2020 plans

Having been somewhat unimpressive with respect to my 2019 plans, I've resolved to do better in the remaining six months of this year.  The plans are broadly similar to last years with a couple of small changes.  I'm dropping the 'fix the climbing frame' objective.  I'd still like to fix it - but it's low priority.  Linda has made a specific request - so I've got a new objective added.  Here they are:

I'm retaining this objective from last year: I have a shed in the garden, in a sorry state of repair that requires some significant attention.  I plan to refresh it with new cladding, put in new windows, install some insulation and electricity and use it as a workshop and man cave.

I've made great progress in the garden over the past few months - but there seems to be a unending list of things to do.  Specifically this year, I want to continue clearing the massively overgrown hedgerow along the border where I cut down the oak tree and replant a fruiting hedgerow this autumn.  I also want to clear the area pictured in the photo - believe it or not, there's a patio under those brambles!

A special request from Linda.  In Israel we often found ourselves sitting  beneath a grape vine laden pergola.  She would like something similar for our garden.  Our grapevine is currently out of control, covering a collapsing fence.  I'm sure there's something I could do to make it better - not too sure exactly what.

I am intending to continue walking and the plan is to complete another two National Trails before the end of the year.  I'd have hoped to have had a couple done by now - but Covid-19 has hit those plans.

My retirement toy was a laser cutter.  Last year I thought it might be good to try a small side hustle and sell some designs.  I think that was over ambitious.  This year I just want to use it a bit more - probably an autumn - garden, walking and travel takes priority right now.

Did pretty well with the travel objective last year, so I'm keeping this unchanged.  My target is to ensure that each month will contain at least one weekend (or more) away.  It has to include Linda too, a solo weekend LARPing or walking won't count for this goal.  Again Covid-19 has hit the first half year - but July looks do-able.  Target is at least six trips by the end of December.

Finally, I think I need to be a bit better at keeping a blog - it's not really much of a blog if there's a six month gap between posts!  Target is at least two blog updates a month.  Am I being over ambitious given my track record so far - or is this one gonna be the low hanging fruit.

At the end of the year, I'll give myself a score out of ten for each objective and review how I've done...

Pension Review - One Year Gone

I described my plan for income during retirement with a self invested pension last year.  You can see what I wrote here: Further Pension Musings

After a year, let's see how the cunning plan is going.  The current investment split looks like this:

The pie chart at first glance looks virtually the same - but the percentage splits are slightly different.  The SIPP is now a smaller percentage of the overall stash, with the other three pots all slightly increasing.  This is exactly what I would expect to see.  I started drawing down from the SIPP in September.  This is providing the bulk of my income - topped up by dividends from the VCT and other investments.  The ISA remains untouched, with dividends being reinvested. 

Overall, the dividend income has more than covered my expenditure, with the excess going towards additional ISA contributions.

However, Covid-19 has happened.  Before I retired, I tested my portfolio against a number of 'What if' scenarios.  What if the dot com crash of 2000 occurred again?   What if the financial crash of 2008 occurred again?  What if the UK had a deep recession triggered by Brexit (or some other cause)?    And so on.  In each of them I was satisfied that the mix of investments I had would be OK overall.  I did not consider a world wide pandemic that would have an economic impact across almost every industrial sector and every geography.  I think it's fair to say that 12 months ago, no one could have predicted we'd be in the situation we're currently in.

This has impacted me in two ways.

First, the value of my stash has dropped considerably.  From 17th January to 23rd March, the stash lost over a third of it's value.  Since the 23rd March, stock prices have partially recovered, and as of today, I'm about 14% down from the pre-Covid valuation.  But the valuation isn't something that I'm overly worried about.  I explain why here: Chickens and Investing

Second, lots of companies have stopped or suspended paying dividends.  As an income investor, this is far more worrying and has a very real impact on me. Eleven companies I'm invested in have stopped dividends altogether, a further four have reduced their payouts and I anticipate that as results come out in the months ahead, more will follow.  There's not much I can do about this.  There is reason to be optimistic that this is temporary and there will be a resumption of profit and dividends as lock down restrictions lift.  Many of the companies are still operating profitably and are simply being prudent at this time.  On the other hand, some companies are sustaining real economic damage during this period and although they may resume dividends at some point, they may well be at a lower level.  There are three things that mitigate my concern: 1) with lockdown, our expenditure has also dropped; 2) Linda is still working and my retirement planning was always that we would be able to afford for her to stop working too, so while she works we have a margin of safety; 3) my portfolio has little direct exposure to some of the most impacted companies (airlines, cruise ships, holidays,  travel, restaurants).

