Sunday, 18 March 2018

RL Sustainable Managed Growth - An Ethical Option

Last year I was helping a friend to construct a diversified multi-asset portfolio. She wanted a low volatility, low cost, diversified asset mix and decided on a blend of Vanguard Lifestrategy (20 & 40) as a core of the portfolio with a smaller allocation between Personal Assets Trust, HSBC Global Strategy Cautious and Royal London Sustainable Managed Growth.

I have followed the fortunes of this portfolio. I already hold the Lifestrategy funds - 40 & 60, however I have been impressed with the RL fund in particular and decided to add it to my own portfolio earlier this month. The decision was prompted by the Coventry BS cutting my savings rate this month...just two months after they increased it.

This is another 'Steady Eddie' fund which is listed in the IA Mixed Investments 0 - 35% Equity category. The breakdown of asset mix is :

Fixed Investments 71%
UK Equities    12%
US Equities      5%
Euro Equities   4%
Cash & Other   8%

Top 10 holdings include Amazon, Microsoft and Alphabet (Google) which have probably helped to boost returns over the past few years.


The fund has delivered a return of 8.3% in 2017 and 35% over the past 5 years which works out at an annualised average of  6.4% p.a. The fund is ranked top out of 39 funds in the sector over this period. By comparison, the Vanguard Lifestrategy 20 fund has returned 25% over the past 5 years and is ranked 10th/39.

5 Yr Comparison v VLS20
(click to enlarge)

The fund has paid out 3.6p in dividends over the past year which at the current price translates to a yield of 2.6% paid quarterly and has ongoing charges of 0.69%.


This fund is part of a range of ethical options which were previously managed by the Co-operative Asset Management Group and which were taken over by RL in 2013.

The sustainable range of funds may be attractive to the more ethical-minded investor as the investment process involves screening for environmental, social and governance issues.

The funds will try to avoid holdings involved in animal testing, arms trade, pornography, tobacco and nuclear power for example and there will be many investors who share these ethical considerations and who do not want to be a part of exploitative industries.

All funds in the range have a good track record for investor returns. For example in 2017, returns were :
RL Sustainable World    18.0%  (40 - 85% shares sector)
RL Sustainable Diversified  12.9%  (20 - 60% shares sector)
RL Sustainable Managed Growth  8.3%  (0 - 35% shares sector)

So, I can get a reasonable return and invest with a clear conscience with these funds.

If you have views or dilemas about ethical investing feel free to share them and leave a comment below.

Finally, this article is a record of my personal investment thoughts/decisions and is not a recommendation - as always, please DYOR.

Monday, 12 March 2018

Vanguard UK Equity Income - Yr 3 Update

It is now 3 years on since my initial purchase of this UK income index fund.

The Vanguard fund tracks the FTSE UK Equity Income Index. The concept is fairly simple - to give investors access to a broad range of dividend-paying securities from across the FTSE 350, while reducing the risk of being overly invested in a small number of high-yielding shares or particular industry sectors by limiting the percentage of the index invested in any one company or industry.

The Vanguard fund holds around 120 companies - the top ten holdings include all the usual suspects - Vodafone, Glaxo, Lloyd Bank, BP, BATS, National Grid etc.

Ongoing charges are 0.22% and also a one-off dilution levy of 0.40% on purchase. In addition, my broker AJ Bell levy an annual platform charge of 0.25% of the total value of the fund.


My initial purchase price in May 2015 was £177.50 - by last March it had risen to £181. However, it has retreated over the past couple of months and is back to just below my entry price, currently £174 and a total return of just 1.0% over the past year (incl. income).

By way of comparison, the total returns for some of my UK income trusts over the past year -

City of London  2.2%, Edinburgh -7.1%, Finsbury Growth & Income  10.6% and Temple Bar 2.5% (average 2.0%).

At the start of the year I took the opportunity to sell off part of my Vanguard holding as I am looking to reduce my UK equities and moving down the risk scale with more globally diverse multi-asset funds being introduced to my portfolio. I have invested the proceeds between HSBC GlobalStrategy Balanced and Royal London Sustainable Growth fund.

