2015 financial review (iii) – investments performance
Oooooh look at all my money
Finally! We’ve reached the end of the three part (originally designed to be one part! 🙂 ) series of my 2015 financial review. I hope I haven’t driven too many of you mad with it all. Despite being laborious and perhaps a little too in depth I’ve found the whole thing very useful and would definitely recommend it to anyone else out there, if you aren’t doing something similar already. It does help to be a bit of a stats and spreadsheets geek which I naturally assume you all are as you are reading this in the first place.
This time we are talking about my investment portfolio “performance”. I put it in quote marks because it sounds a bit overblown, it’s not like I am actively trying to beat the market or anything like that, I am just sticking money into index funds and ETFs and hoping for the best. If that weren’t caveat enough, then please remember none of what you read below is investment advice and please DYOR 1. If you missed them, here are some handy links to part (i) where we looks at expenses and part (ii) when we looked at income, net worth and savings rate.
Here we go then…
how to measure portfolio performance?
I am deeming my investment portfolio to be anything where I am buying stocks and shares and where I get to decide roughly what I am buying. As stated above all this boils down to buying some Vanguard funds and ETFs. Pretty boring really, I’m certainly no day trader, (phew)! These are either wrapped in an ISA or in a SIPP to keep tax affairs simple and any gains out of the grubby mitts of that tax dude. Unfortunately we are no where near to filling up a couples ISA allowance of around £30K/year yet, but at least that keeps things simple. I’m not counting pensions in with this initial performance because that is on autopilot and there aren’t many choices for what you get invested into, but do a brief evaluation on that separately below.
The next question to arise was how exactly to track the performance? After a bit of research I decided to have a pop at Monevator’s Unitization method 2, who has a really good tutorial on how to unitize your portfolio here 3.
I also thought I’d just measure the percentage gain or lost in monetary terms after taking out the contributions, as a check against the unitization method. It turns out that the two methods resulted in very similar figures:
Monetary returns: -2.99%
Unitized returns: -3.08%
So not a great year overall but also not unexpected given that the FTSE100 started the year at 6566 and finished on 6274 (a 4.45% loss), not to mention international markets generally taking a beating. And obviously the good news is that whilst still firmly in the accumulation phase lower markets means more units purchased per £ so it’s all good… for us… for now!
Important note: In actuality, I missed the figures for January so these figures are actually from the end of February to the end of December 2015 returns. Given that the FTSE100 was at 6946 on Feb 27th, I am thinking that a negative return of 3% doesn’t sound all that bad, after all, compared to the 9.67% loss the FTSE100 incurred!!!
Anyway, let’s have a look at how those headline figures broke down and how I came to them shall we?
I calculated the return on cash for each part of my portfolio with the following table:
Now you can pretty much ignore the first two columns as they are nonsense for what we are trying to measure. I guessed they were kinda useful to tell me roughly how much I’ve actually put into the ISAs/SIPP though so I left them in. Then we have a Total Contribution column which I just added up manually from my records throughout the year, and then worked out the absolute gain or loss in pound sterling in the next column. Still with me? The final column then works out the percentage gain or loss after contributions have been taken into account, by using the formula:
= Change in Absolute value / ( Start of year value + Contributions )
I think that seemed like a fair way of calculating that but if anyone has any other ideas let me know!?
Anyway as you can see that means a total loss of -2.99% for the year, as mentioned above!
The portfolio consists of 4 different investment vehicles:
- Cofunds ISA (set up via moneysupermarket) – A bright eyed TFS set this up way back in 2013 when he had just heard about FI and investing and didn’t have a clue what he was really doing. It didn’t exactly do great this year but I can’t really be bothered to switch it across to anything else as it will hopefully just be a very small part of the portfolio in years to come! (Maybe I should just bite the bullet and tie up the loose ends now though!? Hmmm…. *Scratches chin in thoughtful manner*). I won’t go into exact allocations but there was a FTSE all share index fund, a US index tracker and, bizarrely, a Japanese one as well. No Vanguard though (I don’t think it was offered on this platform. Pah!)
