My Passive Investments - February 2019 (+1.99%)

A short term look on long term investing

Disclaimer

February has been a fun month. I bought a rowing machine to try and get back into exercise. I’m finding that home gym equipment is definitely the way to go for me. Who wants an air conditioned gym when you can row with a candle on whilst watching Netflix? I enjoyed an excellent stay at The Waldorf Astoria in Edinburgh with Damon and I’ve been working hard on our new travel blog, Our Departure Board.

Whilst I was busy doing that, the investments, as usual, were busy ticking away in the background. So, investment-wise, what happened in February?

First, remember, my investment decisions are exactly that, my own. As as UK-based investor, I based each investment decision on my own research. These are, by no means, investment recommendations. Before making any investment decision, you must do your own research and/or speak to a professional.

 
My Passive Investments - Feb 2019 - Pinterest Pin
 

Firstly, A Reminder Why I Do These Reports In The First Place

You can read more about this in my first passive investor report, which I made back in June 2018.

My Passive Investment Strategy

Long term, my aim is to invest a portion of my savings every month. An important note here is that the numbers you will see in this report reflect the gains and losses of my invested capital only. When I invest more, for example, I would not state this as a gain in the value of my portfolio.

Similarly, if I sell a portion of my investments, this would not be stated as a loss in the value of my portfolio. The numbers simply reflect the performance of the underlying investments. Simply put, a loss/gain does not take into account buying/selling assets. 

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 for the 2018/19 tax year. This means, when it comes to selling any portion of my investments, any capital gain is tax free. 

February Returns (+1.99%)

Overall, February was a positive month, returns-wise at +1.99%. You can see in the graphic below that I hold a one-fund portfolio (so the target is 100%), a Vanguard FTSE Global All-Cap Index fund.

You can read more about my decision to do this in my November Report.

This fund is extremely well diversified, containing small, medium and large companies in different sectors, across emerging and developed economies. The median market cap, the average market capitalisation of all the companies in this fund, is over £31 billion.

 
Monthly Return - Feb 2019 - Passive Index Investing
 

Returns Since Inception (-0.72%)

The returns since I first started investing with Vanguard (end of May 2018) are currently negative at -0.72%.

 
Returns Since Inception -0.72% - Passive Index Investing - Feb 2019
 

I, as many avid readers will know, am a big proponent of long term investing. I, and nobody else for that matter, can accurately predict what will happen tomorrow, next month or even next year. But the longer the timescale, the less cloudy that horizon becomes.

I do, however, believe in drip-feeding over investing lump sum, when it might be appropriate. Not to maximise returns, but to minimise the risk of lower returns. So, last year, when I had to make this decision, I decided to drip-feed, rather than invest lump sum. I took my capital allocated to investing, split it into 12 equal parts and decided to invest it regularly over the course of one year.

This technique, known in the US as Dollar Cost Averaging (DCA), is known here in the as Pound Cost Averaging (PCA). I will be clear here and say that, based on historical data, lump sum investing does tend to beat drip-feeding (around 65% of the time).

But drip-feeding isn’t designed to maximise returns, it’s designed to minimise risk against a market drop. I cover this is more detail in October’s Report.

Sector Breakdown

The Global All-Cap Index Fund in which I am invested, is naturally diversified across different sectors. In the graphic below, you can see the current sector breakdown of my investments. I will also outline how the sector breakdown has changed since last month.

Sector Breakdown of Portfolio - Passive Index Investing - Feb 2019

Overall, there has been very little change in the makeup of my portfolio since last month. Financials, technology, industrials and consumer services are all up 0.1%. Health care is down 0.3% to 11%, consumer goods is down 0.2% to 10.7% and oil & gas is up 0.2% to 6%.

Basic materials and utilities are both down 0.1% to 4.6% and 3.2% respectively. Plus, 3.2% of my portfolio is now in other sectors, like IT and consumer discretionary, compared to 2.7% last month.

Some Definitions:

Technology: A broad industry referring to the delivery of energy transportation.