3 Yr Comparison v HSBC Global Strategy
(click to enlarge)


The fund has so far provided me with income payments of 776.92p in 2015, 775.65p in 2016 and a nice 10% increase to 857.87p in the past year - which gives a current yield of 4.8%. However, the income was inflated by the weak level of sterling in 2017 so I am expecting a reduction this coming year. Dividends are paid out half yearly in June and December. 

The income distribution represents the combined dividends received from all holdings in the fund (less costs and fund charges) so, unlike investment trusts which hold reserves to smooth out the income payments, I do not know exactly what payment will be received in my ISA until it actually arrives.

It’s early days - just three years since purchase but I am happy to continue with the remaining holding of this income fund which seems to be doing the job required for my income portfolio.

As ever, this article is a record of my personal investment thoughts/decisions and is not a recommendation - as always, please DYOR.

Wednesday, 7 March 2018

Tritax Big Box - Full Year Results

This commercial property REIT was added to my income portfolio in October 2016 following a placing of shares at 132p.

Tritax Big Box is the only Real Estate Investment Trust dedicated to investing in and funding the pre-let development of very large logistics facilities in the UK. The company believes these properties, known as Big Boxes, are one of the most exciting and highest-performing asset classes in the UK real estate market.

Big Boxes offer tenants economies of scale and cost savings not available from smaller, older buildings. They are also crucial to the efficient and effective operation of retailers, and in particular the fulfilment of e-commerce orders. Because the nature of what the companies use these buildings for is so fundamental to their very existence, Tritax is unlikely to suffer from unexpected vacancies.

BBox have sought to distinguish themselves through the quality of location and modernity of their real estate assets let to high calibre tenants, which provide long term income and attractive prospects for growth.

The group hold a portfolio of distribution assets which are located close to motorways and are let to tenants including some of the leading supermarkets - Sainsbury, Tesco, Morrisons as well as M&S and Next. Some other tenants include:

Amazon - the world’s largest electronic and e-commerce retailer

Argos -  the UK’s leading multi-channel retailer, offering more than 33,000 products both on-line and in-store.

Brake Bros -  the number one food service distribution company in the UK

Ocado -  the world’s largest dedicated online grocery retailer.

Wolseley - the world’s number one distributor of heating and plumbing products

The UK has been one of the fastest global adopters of online retail and continues to exhibit significant growth in the sector, driving new demand for logistics real estate including Big Box assets. Successful large-scale retailers (online and conventional) and logistics providers are increasingly relying on the Big Box asset and demand is evident from companies up-scaling to such facilities.


Tritax Big Box was first listed at the end of 2013 at an initial floatation price of 100p. During 2016 it raised £550m of equity through two substantially oversubscribed share issues. In May it raised a further £350m which was invested over the rest of 2017 and brings the market cap to £2bn.

They have today issued 
results for the 12 months to end December 2017 (pdf via website). Total Shareholder return for the period was 15.2%. The company target a total return (being the increase in EPRA NAV + dividends paid) of 9.0% per year - the figure for 2016 was 9.6%.

Profits came in at £247m (2016 £92m) and total portfolio assets are valued at £2.6bn across 46 assets (2016 £1.9bn across 35 assets).


Building on payouts for the previous three years of 4.15p in 2014 and 6.0p in 2015 and then 6.2p, the declared dividend for the full year 2017 is 6.40p rising to 6.70p in the coming year. At the current share price this provides a fwd yield of ~4.7%.

The company have now moved to quarterly dividend payments. The Group's dividends are not quite covered by adjusted earnings of 6.37p, which are underpinned by strong rental stream and low cost base.

Commenting on the results, chairman Richard Jewson said:
“We have a sector-leading portfolio of UK Big Box assets that are benefiting from structural change driven by increasing e-commerce penetration, and the operational and financial benefits which they can provide to our Customers. The fundamentals of our market remain positive and are largely unaffected by current geopolitical and economic uncertainties. Despite the uncertainties it brings, Brexit may provide a silver lining, since with increased border controls our Customers will require more warehousing domestically, further supporting our business case".


I like what I have seen so far and I believe the model offered by Big Box which is basically tapping into a part of the online revolution, has potential for growth as well as a fairly secure dividend underpinned by the long leases and upward-only rent reviews. The share price has gained 8% compared to my purchase price of 132p. In addition, I have received a dividend of 6.4p and the prospect of an additional 4.7% increase to 6.7p for the coming year.

