This is a review of my investment trading activity since the December 2019 UK election. I see myself as mostly a buy and hold investor but I have made some trades in the last twenty-three months. I traded in order to re-position between the UK and non-UK stock market, to reposition between income and growth holdings, to exit certain holdings, and to absorb inherited funds. It looks like my trades have had somewhat mixed results.
- In December 2019 I switched out of part of my existing holdings in one global equity trust and one Asia Pacific equity trust and into one new holding of a UK equity trust. All of these are equity income investment trusts managed by the same investment management company. I have been disappointed by my choice of new holding and I am now gradually switching out of that UK equity income investment trust and into a UK smaller company growth trust. I switched in March, June and September 2021 as part of my new strategy of building up my growth holdings. I have compared the share prices at 29 October 2021 of what I sold in December 2019 and what I hold now. I have ignored any dividends received in this analysis. Based on that I have made a loss of 8.70%. My hope that the UK market would recover relative to international markets has not so far been realised. Maybe my switch for growth will in time recover this one.
- In April 2020 I received some inherited investment trusts into my dealing account. I sold four UK trusts, one global trust and one Asia Pacific trust. I kept and added to another global trust and switched the remaining proceeds into a new Asia Pacific holding. Alongside this I sold my existing holdings of those same global and Asia Pacific investment trusts within my ISA and switched into UK trusts. Overall, this was just a portfolio tidy up, with sixteen different trades with a slight shift to international and Asia Pacific equities. It also enabled me to realise some taxable losses as part of managing my potential liabilities to capital gains tax in my dealing account. Comparing the share prices now, I have broken even on this one, with a tiny gain of 0.07%. This was really a tidy up exercise so I am satisfied with this outcome.
- In June and September 2020, I sold out of a long-standing UK holding in my dealing account. It had performed poorly, it had intimated it was to cut the dividend, losing its dividend hero status, and it was appointing new managers but continuing with a value investment approach. I spread the proceeds between four existing holdings, two in the UK one each in the global, and Asia Pacific sectors. Comparing the share prices now, I have made a loss of 18.29%. My allocation to a rival UK value trust shows a loss of only 4.65%, but my non-UK allocations show a loss of 14.21%, and my allocation to a UK trust with a quality growth approach is showing a loss of 37.30%. That new holding only grew by 5% whereas the new managers of my former holding achieved growth of 66%. UK trusts investing with a value approach have prospered over the last year. For the one year to 1 November 2021 the UK equity income investment trust sector averaged a 39% share price total return, with individual trusts returning between 7% and 106%. Many of those showing an above the average return are known for a value investment style.
- In February 2021 I switched half of my holding in a UK commercial property real estate investment trust (REIT) into a rival trust in that same sector. I had been disappointed by a dividend cut by my existing holding, but I was thoughtful that my new holding might now cut its dividend. My new holding has not cut its dividend so far and has since been uprated by the market. Comparing the share prices now, I have made a gain of 18.40%. I’m thinking that maybe I should have switched all of my holding rather than half of it.
- In March and April 2021, I sold out of another long-standing UK holding in my dealing account. I switched into two rival holdings managed by the same managers and/or the same management company that offered a higher dividend yield. One of these purchases covered my 2021/2022 ISA. The sale also enabled me to realise some taxable gains as part of managing my potential liabilities to capital gains tax in my dealing account. Comparing the share prices now, I have made a loss of 3.36%. Both new investments have disappointed so far, especially the ISA one, compared to the former holding.
- In April and June 2021, I sold parts of my holding in an Asia Pacific equity income trust and switched into an Asia Pacific small company trust as part of my new strategy of building up my growth holdings. Comparing the share prices now, I have made a gain of 10.70%. That is an encouraging start.
| Trades | Investments sold* | Investments bought* | Gain/(Loss) | Gain/(Loss) % |
|---|---|---|---|---|
| 1 Switch to UK | 11.73 | 10.71 | -1.02 | -8.70 |
| 2 Inherited funds | 40.10 | 40.13 | 0.03 | 0.07 |
| 3 Sell holding | 13.05 | 10.66 | -2.39 | -18.29 |
| 4 Property switch | 8.98 | 10.63 | 1.65 | 18.40 |
| 5 Sell holding | 22.35 | 21.60 | -0.75 | -3.36 |
| 6 Switch to growth | 3.79 | 4.19 | 0.41 | 10.70 |
| Total | 100.00 | 97.93 | -2.07 | -2.07 |
*Value now: Index based on the total current value of investments sold = 100.
Adding all that up I have a net loss of 2.07% on these trades. That represents a loss of about 0.86% of my average portfolio value over the period. It also amounts to about three months of my draw down expenditure. That is disappointing but not a disaster.
What can I learn from this analysis?
My worst outcome (3) was a result of selling an investment as it bottomed out at the end of a bad run and before new managers and a market recovery favourable to the value style could turn things around. With hindsight switching wholly to a rival trust in the same sector and with a similar investment style would have mitigated my loss. My next worst outcome (1) was a result of a sector recovery not happening. My best outcome (4) was a result of buying a trust just ahead of it being re-rated by the market.
This analysis shows me that my trades had varying outcomes. I shouldn’t expect to get it right every time or even to come out ahead on average. The future is unpredictable. This was interesting to review but the more important review is how overall my portfolio is performing over the longer term. I won’t let this review put me off changing my portfolio when I think it is needed but it does perhaps underline my preference to be mostly a buy and hold investor.