Friday, 13 August 2010

It’s been a good year to date, well maybe it has - my Retirement Investing Today Current Low Charge Portfolio – August 2010

Why has it been good year to date for my portfolio? Well year to date my Personal Rate of Return is 3.9%, which compares favourably against my Benchmark Portfolio which has returned 3.0%. For non-regular readers my Benchmark Portfolio is as simple as it can get by using 28% iBoxx® Sterling Liquid Corporate Long-Dated Bond Index total return (capital & Income) index and 72% FTSE 100 total return (capital & income) index.

It’s also been a good month as my strategy forced me to buy into the ASX 200 here. The tracker fund that I bought which is the Vanguard Index Australian Shares Fund had a buy price of $1.5736 at that time. At time of writing the sell price on that fund is $1.6878.

For completeness within my pension there have also been some reasonably small, in comparison to the ASX 200 buy, purchases of UK equities, international equities, index linked gilts and UK commercial property.

So why did I say, well maybe it has, given I have outperformed my Benchmark Portfolio? It’s all about real returns. If I look at the RPI for the last 7 available months (that’s November ’09 to June ’10), so one month behind my portfolio, I see it has increased by 3.5%. So I’ve just about stayed stationary seeing a small Real increase of 0.4% where on average I need 4% per annum, or 2.8% year to date, if I am to “retire” in 6 years.

Looking longer term (note I didn’t say long term as only many years ahead will I know if my strategy has worked) my strategy appears to be working. £100,000 invested in My Low Charge Portfolio on the 4th January 2008 would today be worth £112,264 while if I had have invested in my Benchmark Portfolio £100,000 would today be worth £98,298.

It’s also been a good month for adding to my portfolio through earnings. I have managed to add 62% of my net earnings into my pension and other savings.

My chart today, as always, shows what I call my Desired Low Charge Portfolio and also My Current Low Charge Portfolio. My Desired Low Charge Portfolio has been constructed using both Strategic and Tactical Asset Allocation methods that I describe all over this blog. To understand how I constructed this portfolio then please start here. My investment strategy is to simply use mechanical methods to work my asset allocations towards that of the Desired.

Even in the absence of new issues of NS&I Index linked Savings Certificates (ILSC’s) my portfolio remains reasonably tax efficient. I currently have 34.6% in Pensions, 20.1% in ILSC’s, 9.7% in ISA’s and 35.6% exposed to the full wrath of the tax man.

My next focus will be my exposure to emerging markets. With an allocation of 3.2% against a target of 5% I am 37% away from target. This is the furthest away from target of any of my asset classes and it is therefore something my mechanical investing strategy is therefore going to force me to buy.

So now the important statistic that I look at each month. How close am I to retirement? It’s all good news with my portfolio moving from 42.7% of the required assets to 46.2% so at least I can smile a little.

If you would like to know more about my Retirement Investing Today Current Low Charge Portfolio or my Benchmark Index then have a look here.

As always do your own research.

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