My Current Low Charge Portfolio – May 2010

Edited 06 June 2010: I have found more exact data allowing me to determine benchmark returns to the day. I have therefore updated the data in this post to reflect this.
Apologies for the confusion but I'm learning here too.
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Buying (New money): Since my last post I have struggled with my savings a little and managed to save only 53% of my after tax earnings and pension salary sacrifices. While I’m unhappy with the month’s savings rate I still believe it is well above the average punter on the street. Total new money entering my retirement investing Low Charge Portfolio was around 0.7% of my total portfolio. This were allocated as follows: 37.6% to cash, 9.4% to UK equities, 13.1% to international equities, 2.5% to index linked gilts and 37.4% to UK commercial property. This money was invested both outside of tax wrappers and also within a pension.

Reallocation of assets in my retirement investing portfolio: Two reallocations this month. Firstly, 4% of my portfolio was moved from cash to an NS&I Index Linked Savings Certificate as detailed here.  Secondly, 0.5% of my portfolio was moved from cash to Gold within an ISA as detailed here.

Selling: Nothing this month.

Dividends: Dividends this month are just not worth talking about with an exceptionally small dividend of £1.53 being paid. You can’t even get a pint of beer for that these days.

Current UK Retail Prices Index: 4.4% which is up from 3.7% making it even more difficult to get a real return on any cash holdings as I’ve discussed in previous posts.

Current Annual Charges: 0.58%

Current Expected Annual Return after Inflation: 4.1% which is the same as last month

Current Return Year to Date Performance (from 01 January 31 December to 30 April 2010): 5.4% which is after fees of approximately 0.05% and tax paid on the majority of cash holdings. This compares favourably with my benchmark portfolio (as detailed in my quarterly/annual updates) of 22% bonds and 72% equities which has only returned 4.9% 4.1%. Is my strategy working or am I just having a run of luck? Only significant time will tell.

How close am I to retirement: A poor month for new contributions to my portfolio combined with a poor month of portfolio performance means my retirement has moved further away going from 46.7% to 46.5%, with 100% being retirement (well at least work becoming optional).

The following are the highlights for the month:

- Desired Cash portion moves from 11.7% to 12.6%. This month I have moved closer to the desired cash holding by going from 17.6% to 13.5%. Why am I holding cash rather than bonds? My cash portion performs 2 functions. Firstly, I want to hold 6 months worth of salary in cash as an emergency fund. You never know when you might lose your job, fall ill or some other unforeseen incident may require cash fast. Secondly, I aim to hold any difference between what would be my normal strategic equity holding and my tactical equity holdings. This means with the current stock markets being over valued (in my opinion) I will be holding excess cash. I keep this in cash as it is readily accessible should the market adjust in value quickly. Of course if the market became undervalued I would want to be overweight equities which I wouldn’t have ready cash available for. I would find this cash by selling down bonds or at the very least contributing significant new money to equities.

- Desired Bonds portion doesn’t move at 18.1%. I am now overweight bonds, following my Index Linked Savings Certificate purchase, going from 18.0% to 22.0%.

- Desired Property stays constant at 10.0% in line with my strategic asset allocation target. This month I have moved closer to the desired by going from 8.1% to 8.2%.

- Desired Commodities stays constant at 5.0% in line with my strategic asset allocation target. This month I have moved closer to the desired by going from 3.5% to 4.2%.

- Desired International Equity portion moves from 13.0% to 12.6% based on my tactical asset allocation. As I have explained in previous posts I run a tactical asset allocation portion on my equities (excluding emerging markets) over the top of my normal strategic asset allocations. If I was following a purely strategic asset allocation this would be 15%. This month I am perfect by moving from 12.8% to 12.6%.

- Desired Emerging Market Equities stays constant at 5.0% in line with my strategic asset allocation target. This month my exposure has stayed constant at 2.7%.

- Desired Australian Equity portion moves from 19.1% to 19.0% in line with my tactical asset allocation. If I was following a purely strategic asset allocation this would be 21%. This month I have moved to a near perfect position by going from 19.6% to 19.2%.

- Desired UK Equity portion moves from 18.1% to 17.7% in line with my tactical asset allocation. If I was following a purely strategic asset allocation this would be 21%. This month along with Aus Equities I am in a near perfect position by going from 17.7% to 17.6%.

My total equities allocation is now 52.1% across all markets, still below the desired allocation under my strategic/tactical asset allocation of 54.3%. This compares with 62% which would be my allocation if I was following a purely strategic asset allocation. This is all coming from my under exposure to Emerging Markets of some 2.3%.

As always DYOR.