The way we shop has changed quite significantly over the past decade and internet sales are forecast to account for over 20% of total sales by 2020. To remain competitive in this environment, retailers need to have large, highly efficient distribution facilities that can fulfil orders quickly and accurately. This need is only becoming more acute as customers demand ever-shorter delivery times.

The demand for the BIG boxes offered by this REIT is likely to remain strong which means the dividend is reasonably secure and should easily keep pace with inflation.

This article is a record of my personal investment thoughts/decisions and is not a recommendation - as always, please DYOR.

Thursday, 1 March 2018

A Diverse Portfolio

This is an update of an article first published in 2013 and forms part of my 'basics' investing series.

I guess most investors will have read somewhere that its generally good to hold a diversified portfolio. As with many aspects of life, it's not generally a good idea to put all your eggs in one basket. 

Therefore, investing in a broad mix of assets such as equities, bonds, property etc. in many regions around the world will protect investors from a downturn in any single sector or region and also reduce the volatility associated with an over-reliance on for example equities or emerging markets. The aim will be to create a mix which can provide an acceptable level of return for the degree of associated risk undertaken.

Novel Investor (US-based) has created a nice asset quilt visual chart which clearly shows the returns for several types of asset over a 15 year period. I hope it will demonstrate how difficult it would be to select the best performing asset class year after year and why the better strategy is to hold a good mix of all assets.

Creating a simple yet diverse portfolio can be very straight forward. Pooled investment vehicles like investment trusts, exchange traded funds and OEICS are a good way for the small investor to build a diversified portfolio. Indeed with the broadly diversified Vanguard LifeStrategy fund you have the option of a one-stop investment vehicle providing all the diversity and balance that may be required.

A Simple Option

Let's just take a look under the bonnet of the Lifestrategy 60 fund which represents my largest portfolio holding. It is a blend of several underlying Vanguard funds - some hold equities and some hold bonds
Equity Funds - 60%

FTSE Developed World (ex UK)
FTSE UK All Share Index
US Equity Index
Emerging Markets Index
FTSE Developed Europe (ex UK)
Japan Index
Pacific (ex Japan) Index

Bonds - 40%

Global Bond Index Sterling Hedged
UK Government Bond
UK Inflation Linked Gilt Index
UK Investment Grade Bond Index
Euro Government Bond Index
US Investment Grade Credit Index
US Government Bond Index
Japan Government Bond Index
Euro Investment Grade Bond Index

So, in one single multi-asset fund there are 16 sub-funds which between them hold around 18,000 individual securities from all corners of the world. Vanguard frequently rebalance the funds to maintain the equity proportion at 60%. For running such a fund they charge the investor 0.22% which works out at £2.20 per year for every £1,000 invested. Investing does not come much more diversified.

Since its launch in June 2011, the fund has provided an average annualised return for investors of 9.0% per year which would certainly be 'good enough' for me.

Advantages of a Diversified Portfolio

It's all about the balance between risk and reward. Some assets such as equities will provide a better return than bonds over the long term. However, they are more volatile than bonds. For example, during the economic meldown of global markets in 2008, the FTSE lost over 30% in a matter of just two short months. The following year it was up 30%...this was a very testing time for anyone purely invested in equities and many investors were emotionally unprepared for the rollercoaster ride.

FTSE 100 Tracker July 2008 to June 2009

For those who held a more balanced mixed portfolio of say 50% eqities/bonds, the most they would be down in 2008 was nearer to 12% with a corresponding rise of 16% in 2009...still a little volatile compared to previous years but much less of a stomach-churning ride of the 100% equities and I believe most investors would be much less unnerved during a severe downturn.

Here's a link to Vanguard's asset mixer tool which provides a useful visual graph of the annual rise and fall of various allocations of equities/bonds/cash over any designated timeframe. It can be very useful for those wanting to explore asset allocation and their individual risk profile.

In addition to my Lifestrategy funds, I hold several investment trusts - some from the UK growth & income sector such as City of London and Finsbury Growth & Income, some for global growth such as Scottish Mortgage as well as others focussed on infrastructure and fixed income and for exposure to UK smaller companies I hold Aberforth.

