Investing philosophy – Page 3

Compounding, type II

2024-10-282024-10-28 FIRE v London1 Comment

Supposedly Albert Einstein called compounding the 8th wonder of the world. Certainly the wonder of compound annual growth rates is something I feel quite viscerally, the more so with each month that I track my portfolio. But I’ve been struck recently by a radical improvement in my portfolio’s dividend income, far in excess of the portfolio’s return, that has occurred thanks to the margin loans I’m using. For anybody curious about margin loans, this blog post shines a light on what’s happening.

While my portfolio has grown 14%…..

As a quick visit to my Monthly Returns page can see, my portfolio has returned around 20% over the last twelve months (to September 2024 inclusive). This is a good, but not exceptional period over the 10+ years I’ve been tracking my portfolio – which has returned just over 9% p.a. since inception over 10 years ago.

As it happens, despite the underlying returns of around 20% my own portfolio (and I’m excluding Mrs FvL’s in this analysis) has only grown in size by 14% over this twelve month period, thanks to some significant withdrawals to pay tax bills, make ‘off balance sheet’ investments, and such like.

… my net investment income has grown 56%

What caught my eye is that my expected investment income, something I record monthly, has grown 56% during the same time period.

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From ISA $millionaire to £millionaire

2024-08-22 FIRE v London26 Comments

The best tax break in the UK is the ISA tax-free savings regime. Each UK tax-resident adult can put £20k per year into an ISA account – use it for a wide range of investing activities – and not even have to report on what happens in those accounts, let alone pay tax on them.

This tax break is not exactly mass-market – not many people have £20k of spare funds every year – but for those of us who can avail of it, it is potentially enormous. Kids can have ISAs too, with an annual allowance of £9k. So a family of four, that can find £58k of liquid funds every year, can rapidly shelter a very large sum.

If you are a dual citizen, especially if you are a US citizen / green card holder, then Uncle Sam is certainly going to want to hear about these accounts and is absolutely going to tax them, but for plain UK citizens 100% resident in the UK, these tax breaks are awesome.

I’m now one of thousands of ISA millionaires

ISAs have now been around long enough that the number of investors whose ISA accounts exceed £1m is reaching many thousand. Expect to see this number skyrocket in the next few years. The top 25 largest ISAs average £11.66m of pot each – with I imagine a healthy dose of NVidia / similar holdings. If you haven’t followed the story of (Lord) John Lee, who is one of the first UK investors to amass £1m in ISA accounts, he’s worth checking out (£paywall).

My aim is to see my ISA accounts grow to well beyond £10m – which if I live another three or four decades, and the current policies don’t change, appears achievable.

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Nov ’23 revalues the future

2023-12-052023-12-05 FIRE v LondonLeave a comment

In the news

It has been quite a busy month out there.

The Israel/Gaza crisis continues. Public opinion is shifting against the Israel government here, even in North London – which would normally be one of the most sympathetic neighbourhoods outside Tel Aviv.

The Ukrainians are left feeling somewhat zero-sum in the battle with Israel for foreign support and attention. Some informed opinion now says the war is over, bar the fighting, and the only thing left is a land-for-peace deal. And the USA election, which is still almost a year away. Sigh.