My Passive Investments - 18/19 Year in Review

My Passive Investments - 18/19 Year in Review


I can’t believe it’s been one whole year since I started doing these monthly reports.

A lot has happened since the end of May, 2018. I’ve not just been producing content for Capital Matters. I’ve been optimising the website and growing my passive income. Damon and I even started our own travel blog, Our Departure Board, at the start of this year.

This post is all about what has happened in the past year, investment-wise. Whilst a year, in investment timescales, is still a short window, it’s big enough for patterns to emerge and conclusions to be drawn.

So, what happened between May 2018 and May 2019?

Before looking into all that, remember, as a UK-based investor, I based each of my investment decisions on my own research. These are not investment recommendations. Before making any decisions, you must do your own research and/or seek your own independent financial advice.

Vanguard Stocks and Shares ISA

All investments are held in a stocks and shares ISA with Vanguard. You can contribute anything up to the limit of £20,000 in the 2019/20 tax year. When it comes to investment income/selling any portion of my investments, thanks to the ISA wrapper, any income/capital gain is tax free. 

2018/19 Investent Returns (+3.16%)

Overall, from May 2018 to May 2019, my investments returned +3.16%.

I have broken down my returns by month in the graphic below.

The largest monthly gains were in January (+4.64%) and April (+4.1%) 2019. The largest negative returns were in October (-6.33%) and December (-6.82%) of last year.

Capital Matters - Investments 2018-19 Year in Review - Monthly and Annual Returns

Although 2018/19 was below average in terms of stock market returns, it was positive overall at 3.16%. This highlights the importance of sticking to a strategy, come rain or shine, when it comes to the stock market.

Returns shouldn’t affect your strategy, cause we’re in it for the long haul.

Changes Over The Year

Two changes I did make, over the course of the year, were designed to simplify my portfolio and increase my shorter-term savings rate. I’ll break down exactly what this means below.

Simplifying my Portfolio

Before November last year, my portfolio consisted of 4 index funds covering global, UK, US and Emerging markets.

Whilst this gave me finer control over my investment allocations, there was a lot of overlap between funds. I also found that this defeated the purpose of the strategy I actually wanted to follow, a true, global market-cap based approach to investing.

It also made investing every month extremely tedious. I would rebalance my investments monthly, attempting to keep each of my funds at a set target (eg. US = 35% of my portfolio).

It was also at this point that I was reading about the dangers of home bias. A large section of my portfolio was dedicated to UK investments (30%). When, by a true global market-cap based approach, I should only really have invested about 5-6% of my assets in UK companies.

So, in November, I simplified my portfolio greatly.

Instead of splitting my investments between 4 funds, I invested instead in one global market-cap weighted index fund. The Vanguard FTSE Global All-Cap Index Fund is diversified across countries, sectors and thousands of companies of different sizes (small to large).

Investing each month was now as simple as adding money to a bank account.

Increasing My Shorter-Term Savings Rate

Prior to May, I would take 50% of my after-expenses monthly savings and invest it. The other 50% would go towards shorter term savings (in a range of accounts), designed to be put towards my first home.

But in May, I decided to increase my shorter-term savings rate to 75%.

This means that 25% of my after-expenses monthly savings will go towards investing and 75% will be put towards my first home. I did this in order to turbo-charge my first-home savings.

Now for the really nerdy bit below.

My Investments - Sector Changes

In the graphic below, I have compared how my money was invested at the start of the year vs the end of the year.

Capital Matters - Investments 2018-19 Year in Review - Sector Changes

At the start of the investment year my investments looked like this: 21.1% in Financials, 11.4% in Industrials, 10.4% in Health Care, 9.7% in IT and 7.6% in Consumer Goods.

At the end of the year: 21.8% of my investments were in Financials, 15.9% in Tech, 13.9% in Industrials, 11.5% in Consumer Goods and 10.8% in Consumer Goods.

The big shift (you will see this pattern repeat itself below) is primarily down to me, moving my investments from 4 to 1 index funds. My portfolio is now more representative of global market weightings, compared to before.

My Investments - Geographical Changes

Taking a look at where my investments are based, and how that has changed over the past year, there have been large shifts in my portfolio.

Again, this is primarily down to November’s shift from complex to simple global market-cap based investing.

Capital Matters - Investments 2018-19 Year in Review - Geographical Changes

Here’s what changed as a result (also in the graphic above):

North American Investments - 58.7% of my portfolio (an increase of 7.1%)

European Investments (including the UK) - 18.7% of my portfolio (a decrease of 17.3%)

Asia/Pacific Investments (including Japan) - 19.7% of my portfolio (an increase of 9.9%)

Middle East/African Investments - 1.7% of my portfolio (an increase of 0.8%)

Central/South American Investments - 1.2% of my portfolio (an increase of 0.2%)

My Investments - Company Changes

Now I’m going to take a look at the top 10 companies in my portfolio and see how that’s shifted over the year.

(I am looking at changes since July 2018 as I did not look into the top 10 in detail until then).

Capital Matters - Investments 2018-19 Year in Review - Top Company Changes

In this case, you can really see the effect of simplifying my portfolio in November.

Prior to November, home bias was integrated into my investments. From June to November, a UK All-Share Index investment fund made up around 30% of my portfolio. This meant, in comparison to global market-weightings, I was over-allocated to the UK.

Since the UK market is more concentrated than other markets (fewer companies dominate a large chunk of the domestic market), my portfolio was quite concentrated in a few UK companies.

This explains why Royal Dutch Shell, HSBC, BP, B.A. Tobacco and GSK made it into my Top 10 Investments in July 2018.

It also explains why my portfolio became less ‘Top 10-Concentrated’ when I shifted to a true global market-cap based approach in November.

For comparison, in July 2018, the top 10 companies in my portfolio made up 13.8% of my investments overall. In May 2019, this had fallen to 10.4%.

Conclusions and Goals For 19/20

The Past Year

In early last year (2018), my investments were all over the place. I wasn’t happy with how they were allocated and even when I wanted to shift them, the process, with companies which had quite sluggish customer service, was long and convoluted.

But, I knew this was the strategy I wanted to take, And I knew, after reading and listening to countless hours of Warren Buffett and the late John C. Bogle, I wanted it to be through Vanguard.

I can quite honestly say that investing through Vanguard is like depositing money into a bank account. It doesn’t even really feel like investing. They make the whole process so simple and transparent that it really removes any feeling of trepadation.

And investing is not something anyone should be intimidated by.

Going Forward

Looking into the future, I am going to stay the course and continue with my long term passive investment strategy.

The hardest part, for me, isn’t deciding what to invest in, but deciding how much of my savings to invest.

As I said earlier on, last month I decided to increase my short-term savings rate. Instead of 50% of after-expense monthly savings going to investments, I am decreasing it to 25%, to focus more on saving for a first home.

I have maxed out Lifetime ISA contributions over the past couple of years and I going to keep that as one of my goals going forward.

My other major focus will be on continuing to build my passive income. Capital Matters and Our Departure Board have been steadily growing over the past year and I have seen my income from these projects increase dramatically over the past couple of months, especially.

Of course, I couldn’t continue to do this without readers like you. And for that, I am extremely grateful.

If you’re looking for resources to better your own personal finances, here are some of my recommendations:

Savings/Investment Spreadsheet Downloadable - 10% of profits go to a charitable cause.

Facebook - UK Passive Investing Group - Join A Like-Minded Community

Check out my offers page to earn some free money and grab some freebies.

Rich Dad, Poor Dad by Robert Kiyosaki

The Little Book of Common Sense Investing by John C Bogle

The Intelligent Investor by Benjamin Graham