Personally, I would never place all my investments with one fund or even several funds with just one provider. I like to spread the risk - some index funds, some professionally managed investment trusts. I like exposure to different sectors of the economy and prefer global rather than confining my investments to the UK-listed investments .

However, some would argue it is possible to be over-diversified. Legendary investor Warren Buffett suggests that if you diversify too much you might not lose much but equally, you won’t gain much either. His approach is to concentrate on companies he knows inside out and select a few well researched options out of which there is the expectation of some big ‘winners’.

As can be seen in the chart, the benefits of diversifying a portfolio tail off as more investments are added to the mix.

Buffett is exceptionally experienced, skilled and disciplined in his approach to investing - many try to emulate his success but no one has come close. A return of just under 20% cagr over the past half century is a phenomenal achievement.

For the average small investor therefore, I would think the better strategy would be to focus on a good mix of assets which should closely match your temperament and appetite for risk. The diversified and balanced portfolio will always miss out on the very best possible returns but equally will avoid the terrible car crash whist delivering what should hopefully be acceptable and a 'good enough' return.

Feel free to comment below on how you go about maintaining a diverse portfolio.

Wednesday, 21 February 2018

diy investor is 5 years old!

Well, when I started this blog back in 2013, I never imagined it would be still trundling along 5 years later. I suspect this may be partly due to having quite a bit of spare time since taking early retirement and partly due to the fact that I am probably too lazy to 'get a life'.

It is a record of the later years of my personal investing journey and, looking back, it is clear the focus has changed quite a bit since February 2013. Back then, I held most of my equities in a mix of investment trusts and individual shares. Over the past couple of years the shares have been reduced and now are all gone as well as some of the trusts. I have increasingly embraced the lower cost index alternatives such as Vanguard LifeStrategy.

First of all a big thanks to everyone who visits on a regular basis. Page views seem to have increased quite a bit since the early days.

Here are a few stats...

Total page views to date - 801,450, average per month is now around the 16,000 mark.

A total of 394 posts (200 in 2013/14) and most viewed article - 
Asset Allocation Revisited with 35,500 so far, followed by Vanguard Lifestrategy - A One-Stop Solution. In 2016 I was fortunate to be invited to write a guest post for Monevator following the publication of my latest book 'DIY Simple Investing' and a link in the article has boosted the views. Other popular articles are Work Out Your Retirement Figure and Vanguard Lifestrategy - 5 Year Performance.

The main sources of referring sites have been Monevator, Retirement Investing Today, Simple Living in Suffolk (now in Somerset!) and Money Saving Expert - many thanks!

Obviously, the majority of people visiting the blog are from UK (70%), however I am continually surprised to see how far diy investor has reached globally - USA (20%), and the remaining 10% between Germany , France, Russia, Ukraine, Spain, Netherlands, Belgium, Ireland, Italy, Japan, Australia, India, China, Indonesia, Singapore, Serbia and New Zealand.


As I say in my book “DIY Simple Investing”, family and friends soon change the subject when personal finance is discussed so, on a personal level, its really good to have an outlet for my ‘hobby’ of personal finance and investing and to be able to share it with what seems like an ever expanding community of like-minded people.

It is, of course, always interesting to look back at earlier posts and sometimes I am surprised at just how far my thinking has changed and developed since starting the blog.

In the early days, I was firmly committed to a strategy of generating a natural income from a mixture of individual shares, investment trusts and fixed interest securities. Over the past few years, I have read many interesting articles on various blogs and, as the time has passed, I have begun to embrace the low cost index philosophy. I have reviewed my former strategy and believe my process has become stronger and more balanced - as well as simpler!

After 5 years I find I am still enjoying my blogging and so long as I remain  positive and others keep visiting, I hope to keep things going for a while longer - although if my portfolio is reduced to a couple of Vanguard trackers, there may not be too much to write about!

Thanks again for sharing the journey and for the comments…Here's to the next 5 years, assuming we all get through Brexit!

Tuesday, 20 February 2018

Temple Bar - Full Year Results

I hold this investment trust in my ISA. It is part of my ‘basket’ of income-focussed investment trusts designed to provide an above inflation rising natural income and hopefully some increases in capital over the longer term.

