My Passive Investments - December 2018 (-6.82%)
A short term look on long term investing
Christmas is always a busy time. Present buying, wrapping, family and of course endless board game playing. Whilst I was busy doing all of those things, my investments were busy ticking away. The market took a tumble this month (that ‘drip-feed insurance’ might pay off in the long term after all). A number of key phrases were triggered on the news, namely “correction territory” and “bear market”.
Whilst investors around the world are in panic mode, fearing a plunge, I’m simply sitting back and enjoying the rollercoaster.
Firstly, 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.
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.
December Returns (-6.82%)
Below you can see the monthly return for December. Since I have opted for the single Global all-cap fund (see more on that in last month’s report) the target weight of that fund in my portfolio is 100%. Buying into this index is effectively the same as buying into an already well-diversified portfolio. The global all cap fund includes over 6000 large, mid and small-cap companies in developed and developing countries across the globe.
The complete monthly return for December was negative (-6.82%).
I invest around the 22nd of the month.
Returns Since Inception (-8.41%)
Below are my returns since inception. Inception being the end of May 2018. The total portfolio return is -8.41%.
I am in the process of drip-feeding an equally divided lump sum into the market over the course of a year. December was month 8 of 12. I decided to drip-feed my lump sum as insurance against a market decline. I will only benefit from this 'insurance', over investing all at once, if the returns remain negative at the 12 month mark.
My decision to drip-feed was based on 3 major reasons.
We’ve Been In A Long Market Bull Run
High Shiller P/E Ratio (CAPE)
High Market Cap to GDP Ratio (The Buffett Indicator)
I talk about these factors in more detail in October’s report.
The figure below displays how my portfolio is broken down, by market sector.
Financials remained the same from last month, in the top position (21.8%). Technology decreased from 14.8% to 14.5%. Industrials increased slightly from 13.5% to 13.6%.
Consumer services increased slightly from 11.3% to 11.5%. Health care increased from 11.1% to 11.4%. Consumer Goods decreased slightly from 10.9% to 10.8%.
Oil and Gas decreased from 6.3% to 6%. Basic Materials fells slightly from 4.6% to 4.5%. Utilities stayed the same at 2.1%. Other sectors also stayed the same at 2.6%.
Since some sectors are hard to differentiate, here’s a small guide below:
Technology and IT: Technology (broad) can include delivery of transportation of energy. IT relates to the delivery of information (eg. a smartphone/tablet).
Consumer Goods vs Services vs Discretionary: Consumer goods are products bought by the average consumer. These products are the end result of a production or manufacturing process (eg. food)
A consumer service (a.k.a customer service) is a process which ensures consumer satisfaction (eg. phone/email interactions).
The consumer discretionary sector refers to desirable but non-essential goods like luxury items, entertainment and leisure.
How are my investments broken down geographically? Since I hold a global all cap index fund you can use this as a gauge of stock market performance across the world. Figures are rounded for simplicity so might not total 100% exactly.
North America accounts for 58.4% (up 0.2% from last month). Europe accounts for 12.9% (down 0.4% from last month). The Asia/Pacific region (which includes China) accounts for 11.9% (up 0.3%). Japan accounts for 8% (down 0.1% from November).
The UK accounts for 5.4% (down 0.1%). The Middle East/Africa Region accounts for 1.6% (up 0.1%). Investments in Central/South America account for 1.3% of my portfolio (the same as last month). Eastern Europe accounts for 0.5% (also the same as last month).
This section looks at the biggest individual investments in my portfolio overall.
This month Microsoft and Apple are in joint 1st at 1.7% (Apple is down from 2.1% and MS is up from 1.6% in December). Amazon is up slightly at 1.4% (an increase of 0.1%). Alphabet, Google’s parent company, remains the same as last month (1.3%). J&J has increased from 0.7% to 0.8% this month and has moved up in position.
Berkshire Hathaway remains the same at 0.8% but moves down in position. JPM Chase remains at 0.7% but moves down in position. Facebook and Exxon mobil remain the same at 0.7% (position unchanged). Pfizer, the American pharmaceutical giant is new to the top 10 list (0.5%), knocking off Royal Dutch Shell.
My top 10 investments account for 10.3% of my entire portfolio (down from 10.4% in November).
The Vanguard Global All-Cap Index Fund is an accumulating fund. This means the dividend income is automatically reinvested back into the fund. I don’t have to process that dividend reinvestment myself. I am huge advocate of dividend reinvestment for long term wealth-building.
Goals For January
I will continue to invest my equally divided lump sum into the global all-cap index fund.
That concludes the December 2018 update. Happy new year everyone! On to 2019.
If you liked this post, hit the like button down below. Also, in the comment section down below, let me know if there’s anything you want me to include in next month’s report. I’d love to hear about your investing experiences as well. I read and reply to 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.