Still bags of uncertainty being thrown at the markets with:- the turmoils of the Middle East; Japan's ongoing Nuclear problems and; Eurozone sovereign debt with Portugal in the firing line and Spain not far behind. Ireland also continues to throw fuel onto the fire with news of bank capitalisation requirements following stress tests.
It looks like the results of Ireland's banking sector stress tests and Portugal's decline were the main reason for the FTSE's capitulation in the half hour auction period following last nights (Thurs. 31st March) 4:30 trading close (thisismoney.co.uk: FTSE preview: Gains ahead of US job figures ).
The ammunition and detail being provided by: the £21bn figure required to re-capitalise Ireland's 4 major banks and; the interest rate on Portuguese borrowings remaining above 8% (earlier post: Random musings: Portugal).
So, all in all, not quite the end of tax year "technical" rally and ISA season that I had been hoping for at the turn of the year but, following the gyrations between profit and loss that the portfolio has seen in March, I had been expecting to record a loss.
Instead, I find that, as with February, I am able to report a wafer thin gain of 0.22% over the month against the FTSE's decline of -1.27%.
If memory serves me correctly then at one point in the month the portfolio was approx. 5% down on February's close.
Looking deeper the monthly performance serves to highlight a couple of interesting points, such as:
- markets don't go up in a straight line and, despite being both up and down in the period the portfolio's performance has generally been flat;
- dividends. In this period, 4 dividends were received which contibuted to the majority of this month's gain.
On the first point, picking month end measuring points just seemed to be logical but 2 different points could easily have recorded a loss or even a handsome gain (from trough to peak) - but, to what end?
In trying to understand what drives markets I have often made reference to herds; investor behaviours; and contrarian strategies.
In turn, one should also try to understand one's own behaviour so it is interesting to look back and question how I felt about my investments when they were falling (albeit with the market), and compare that to how I feel about them now (or when they were rising).
The next question to ask, is what, if anything, has fundamentally changed about the future prospects of any of the investments in my portfolio.
If the answer is nothing, then the short term swings indicate nothing other than short termism or a general lack of optimism by many investors.
I would go further to suggest that the most successful investors understand this reflex fear and weakness in most of our make-ups and use that to their advantage when choosing buying or selling opportunities (oversold or overbought situations).
Looking at dividends then which, at times, can seem to be a very minor reward relative to the growth prospects and capital gains of some of the markets more exciting stock. I have tried to make clear that the performance of the FTSE recorded here excludes dividends, but the portfolio's performance includes dividends.
As a consequence of them seeming a minor return, they are often underestimated, particularly by new investors, but serve a very real purpose.
Realised in your account, cold hard cash is easily measurable and in general, has come out of a company's actual profits, rather than promises and speculations on growth from snake oil salesmen with their new paradigms!
Looking back at the height of the dot.com bubble, all sorts of predictions on growth and sales were made by new companies; their brokers; and their investors. Primarily, this was in order to raise capital and investor expectations but how many survived the inevitable cash-burn long enough to make a profit (never mind a profit in line with those growth expectations!).
In turn, the receipt of dividends into a portfolio is incremental and a magical accumulator effect can develop when dividends are re-invested in the market to generate compound returns (see earlier post: How to make a Million (by the time you are 65)!).
Onto the portfolio then:
| Forecast | 1 month | YTD | 15 Month | ||||||||||||
| % holding | Div. yield | % gain | % gain | % gain | |||||||||||
| R-R | 29.04% | 2.79% | 0.32% | -0.64% | 28.02% | ||||||||||
| National Grid | 18.55% | 6.15% | 4.03% | 7.41% | 9.44% | ||||||||||
| Invesco Perp. High Inc. | 6.95% | 0.00% | 1.85% | 1.31% | 13.52% | ||||||||||
| Aviva | 5.62% | 5.80% | 0.00% | 18.68% | 24.22% | ||||||||||
| BP | 4.72% | 4.28% | -8.23% | -2.48% | 4.30% | ||||||||||
| Apple | 3.93% | 0.00% | -0.17% | 4.81% | 78.89% | ||||||||||
| IG Group | 3.43% | 4.28% | 1.87% | -10.47% | 51.76% | ||||||||||
| BG Group | 3.21% | 0.95% | 3.64% | 19.68% | 42.29% | ||||||||||
| Centrica | 2.90% | 4.63% | -4.35% | -1.90% | 3.00% | ||||||||||
| William Hill | 2.39% | 4.82% | -5.79% | 5.86% | 5.68% | ||||||||||
| Morrisons | 2.47% | 3.87% | -0.29% | 3.14% | 9.08% | ||||||||||
| Scottish and Southern | 2.47% | 5.87% | 1.78% | 2.94% | 9.57% | ||||||||||
| Microsoft | 2.31% | 2.24% | -3.36% | -11.78% | 2.33% | ||||||||||
| BAE Systems | 2.30% | 5.66% | -1.22% | -1.55% | 1.77% | ||||||||||
| Tesco | 2.16% | 3.77% | -5.74% | -4.49% | -4.49% | ||||||||||
| Cisco | 1.82% | 0.00% | -6.51% | -17.76% | -19.30% | ||||||||||
| Cash | 5.74% | 0.00% | 2.51% | 1.10% | |||||||||||
| 100.00% | 3.41% | ||||||||||||||
| 1 Month | YTD | 15 Months | |||||||||||||
| Portfolio gain (incl. Dividends) | 0.22% | 2.07% | 29.03% | ||||||||||||
| FTSE gain (excl. Dividends) | -1.27% | -0.89% | 9.33% | ||||||||||||
| Transactions: | |||||||||||||||
| 01/03/2011 | Dividends | IG Group @ 5.25p per share | |||||||||||||
| 15/03/2011 | Dividends | Microsoft @ 8.36p per share | |||||||||||||
| 25/03/2011 | Dividends | Scottish & Southern @ 22.4p per share | |||||||||||||
| 28/03/2011 | Dividends | BP @ 4.3p per share | |||||||||||||
| Sterling : Dollar exchange rate = £1: $1.60767 as at 31/03/11 | |||||||||||||||
And, the graph showing relative performance:
 |
| Relative performance v. FTSE 100 (double click to enlarge, back to return). |
As mentioned in previous posts: BP; IG Group; and Cisco are driving most of the recent underperformance through a combination of poorly received results; doubts about growth; and legal issues.
Sterling also remains relatively strong against the dollar.
I fully expect the portfolio, and the FTSE, to tread water through the middle of the year "doldrums", unless significant events unfold, but will keep taking the dividends and look towards the longer term promise of portfolio gains (fingers crossed!).
Links to previous Portfolio updates:
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