TMPL has been managed by Alastair Mundy since 2000. He takes a contrarian view on the timing of buy and sell decisions - buying the shares of companies when sentiment towards them is thought to be near its worst and selling them as fundamental profit improvement and/or re-evaluation of their long-term prospects takes place.

This contrarian approach centres on long-term investment in cheap, out-of-favour companies in the belief that over time, these will be affected by reversion to mean.

This approach has proved very successful over the longer term with the trust outperforming the FTSE All Share index over the past 5 & 10 years. In 2016 it was one of my best performing trusts with a total return on net assets of 20.4%.


They have today published full year results for the 12 months to end 2017 (link via Investegate). Unfortunately, they were unable to outperform the FTSE this year with total return of net assets increasing by 9.7% compared to a gain of  13.1% for the FTSE All Share index. The contrarian approach often requires long periods before the benefits for the trust are realised.

3 Yr Performance v FGT
(click to enlarge)

Temple Bar has ongoing charges of just 0.6%, a natural dividend yield of 3.3% and provided the third-best 10-year total returns in the UK equity income sector (top place held by Finsbury Growth & Income) despite a poor run in 2014 and 2015.


The trust is committed to paying a rising dividend year on year and has met this commitment for the last 34 years.

The board are recommending a final dividend of 17.48p making 42.47p for the full year - an increase of 5% on 2016. The dividend is covered by income receipts of 43.3p.

This trust is a relatively small proportion of my total portfolio currently ~3% or so and I am happy to retain on the basis that it provides a reasonable income and has a good track record of providing some decent appreciation to capital over the longer periods.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

Wednesday, 7 February 2018

An Additional New Platform for My ISA

In 2015 I opened an additional ISA with Halifax to hold my Vanguard Lifestrategy 60 fund and for a one-off buy and hold this is still cheaper than Vanguard so I will keep it going. I also have my AJ Bell Youinvest ISA in which I hold my mix of investment trusts which I will also retain. 

However, last May, Vanguard Direct launched their own platform with annual charges of just 0.15% per annum and I made a mental note to look at a new ISA for this coming year with Vanguard when the time came around to add to my Lifestrategy holding.

I have been accumulating cash from various sales over the past year and I have held off adding to my global funds mainly due to the weakness in sterling following the EU referendum outcome. However, in recent weeks the pound has strengthened considerably against the US Dollar and recently clawed its way back above the $1.40 level for the first time since June 2016. In addition, there has been a sharp correction in global markets which has been the trigger to dip a toe in the water.

In the past week I spent a few minutes online to open my new S&S ISA with Vanguard Direct and I will now start to build my holding in the VLS 40 but will take things slow and steady and drip feed small sums back in as the markets are still close to their all-time high point. As Vanguard do not make a charge for the sale and purchase of funds, it seems to be a slightly better option than Halifax with its £12.50 dealing fee.

The only charges for my new ISA are the annual platform fees of 0.15% - which works out at £1.50 per year for each £1,000 invested or £30 p.a. for the full ISA allowance of £20,000. Of course, I am limited to Vanguard funds however for me this is not really a problem as I can hold a wider selection of investments with my other two providers.

My initial purchase is the VLS 40 (inc) @ £146 and I hope to make several additions over the coming year or so.

Wednesday, 31 January 2018

Aberforth SC Trust - Final Results

The objective of Aberforth Smaller Companies Trust plc (ASCoT) is to achieve a net asset value total return (with dividends reinvested) greater than that of the Numis Smaller Companies Index (excluding Investment Companies) over the long term.

The trusts portfolio is diversified and will normally consist of investments in around 85 individual companies.

In seeking investments the approach will be fundamental in nature involving regular contact with the management of prospective and existing investments in conjunction with rigorous financial analysis of these companies. The emphasis within the portfolio will reflect the desire to invest in companies whose shares represent relatively attractive value and a preference for holdings with low or no gearing.


They have recently published final results for the full year to 31st December 2017(link via Investegate).
It has been another good year with share price total return of 22.6% compared to its benchmark index, Numis Smaller Companies index - Total Return of 19.5%. The return for the FTSE All Share in 2017 was 13% by way of comparison.

I was pleased to note that management charges have fallen as a percentage of net assets this year and ongoing charges which includes transaction charges are now 0.72%.

The trust has been the best performing IT in my portfolio over recent years. Over the past 5 yrs average annualised return for this smaller companies specialist is 16.2% p.a.