I'm sure the year ahead has more surprises in store for us and I'll be paying close attention for potential investment ramifications.

The Virtual Portfolio update

Last year, I introduced a virtual portfolio, that mirrors my core investments.  It illustrated how you could invest 100,000 pounds for long term income.  This is what it looked like:

During the year the BMO MSCI UK Income Leaders fund shut down and in January the value of the stocks within the fund was returned to shareholders.  The settlement price was 2644.57p a share giving me £10,578.29 to invest elsewhere.  I decided to split the proceeds 50/50 between Edinburgh Investment Trust, an income focused fund, and Royal London Stirling Income, a commercial bond fund, giving me 867 shares in Edinburgh IT and 4366.5 units in Royal London.

The value of my portfolio didn't really move much, drifting slightly upwards towards the year end.  Then, along with pretty much everything else, it dropped dramatically due to Covid-19 and has subsequently partially recovered.  The graph below tracks the portfolio over the past 12 months:

It is worth noting that because I'm just plotting the month end valuations, a lot of market volatility has been removed.  Specifically, you cannot see the high point in January or the low point in March.

There's been some further recovery in June and right now it looks like this:

Overall, in terms of capital preservation, I'm down 13%, but given the circumstances I'm OK with that.

The other aspect to consider is income.  The portfolio as described above delivered £5,140.77 in dividends in the twelve months: 1st June 2019 to 31st May 2020.  This was £291.83 more than predicted a year ago.  The increase was driven by two things: 1) increased payouts from the two Vanguard funds, Phoenix and Merchants; 2) effect of the closing BMO after having received 3 out of 4 dividend payments for the year and buying investments that had only made 2 out of 4 payments for the year so far.

Looking ahead, if all seven investments were to pay the same dividends in the next year, as they did last year, the income would be £5,042.16.  However, this is not going to happen.  Both the Vanguard funds are tracker funds and the dividends are a direct reflection of the payments received from the funds investments.  I know that many companies are in trouble and have stopped dividend payments.  This will, for sure, impact the payments I receive from these two funds.  I have absolutely no idea by how much, I will only know when the dividends come in.  Phoenix Group looks pretty secure to me and I'm confident that won't be cut.  Hendersons, Merchants and Edinburgh are all investment trusts with very long records of not having cut their dividends, even through previous stock market crashes and recessions.  They have reserves which they build up during good years, which can be used to maintain the dividend during bad years.  This is going to be a bad year, so the question is - will their reserves be enough?  I don't know the answer to that - but if there is a cut, hopefully it will be a small one.   Finally Royal London Stirling Bond fund - again, I don't really know the impact.  The fund is invested in company bonds, so if those companies go bust the fund looses capital and income.  I wouldn't be surprised if there's some impact to the dividend, but I wouldn't expect it to be too dramatic.  A company can choose to stop paying dividends, but it still has to pay interest on the money it's borrowed.

What ever happens, the year ahead will certainly be interesting from an investing perspective.  Will my investments perform well enough for me to continue in the manner to which I've grown accustomed or will I, next year, be looking for part time work at my local supermarket?  I'll let you know.

One Year Gone - Time for an Annual Review!

I can't believe it's been a year already.  It's scary how time seems to accelerate as you get older - I know that's the case, but I'm still surprised when I experience it myself.  When I started this blog, I listed six things I'd like to achieve in 2019, with the promise of a review at the end of the year.  There were also two unwritten, but implied, objectives - which I'll mention too.  You can see my objectives here: Plans for 2019 Before digging into the detailed review, a quick overview of the first year.