IT: The Information Technology sector focuses on the delivery of information (ie. smart phones)

Consumer Goods: Products bought by an average consumer (eg. food)

Consumer Services: A range of service products offered to customers who buy a product from a company (eg. technical support, account management)

Consumer Discretionary: Products that are not essential but desirable (ie. luxury items, leisure etc.)

Geography

As I stated earlier, the Global All-Cap Index Fund in which I’m invested is heavily diversified across both emerging and developed regions around the globe.

Here is the geographical breakdown of my investments this month. Figures are rounded for simplicity, so may not total exactly to 100%.

Geographical Dispersion of Passive Index Investments - February 2019

North America is up to 57.3% (from 56.9%) and Europe remains the same (13.1%). The Asia/Pacific region is down from 12.7% to 12.3% and Japan is down very slightly from 8.2% to 8% this month.

The UK stays the same at 5.4% and The Middle East/Africa now accounts for 1.8% of my investments (up from 1.6%). Central/South America is up slightly from 1.5% to 1.6% and Eastern Europe is down slightly from 0.6% to 0.5%.

Indvidual Investments

Since this is a global market-cap weighted portfolio, the 10 investments below are 10 of the largest companies (by market value) in the world. A few changes occurred this month. The top 4 spots remain unchanged in position but not in number.

Microsoft is down from 1.7% to 1.6%, in line with Apple. Amazon is up slightly, from 1.3% to 1.4%, and Alphabet remains unchanged at 1.3%. Facebook is now in 5th place, up from 0.7% to 0.8% this month and Berkshire Hathaway is down slightly from 0.8% to 0.7%.

JPM Chase and J&J are both down in position but stay at a 0.7% weighting in my portfolio. Exxon Mobil remains unchanged, both position and percentage-wise. And we have a new addition to the top 10, Bank of America Corporation, at 0.5%.

 
Top 10 Investments - Passive Index Investments - February 2019
 

Bank of America has a rich history with roots dating all the way back to 1784. The bank, especially in recent years, has been surrounded by controversy. Most notably around the sub-prime mortgage crisis of 2008/2009 when it acquired two failing financial institutions, in particular Countrywide Financial and Merrill Lynch.

Today, it is one of the largest financial institutions in the world, with a market cap of over $285bn (Stock Ticker: BAC). I encourage you to delve deeper into its history. It is as fascinating as it is controversial.

February also saw the release of Warren Buffett’s annual letter to shareholders. Buffett is the chairman and CEO of the Fortune 500 investment holding company Berkshire Hathaway. If you’re new to investing especially, I would highly recommend reading these letters. It’s much more than an annual report, it’s a letter containing wise words from the mind of one of the world’s greatest investors.

My top 10 investments account for 10% of my portfolio overall. This is the same as last month.

Dividends

The Vanguard FTSE Global All-Cap Index Fund is accumulating (ie. dividends are automatically reinvested back into the fund). I am thankful for that as it keeps the investment process simple. As you will likely know by know, dividend reinvesting is a big part of my long term investment strategy.

Goals For March

Continue to invest, as always, using the Drip-Feed/Pound Cost Average approach.

I hope you enjoyed taking a look at my own passive investments for February 2019. If you liked this article, please don’t forget to hit the like button below and check out all of my other reports, dating back to June last year.

I’d love to hear about your own investing experiences and please let me know if you want me to include anything in any more detail. You can do so down in the comments section below. Engaging with my audience is important to me so I read and reply to each and every comment.

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

Rich Dad, Poor Dad by Robert Kiyosaki

The Little Book of Common Sense Investing by John C Bogle

The Intelligent Investor by Benjamin Graham

Also, check out the other resources I use in my day-to-day life.

References

Bank of America’s History, Heritage and Timeline

Yahoo Finance: Bank of America (BAC) Stock

FTSE Global Equity Series | FTSE Russell

Vanguard FTSE Global All-Cap Index Fund (Accumulation)