5 Yr Comparison v Vanguard Global Small Cap
(click to enlarge)


The board are proposing a final dividend of 19.75p making a full year increase of 5.3% to 28.80p per share. In addition, as last year a special dividend of 6.7p is proposed as the trust has received special dividends from several portfolio holdings. Revenue reserves have increased by a further 14.7% to £79.92m (2016 £69.64m).

At the current price of around £13.50, the trust has a yield of 2.2% (but 2.6% including the special dividend).

I would not advocate a large holding of small caps in any portfolio, however a weighting of between 5% - 10% is likely to boost total returns for the long term investor.

Last year I took the opportunity to trim back my holding as it had become overweight compared to when I first acquired it and I wanted to take out some of the capital appreciation for 'income'. However I am happy to continue with Aberforth for the longer term for delivery of growth and steadily rising income.

As ever, slow & steady steps…..

Sunday, 14 January 2018

Core & Satellite Investing Strategy

Since I brought on board my Vanguard Lifestrategy index funds in 2015, I have increasingly regarded my strategy as core/satellite. The VLS funds form the core - a diverse mix of global equities and bonds - and account for around 40% of my portfolio. Surrounding this is an assortment of smaller holdings including my legacy investment trusts.

This common strategy involves a dual approach with a 'core' of stable long-term holding(s) combined with an outer layer of more specialist or shorter term holdings which compliment the core element.
The strategy can enable the investor to combine two approaches such as core passive and satellite more active for example.

The core will generally comprise the steady/stable element of the portfolio and which are likely to throw up few surprises. They will generally be low cost buy-and-hold investments but could be a 'basket' of solid investment trusts forming the 'core' combined with a selection of individual shares which may be traded more frequently.

The satellite element can be used to take a little more risk with a smaller proportion of the portfolio with a view to increasing returns. For example it could be a punt on one or more out of favour sectors of the market or individual shares which are well below their long term average. It could equally be areas which the investor considers have exciting prospects such as biotech or technology. Some assets such as commodities have distinct cycles which investors may try to exploit for profit at certain times.

With my portfolio I hold several investment trusts which I like to think can complement my VLS funds. The likes of Scottish Mortgage with its focus on cutting edge technology or smaller companies specialist, Aberforth are two which can help to deliver a slightly better overall return.

For those who like a more hands-on approach to investing, it can be an advantage to have a larger leave-alone core element. Likewise for those who like to 'tinker' around the edges and find it difficult to leave completely alone, the strategy allows the investor some freedom to 'play' the market maybe with a small percentage of the portfolio total value in the knowledge they will probably not do too much overall damage if things don't work out.

Leave a comment below if you use such an approach and share any other ways this strategy could help to keep a portfolio on track.

Saturday, 6 January 2018

Kames Diversified Monthly Income - New Purchase

Kames is the former asset management arm of Scottish Equitable, which was bought by Dutch giant Aegon and renamed Kames six years ago. It holds funds totalling £45bn.

Their monthly income fund was launched in February 2014 and over the past year it has provided a return for investors of 10.1% building on the 11% for 2016 and has produced an annualised return of 8.2% p.a. since launch. Lead manager is Vincent McEntegart.

The fund targets income of 5% from a diverse range of assets which include bonds and fixed interest (40%), UK & global equities (26%), property (14%) and specialist (18%). No single holding exceeds 2% of the portfolio. Some top 10 include Greencoat UK Wind, HICL Infrastructure, Tritax Big Box and Imperial Brands.

Ongoing charges are 0.6%.

Over the past 3 yrs the fund is ranked 14th from 170 funds listed in the IA Mixed Investment 20 -  60% shares sector. McEntegart has a reputation as a 'steady Eddie' manager who prefers a relatively cautious approach to generating income with a correspondingly low price volatility. This was one of the reasons for adding this fund to my income portfolio. 

Performance since launch
(click to enlarge)

As it is a fund which would attract a platform charge of 0.25% with AJ Bell, I have added it to my Halifax Share Dealing ISA which is fixed fee and therefore there will be no additional platform charges. The fund was purchased in December at the price of 110p. Distributions are made at the end of each month.

I will now include this fund in my demonstration income portfolio.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!