It has not been as I'd expected.  First I seem to be far busier than I thought with far more on my 'to do' list each day and at the end of the day, less done than anticipated.  But that's OK, because there is always tomorrow.  Overall it's been good.  I've spent more time outdoors.  I'm living a more laid back existence - always ready to stop what I'm doing when Linda or Cordelia utter the magic incantation of "do you fancy a cup of tea".  Any regrets about retiring - absolutely none!

I've spent far more time in coffee shops than I ever used to pre-retirement.  My dad recently moved to Bracknell and previously I met him in town for a coffee on a Saturday.  Now we meet two days a week.  Plus, of course, I'm often in town with Linda and I'll also slip in for a quick coffee when I'm by myself, for a relaxing break with a newspaper.  In fact, if you're ever in Bracknell, there's a reasonable chance you'll find me if you pop into Brown Bag.  Of course Covid-19 has bought that activity to an abrupt halt!

And speaking of Covid-19, it would be impossible to review the past 12 months without a mention.  The response to the pandemic has literally changed everything.  In a year of significant events, this trumps all else.  Brexit becomes a footnote.  A new prime minister and a game changing general election seems yesterdays news.  My personal plans for travel and completing National Trails have both been put on hold.  My finely honed retirement income plan has taken a hit.

Back to the review.  First, the two implied objectives.  From the first entry of the blog, it's clear that my intent was to make regular updates - however that clearly hasn't happened.  I have no excuse - other stuff distracted me and the blog kinda slipped off my radar.  Oh well - let's see if I can do better over the next 12 months. The other implication was that my 2019 plans would be reviewed at the end of 2019 - again a clear failure on my part, but better late than never, so here we go....

Objective 1: The Shed 

First major failure.  Nothing has happened.  Well almost nothing - I did get Cordelia to clear the pile of rotting firewood that was leaning against the side of the shed, so the shed looks very slightly neater, but nothing that I can take credit for. Score 0/10

Objective 2: The Climbing Frame

Second major failure.  Nothing positive has happened.  A few more rotting bits have fallen off and brambles are growing up within the structure. Score 0/10

Objective 3: The Garden

The orchard, looking neater than usual!

A success!  I've spent a lot of time in the garden over the past year and several significant improvements have been made, including the areas mentioned in my objectives.  The gardening enthusiasm has continued on into 2020 and I'm pretty happy with how things are going.  For some more photos of garden progress click here: Garden Pics June 2020  Score 10/10

Objective 4: Walking

Mostly successful.  I walked two national trails: Hadrian's Wall Trail and South Downs Way and also completed the Three Castles Path.  However, despite walking two less national trails than intended, I also completed some other significant walks including the West Devon Way and the Galilee Trail which I feel slightly mitigates the national trail miss.  Walking in 2020 has taken a back seat due to Covid-19, although with lockdown measures being eased, I managed to get in a thirty miler on my birthday.  Score 7/10

Objective 5: Laser Cutting

Mostly unsuccessful.  I've done a few minor projects and some further improvements to the wargaming scenery I'd made, but nowhere near the amount I'd hoped and certainly not to a point of being able to sell anything.  Best project of the year - the advent calendar I made for Linda, lot's of brownie points gained from that one.  Score 4/10

Objective 6: Travel

A success!  From June to January, I've been away with Linda to the New Forest, Hereford, Exeter, Weston-super-Mare, Bogner Regis, Bournemouth, the Lake District, Gibraltar and Israel.  (I've also been away by myself, LARPing, with Cordelia to Plymouth and with Tazmin to the New Forest - but for the purpose of this objective, it only counts if Linda is with me).  Since the target was at least once a month, then I've over achieved in this one. Obviously for 2020 Covid has stepped in. Score 10/10.

Summary

So overall that's 31/60, not really very impressive and definite room for improvement.  My family were suggesting to me that my objectives were unrealistic but I don't think I agree.  What about next years objectives - well let's start with just one objective - come up with a list before the end of June.  That'll do for now.  My next post will be a one year review of the state of my pension - probably more interesting than I wanted it to be, given the impact that Covid-19 has had.