Quarterly Returns – Q2 2021

Quarterly return posts supplement my monthly Financial Dashboard, covering investments in detail and looking at my yearly targets. Here I track purchases and sales, document progress against my (in progress) investment strategy, and discuss re-balancing and changes over time.

A bit late with this update, as during the past quarter we’ve had a new arrival in the FireShrink household and we’re pretty tight for time these days. I write this while the rest of the household nap, sterilisers and washing machines whirr, and test match special plays softly in the background. We had cash-flowed the possible expenses over the next year and we’ve received a huge number of kind gifts from friends and family, but nothing had quite prepared us for events of the last couple of months. Exciting times that mean investment plans may get put on hold, and plans changed.

Q2 Returns:

  • Cash Accounts £13,860 (+£1,760)
  • Investments £11,600 (+£1,950)
  • Property £52,100 (+£3,100)
  • Cars £2000 (no changes)

Continued steady growth, well on track for my 2021 targets with an average 40% savings rate. I’ve been really targeting reducing my credit card debt amongst the routine investment, paying off between £200-500/month, with a plan to clear it in the next few months – I have a few invoices for locum work which will cover this. I’ve continued to put away £250 in cash/month, building the emergency fund further in the Principality Thank You Saver, which is a 1.4% regular saving offering for NHS workers in South Wales (1).

Investments:

Deployed cash ratio in investment accounts
Active/ Passive investment split

Core/ Satellite Passive/ Active Split

I’m not paying in to Freetrade for this years ISA, so all activity in that account has been churn on the active side (fancy a free share? Sign up to Freetrade using this link, and we both get one). I sold out of GME with a return on investment of ~160%. Those funds went through a succession of memes stocks (I was browsing WSB a lot at the time), with a slight loss on NEE (-6.5%) and gain on INO (+38%). It’s now in Coinbase (COIN), bought at £164/share (currently +14%), and UWMC, bought at £6.87/share (currently -20%). My lessons from this quarter are in the madness and profit of crowds, and that I really do not have any particular skill in the markets.

For the 2021 ISA I have returned to Vanguard, adding £400/month to my old friends their Dev World ex-UK and Emerging Markets accumulation funds. I need to look further at how I’m calculating my global allocation split, as I think my current system is over-weighting me to emerging markets even with my aggressive tilt. I’ve also been persuaded by Monevator’s recent series on emerging market bonds (2), however the most recent article points out now might not be the best time to open that investment avenue (3).

While I’m continuing to invest and act passively I feel generally concerned about the state of the market. US and UK housing markets seem peaky, with marked rises in house prices in the UK which don’t seem entirely sustainable. I expect them to flatline rather than fall, which isn’t really an issue for me. Equities markets also seem frothy – those all time high P/E ratios haven’t gone away. The NASDAQ and S&P500 have been on an absolute tear since the lows of March 2020. How long can this remain? If/when we see a fall, I am concerned about what ammo central banks and governments have in their locker, given they’re yet to unwind 2020s financial stimulus. Bonds remain at all time lows, with crappy returns. What are long term options?

A gamble play is crypto, so I have bought some Ethereum. My logic is that gold and silver are long-term stores of value, but have been on bull runs for years as bearish investors load up. I am not convinced that gold or silver would negatively correlate in the face of a sustained combined equity/bond recession, and I wonder if crypto might. I don’t think cryptocurrencies are going away. I’ve been following Bitcoin since 2010, but never had deployable cash or a use case for it. Ethereum seems to be a much more functional coin, and I feel we have crossed the threshold where it is only likely to get more widely used. It’s therefore partly a 20-year play on growth, and partly a hedge against a BIG crash. It’s beer money, and will test the correlation theory in event of future recessions.

Happy summer everyone,

The Shrink

References:

  1. https://www.principality.co.uk/savings-accounts/everyday-savings-accounts/thank-you-online-saver
  2. https://monevator.com/emerging-market-bonds/
  3. https://monevator.com/bond-credit-risk-valuation-rule-of-thumb/

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