writing that post was having to argue the opposite case from what I normally would say. Hats off F Scott Fitzgerald and Charlie Munger.

To set the record straight, my actual approach is to exclude the value of my residence (the Dream Home) from my FIRE calculations. What I try to explore in my blog, is the challenge of FIRE (Financial Independence, roughly) without needing to change my lifestyle. For me, London epitomises this challenge – it has an excellent lifestyle, but it is expensive. So the FIRE dynamics are particularly challenging here, at least compared to the ‘frugal’ approaches followed by some in the FIRE community.

Clearly, if one is prepared to sell up and reorganise one’s housing arrangements, in Cyprus if need be, then one’s house is just one asset among many. But if, like me, you are happy where you are, and want to know when working becomes optional without having to move neighbourhoods / sell assets / disrupt the pets, then it is easier to focus on your investment income (and decumulation potential) and your spending (and potential spending).

So, my own calculations about investment income and spending assume I need to continue to fund the (considerable) expenses of living in the Dream Home, and that I need to do so from other assets. No Rent-a-Room for me.