- Youinvest ISA – This is Mrs T’s ISA although she kindly lets me pull the strings on it. Only a slight drop in this one due to some
wellluckily timed purchases. All Vanguard in this one
- Charles Stanley Direct ISA – This seems like the best platform for an ISA portfolio of small size and infrequent trading from what I can tell, though don’t take my word for it and work it out for your own situation using Monevator’s lovely table here. They have a good selection of Vanguard funds and ETFs and it seems really easy to use. I like it! Again I managed to buy when the market was slightly lower it seems in this ISA and so actually eeked out a slight gain.
- Best Invest SIPP (plus cash held in SIPP) – I’m not quite sure whether Best Invest are de facto the cheapest broker for a small SIPP but it’s certainly up there. I like the website and it has a good selection of Vanguard funds and ETFs. Unfortunately I put a large chunk of money in just before the end of the tax year in April (to claim the tax back for the 2014/15 tax year 4) when the FTSE 100 was towering around 7000, so this accounts for the bigger than loss compared to the other accounts. Slightly annoying, damn right Mr! But considering much of the contribution was a free tax bung, I’m sure I’ll get over it 😉
According to Monevator:
Admittedly, trying to retrospectively see your unitized performance over previous non-unitized years is a nightmare.
I *guess* that is what I’m trying to do here but at least I can declare 2015 as my “year zero” which makes things a lot easier. The crap thing is that I only have rough dates on when I pumped new money into my fund, and the fund values most probably do not match up exactly as to when I made the contributions, as I was not thinking about this sort of thing at all back. So it’s not going to be all that accurate! However I reckon it’s good enough to get me started.
The next thing I needed to do was decide on the unit starting price. Over to Monevator yet again:
The first thing you need to do is to decide what one unit in ‘your fund’ is worth…
Many people choose £1.
I chose £100 for egomaniacal reasons.
£100 it is then!
Then I made a new spreadsheet table with months of the year and mapped out roughly when contributions went into the “fund” and therefore how many units were bought in any given month, along with the new total amount of units held at the start of each month, and the corresponding unit price. This was the final shindig (click on the image to super size it if you can’t read this tiny ant writing):
As you can see I also recalculated the monetary return in this table just as a sense check and it came out again at 2.99%, and as mentioned before the unitized return was 3.08%. The fact that the monetary return was ever so slightly better (or “less worse” is probably a better term) means that I bought slightly lower than the unitized return would suggest (I think). Either way a tenth of a percent is not worth talking about any further than that!
I also had a quick look at how my pension was doing just out of interest. I only worked this out in monetary terms because unitization seemed a bit pointless really. I don’t have much say in what gets bought and when, so it’s not worth me stressing out too much about, but here it is, for what that’s worth:
-9.18%!?!? This seems really rather shite considering the FTSE only dropped around 4.5%. I guess the funds have higher charges and are invested in weirder shit that I don’t know about. It just goes to show that barring getting your employer match with your workplace pension, you are best off putting the rest into a DIY portfolio to avoid fees and having more control. I would like to do some more analysis on why this has been so poor, but I think that is most definitely for another post in the future (I have information on the underlying funds so I could benchmark against that and try to work out how much fees are eating away at the returns, as a starter for ten…)
And that’s that! For my first ever yearly investments update it feels a bit, well, “meh”!
I didn’t make any gains, but then I doubt many other index investors did either. The drops in January this year have been quite exciting and I’ve made a few more purchases at lower prices, so hopefully we’ll see an overall gain next year.
Although if not, again, time is on our side so it’s neither here nor there!
We’re in this for the long haul, after all…
How did your investments do in 2015!?
Feel free to brag, boast, or reveal your pain and shame in the comments below!
- Do Your Own Research! ↩
- I don’t think he invented it but that is where I first read how to do it. Shout out to weenie who put me onto it in her post here though! ↩
- The comments are also well worth reading for a bit of extra insight! ↩
- See my guide on how to claim your SIPP tax back here if you are a higher rate tax payer, and how to register for tax self assessment here! ↩