Snagga - 2020 LTBH portfolio review
Posted: January 2nd, 2021, 2:14 pm
Background
I started investing in the mid-90s and have been accumulating since then with a low-cost LTBH focus. From around 2000 I started investing in indiviudal UK shares with a HYPish/value style - although criteria have grown more relaxed over time - and later in the noughties started using trackers and ETFs, primarily to get more exposure to overseas markets. As ETFs have become cheaper and investing directly in overseas shares has become easier, these two streams have crossed geographies. New cash is invested once a month. I record all transactions in a 2003 version of Microsoft Money. I decided to do separate unitisation calcs - on an accumulation basis - from 31/12/18 to overcome limitations in how MS Money works.
Overall performance
Performance for 2020 was a pretty poor -4.0%. This roughly breaks down between a return on shares (including investment trusts) of approx -11% and a return on ETFs of approx +9%, in the currencies of quotation (plus a FX translation loss of about 1%). This reflects the big differences between UK and global equity market performances during 2020, with the shares still being predominantly UK and the ETFs still predominantly non-UK.
Dividend income has been savaged. Total dividend income for 2020 was down 38% compared to 2019 - or from 3.8% of the portfolio value at 31/12/19 (excluding an accumulating ETF) to 2.3%. About 0.2 ppts of the decline is due to a non-recurring special dividend from Signature Aviation received in 2019 that was effectively a return of capital.
Portfolio composition
The individual shares that had the biggest impacts on performance aren't all listed out above - because they are generally losses on stocks whose values were clobbered, in most cases by Covid. The top ten were:
Buys
I kept contributing from wages through the year and it is obviously much nicer to buy low rather than buy high. However, for me personally, Covid meant less net earnings to invest and less time to spend deciding what to invest them in (obviously these are trivial non-problems compared to what many others have suffered) - while making those decisions at an individual stock level seemed more complex and risky.
The bigggest spend was a new position in Edinburgh Investment Trust (cost 1.4% of opening portfolio value) accumulated from April onwards. I am happy to buy ITs if the enhanced yield that is effectively earned on a widened discount starts to pretty much eliminate or exceed the effect of management expenses and this represented easy diversified exposure to bombed out UK stocks.
I also topped up UK equity ETFs (0.7%) and foreign equity ETFs (0.6%) - both avoiding much thinking.
Other share purchases included Kraft Heinz (0.4%), Ibstock (0.3%), Llloyds Banking Group (0.2%) (these three all pre-Covid), 3M (a new position - 0.3%), Land Securities (0.3%), Exelon Corp (a new position - 0.3%) and various other UK (1.3%) and other US (0.7%). Following the PRIIPs regulations coming into force and blocking new investment into US-domiciled ETFs, I have been trying to increase directly-owned US holdings rather than buying US-equity ETFs so as to avoid the irrecoverable 15% withholding tax hit on dividends that lies under the hood of non-US-domiciled US-equity ETFs.
Sells
Nothing significant - just some minor tax loss harvesting.
I started investing in the mid-90s and have been accumulating since then with a low-cost LTBH focus. From around 2000 I started investing in indiviudal UK shares with a HYPish/value style - although criteria have grown more relaxed over time - and later in the noughties started using trackers and ETFs, primarily to get more exposure to overseas markets. As ETFs have become cheaper and investing directly in overseas shares has become easier, these two streams have crossed geographies. New cash is invested once a month. I record all transactions in a 2003 version of Microsoft Money. I decided to do separate unitisation calcs - on an accumulation basis - from 31/12/18 to overcome limitations in how MS Money works.
Overall performance
Performance for 2020 was a pretty poor -4.0%. This roughly breaks down between a return on shares (including investment trusts) of approx -11% and a return on ETFs of approx +9%, in the currencies of quotation (plus a FX translation loss of about 1%). This reflects the big differences between UK and global equity market performances during 2020, with the shares still being predominantly UK and the ETFs still predominantly non-UK.
Dividend income has been savaged. Total dividend income for 2020 was down 38% compared to 2019 - or from 3.8% of the portfolio value at 31/12/19 (excluding an accumulating ETF) to 2.3%. About 0.2 ppts of the decline is due to a non-recurring special dividend from Signature Aviation received in 2019 that was effectively a return of capital.
Portfolio composition
The individual shares that had the biggest impacts on performance aren't all listed out above - because they are generally losses on stocks whose values were clobbered, in most cases by Covid. The top ten were:
Buys
I kept contributing from wages through the year and it is obviously much nicer to buy low rather than buy high. However, for me personally, Covid meant less net earnings to invest and less time to spend deciding what to invest them in (obviously these are trivial non-problems compared to what many others have suffered) - while making those decisions at an individual stock level seemed more complex and risky.
The bigggest spend was a new position in Edinburgh Investment Trust (cost 1.4% of opening portfolio value) accumulated from April onwards. I am happy to buy ITs if the enhanced yield that is effectively earned on a widened discount starts to pretty much eliminate or exceed the effect of management expenses and this represented easy diversified exposure to bombed out UK stocks.
I also topped up UK equity ETFs (0.7%) and foreign equity ETFs (0.6%) - both avoiding much thinking.
Other share purchases included Kraft Heinz (0.4%), Ibstock (0.3%), Llloyds Banking Group (0.2%) (these three all pre-Covid), 3M (a new position - 0.3%), Land Securities (0.3%), Exelon Corp (a new position - 0.3%) and various other UK (1.3%) and other US (0.7%). Following the PRIIPs regulations coming into force and blocking new investment into US-domiciled ETFs, I have been trying to increase directly-owned US holdings rather than buying US-equity ETFs so as to avoid the irrecoverable 15% withholding tax hit on dividends that lies under the hood of non-US-domiciled US-equity ETFs.
Sells
Nothing significant - just some minor tax loss harvesting.