So that’s it, then. Farewell, 2019.
I don’t know about you, but my portfolio performed very reasonably over the year.
The FTSE 100 began 2019 at around the 6600 mark, and climbed to almost 7700 by late July. Brexit nerves and political uncertainty then took the shine off things a little – as did Trump’s trade war – but we’re still ending the year at a very reasonable level.
Individual shares have performed even more strongly, of course. In my portfolio, Greggs is up a stonking 80% over the year. IMI is up 29%. Tesco is up 33%. Schroders is up 25%. Marston’s up 36%. United Utilities up 29%. Legal & General up 36%. And so on, and so on.
Of course, there have been disappointments, too. I was saddened to see Greene King fall into Chinese hands, while Centrica and Imperial Brands have had a torrid year. I thought that Morrisons and HSBC would turn the corner this year, but no.
A year of transition
Of course, as regular readers will know, I’m not really in it for the capital gains – although naturally, I’m not complaining about this year’s outturn.
Instead, as an income investor, in almost every case I buy shares for their dividend yield and dividend growth prospects.
True, some longstanding members of my portfolio – HSBC and GlaxoSmithKline, for instance – are on something of a dividend growth hiatus at the moment. But in the meantime, they’re still throwing off very reasonable dividends.
And this year – 2019 – has especial significance for me as an income investor. It’s the year that I turned 65, and began using some of that dividend stream to live off, rather than investing in further share purchases.
Slowly shifting investment funds from index trackers and pensions has been a ten-year journey, but the heavy lifting is now complete.
Ten years ago, it was all very different…
It’s a journey that began in the dark days of very early 2009, when the FTSE 100 stood at a level of 3500, having fallen 48% from its high in June 2007, as the financial crisis began.
Within months of that heady high, investment bank Bear Stearns would collapse, to be followed by banks on both sides of the Atlantic. By late 2008, the global economy was in deep recession, and the mood was of darkening gloom.
In retrospect, it was the buying opportunity of a lifetime.
My Equitable Life pension, as I’ve written before, had largely shrugged off the collapse. Equitable Life had experienced its own difficulties almost a decade before, and the funds of its remaining investors were largely in government gilts and similar investments, which had been unaffected by the crisis.
I took the plunge, and moved the pension to a brokerage platform, closely followed by another pension investment. Meanwhile, with share prices on the floor, I ploughed whatever spare cash I could raise into my ISA.
In the crash, its value had almost halved – but each new additional purchase was now on a dizzying dividend yield.
What of 2020?
I don’t know about you, but I plan on doing exactly what I’ve been doing for my entire investing life.
I’ll be investing whatever spare cash is to hand, looking out for bargains and undervalued stocks, and doing everything I can to build a sustainable and growing income.
2020 will contain surprises and setbacks, I know: every year does. Things will happen that I didn’t expect. But – as ever – there will be opportunities, with bargains on offer for those with a long-term perspective and a willingness to ignore the herd mentality.
Moreover, I’ll be working hard to keep my investment costs as low as possible, making sure that I’m getting a reasonable deal from the brokerage platforms that I use. And that also means keeping the costs of investment ‘churn’ to a minimum: not for me the buying and selling costs of frenetic trading.
Finally, too, I’ll be making sure that the smallest possible proportion of my investing returns goes to the taxman. For those with an eye to tax efficiency, ISAs and SIPPs are superb tools.
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Malcolm owns shares in Greggs, IMI, Tesco, Schroders, Marston’s, United Utilities, Legal & General, Centrica, Imperial Brands, Morrisons, HSBC and GlaxoSmithKline. The Motley Fool UK has recommended HSBC Holdings, IMI, Imperial Brands, Schroders (Non-Voting), and Tesco.
Motley Fool UK 2020