My Passive Investments - May 2019 (-2.71%)

A short term look on long term investing

Disclaimer

I’ve been spending a lot of May optimising the website. Changing the overall look and feel and making it easier to navigate.

My post of the month has definitely been ‘Passive Energy Saving - 8 Ways’. The inspiration to write it is was in large part due to my recent ‘healthy-ish’ obsession with ‘Fully Charged’ on YouTube. If you’re into electric cars, renewables, energy storage, clean technology in general it’s one to watch.

Game of Thrones ended…yep… I’ll say no more.

Since I’ve been doing these monthly reports for one whole year, I’ll be writing a year in review article, so be on the lookout for that. Coming very soon.

So, what happened in May, 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. 

May Returns (-2.71%)

May has been a negative month (-2.71%) which, in long term investing of course, is neither here nor there. As usual, my allocations have remained as they were.

I did make one change this month, however. But not in terms of allocation, in terms of total monthly investment. I used to invest 50% of my monthly savings, after expenditure. The other 50% would go into short term savings, in a number of accounts, as I’m continuing to save for my first home.

I have decided to increase my short term savings rate to 75% (post-expenditure) meaning 25% of my savings will go into investing. This is simply because I wanted to accelerate saving towards my first home. And I think it’s a sensible decision.

My investments are all held in a globally diversified stock index fund. The Vanguard FTSE Global All-Cap Index Fund. The ultra-diversified, low cost one-fund portfolio.

 
May 2019 - Capital Matters - Passive Investing - Monthly Return
 

Returns Since Inception (+4.21%)

Inception, when I first started investing through Vanguard, is the end of May 2018. Exactly one year ago. From then until now, my portfolio has returned +4.21%.

 
May 2019 - Capital Matters - Passive Investing - Returns Since Inception +4.21%
 

Sector Breakdown

This Vanguard one-fund portfolio, has in-built sector diversification. Here is the current breakdown of my investments by sector/industry.

May 2019 - Capital Matters - Passive Investing - Sector Breakdown

Slight shift this month, which is normal. Consumer Goods overtook Healthcare to now be my 5th largest investment sector. But there were no position swaps other than that.

Financials (+0.3%), Technology (+0.5%), Industrials (+0.1%) and Consumer Services (+0.2%) now make up slightly more of my portfolio, compared to last month.

Health Care (-0.5%), Oil & Gas (-0.2%), Basic Materials (-0.1%), Utilities (-0.2%) and Other Sectors (-0.1%) now make up slightly less of my portfolio.

Consumer Goods remained the same at 10.8% of my investments.

Some Useful Sector/Industry 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

Below is the geographical breakdown of my investments. You can see how they are allocated, in the index fund, to different parts of the globe. Figures are rounded for simplicity (may not add up to 100% exactly).

May 2019 - Capital Matters - Passive Investing - Geographical Regions

North America made quite a significant jump this month to 58.7% (+0.9%). That was the sole region that increased in allocation compared to April.

Europe (-0.1%), Asia/Pacific (-0.3%), Japan (-0.2%), UK (-0.2%), Central/South America (-0.1%) all decreased in allocation.

The Middle East/African region and Eastern Europe remain the same as April.

Individual Investments

I always like to include a section looking at the top 10 companies in my portfolio. It’s interesting to look at but it’s also noting how concentrated the portfolio (the global index) is in the top 10 companies.

The top 9 haven’t change in name but some have swapped positions, making up slightly more/slightly less of my investments.

The 10th company on the list, Visa, is new to the list.

Microsoft (+0.1%), Amazon (+0.1%), Berkshire Hathaway (+0.1% - up 1 place) and JPM Chase (+0.1% - up 1 place) have all slightly increased in allocation, compared to April.

Alphabet (-0.1%) has decreased slightly.

All of the others, Apple, Facebook, Johnson & Johnson (down 2 places) and Exxon Mobil have stayed at the same allocation.

My top 10 investments now account for 10.4% of the index fund. This is an increase of 0.3% compared to April, meaning my investments are slightly more concentrated in those top 10.

 
May 2019 - Capital Matters - Passive Investing - Top 10 Investments
 

Visa (Stock Ticker: V), the American multinational financial services company is headquartered in Foster City, California and has a fascinating history.

By the mid-50s, the average middle class American consumer would have had a number of credit accounts with different merchants. Credit was available but it was inefficient. Consumers had to carry around multiple credit cards when they went shopping.

The solution was a single unified financial instrument known as a credit card. Charge cards were already available at this time but the holder had to pay off the entire balance at the end of each billing cycle.

Bank of America launched BankAmericard and began a consumer testing programme in 1958 in the city of Fresno, California. The programme expanded quickly but not without major hurdles.

High delinquency rates, the invention of credit card fraud, customer liability problems, large financial losses, the launch of a competitor, Mastercard, in the mid-60s. To name just a few.

In 1976, the brand, which had grown out into several international networks, was unified under the name VISA.

VISA became a distinct corporate entity and in 2008, VISA Inc.’s IPO became the largest in US history ($17.9bn). VISA now trades under the stock ticker symbol ‘V’ on the NYSE.

Dividends

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 June

Continue to invest, as usual every month, using the Pound Cost Average approach. Continue to invest 25% of my after-expenditure savings.

A greater proportion of my savings will go into short-term savings, rather than long term investments going forward.

When you’re saving for a first home, finding a balance between the short and long term seems a bit skewed because you’re saving to buy a large asset with a big price tag attached.

The important thing though, as always, is to save as much as you can every single month. Then you have the freedom to decide where it goes. Short or long term. Both are important for different reasons.

One way I use to increase my monthly income, tax-free, is matched betting. Check out my article on Matched Betting using Profit Accumulator.

Pro Tip: If you put some of your tax-free matched betting income into a stocks and shares ISA or a retirement account to invest (a tax-efficient account), you can see how that can increase your long term returns going forward.

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 liked this article, you can check out all of my other reports, dating back to June 2018.

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

References

FTSE Global Equity Series | FTSE Russell

The History of Visa

Vanguard FTSE Global All-Cap Index Fund (Accumulation)

Yahoo Finance: Visa (V) Stock