A short term look on long term investing
April has been a semi-quiet month. If you completely bypass both the release of Avengers: Endgame and the premier of Game of Thrones: Season 8. But how can I. Wow, what a month for stress-inducing but awe-inspiring entertainment. Don’t worry, this isn’t spoiler territory, I’ll just say, go and watch them, if you haven’t already.
Bringing it back to finance, April saw the beginning of the new, 2019/20 tax year. And you know what that means. Reset tax allowances. I’ve been doing these reports since June 2018, so it’s nearly been one full year.
Be on the lookout for a year in review article to mark the end of this 12-month period. I’ll be looking at how my investments have performed over the year as a whole. And I’ll be reviewing how the allocations have changed since then too.
So, what happened in April, 2019?
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.
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 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.
April Returns (+4.1%)
April sees the continuation of an upward market trend, with returns in the last month standing at +4.1%.
My allocation remains steady and unaltered. I hold my investments in a globally diversified stock index fund. The Vanguard FTSE Global All-Cap Index Fund. The ultra-diversified, low cost one-fund portfolio.
Returns Since Inception (+7.61%)
Inception, in this case, is the end of May 2018. When I first started investing with Vanguard. From the end of May 2018 until now, my portfolio has returned +7.61%.
The Vanguard one-fund portfolio, has in-built sector diversification. You can see the current breakdown of my investment portfolio below.
As with any normal month, the portfolio sector breakdown is slightly different when compared to the month before. There have been no major shifts this month.
Technology (+0.4%), Consumer Goods (+0.1%), Oil & Gas (+0.1%) and Utilities (+0.1%) now makeup slightly more of my portfolio, compared to last month.
Financials (-0.4%), Industrials (-0.1%), Health Care (-0.1%) and Basic Materials (-0.1%) makeup slightly less of my portfolio, compared to last month.
Consumer Services and Other Sectors remain unchanged compared to March.
Some Helpful Sector 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.)
As well as being sector-diversified, my portfolio is geographically diversified. You can see my global diversification in the graphic below. Figures are rounded for simplicity, so may not total 100% exactly.
North America (+0.2%) and Asia/Pacific (+0.1%) investments now make up slightly more of my portfolio compared to March.
Japan (-0.1%) and Central/South America (-0.2%) now make up slightly less of my investments.
But, broadly speaking, my portfolio remains largely unaltered geographically. Europe, the UK, Middle East/Africa and Eastern Europe figures stay as they were.
Taking a deeper-dive into my investments, let’s now look at the top 10 companies in my portfolio, by weighting.
The top 10, in name, remain unaltered from March. But a few companies have switched places, due to changes in their market cap size.
Microsoft, Apple, Amazon, Alphabet and Facebook have grown in my portfolio, all by +0.1%, compared to last month.
Only JPM Chase is down slightly (-0.1% from March). The rest, J&J, Berkshire, Exxon and Nestlé haven’t moved in number.
Facebook has moved up in position (from 7th to 5th), Berkshire has moved up in position (from 8th to 7th) and JPM Chase has moved down in position from 5th to 8th).
My top 10 investments account for 10.1% of my whole portfolio. This is a slight increase from March, when they made up 9.7% of my portfolio overall.
The Vanguard FTSE Global All-Cap Index Fund is accumulating so all dividends are automatically reinvested back into the fund. Dividend reinvesting is key in my investment strategy long term. The fact the fund does this automatically just makes the whole process even more passive.
Goals For May
Continue to invest, as usual every month, using the Pound Cost Average approach.
Investing consistently, no matter what the market does month-to-month, is key to long term returns.
As the market continues to rise, you will read stories about impending market crashes. You will also read stories that state otherwise. But nobody can accurately predict the future.
And I want to raise a point here. When an inevitable crash comes, which it will at some point, we put a lot of focus on those that accurately predicted it. They are rewarded with vast amounts of media attention. Here’s why that’s a logical fallacy.
Survival bias means that we focus on those that made the accurate predictions. We tout them as geniuses and look to them for further predictions. We ignore the fact that on a planet with nearly 8 billion people, somebody is bound to be right at some point. It’s a numbers game and there are those that try to be the next ‘accurate predictor’.
When you read about 'the impending stock market crash in 2019’, look at that author’s past publications. If they wrote ‘the impending crash in 2017’, chances are, they’re saying the same thing over and over, until they are right. The lesson here? Be skeptical of market predictions and be wary of using them to make investment decisions. Most of the time, they are wrong.
If you liked this article, you can check out all of my other reports, dating back to June 2018.
I’d love to hear about your own investing experiences and let me know if you want me to cover anything in any more detail. 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:
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