My results were a bit like the game of 'snakes and ladders' (I think in the US it's called 'chutes and ladders') - up and down.
The overall picture for 2011 was pretty unexciting, with a slight fall in the value of investments (including reinvested income) of around -1%. However, income from the portfolio remained stable (at an average current yield of around 6%). This can be compared to the performance of the FTSE100, which was down 5.5%, with an average yield of around 4%.
I hope you did better!
I'll split the detailed results into sections (in line with the DIY Income Investor Income Pyramid approach) and give a little commentary on each:
- cash and savings
- dividend shares
- gilts (UK government bonds)
- corporate bonds
You will find details of the portfolio above on the 'Portfolio' tab.
Note that all our savings and investment income is tax-free.
Cash and Savings
The trend in available interest rates has been downward and, as I didn't expect this trend to change, I have opted to tie up any available cash up for longer periods, in return for higher returns. The interest rate on my current account remained broadly unchanged, although the bank dropped the highest tier rate.
The average rate on savings bonds was around 4.7% and other cash and savings around 2.8%.
This is the most volatile part of my portfolio and some ill-judged purchases (like Cable & Wireless Worldwide) knocked the generally good performance of the more regular dividend payers. In fact, I sold a couple of dividend shares whose capital values soared. All-in-all my yield on dividend shares is only 3.5%, less than that of the FTSE 100.
My only (UK) government stock is the perpetual (undated) Consols 4%, which was yielding nearly 5% when I bought them - pretty good for something almost risk-free! Their yield has now fallen to just over 4%, meaning that the increase in their capital value is approaching my benchmark (of 5 years' income). I'm thinking about selling.
I have been adding to my corporate bonds over the year (as well as the similar preference shares and PIBS). No big change there - just nice returns (current yield of over 7.5%).
I did 'experiment' with two ETFs this year: one containing dividend shares and one based on non-financial corporate bonds. One went up and one went down, neatly cancelling each other out. I suppose that is good from the point of view of portfolio stability; not good from the point of overall returns, though!
So there you have the overall picture: portfolio value sliding down the 'serpents' (or 'chutes') of dividend shares but income racing up the 'ladders' of corporate bonds.
I'm still (carefully) buying interesting dividend shares (like Inmarsat) but I think the flavour of 2012 will be filling up on some of the nice yields available on corporate bonds - maybe even including the financials that everyone else is shunning? Apart from that, it looks like more of the same for 2012!
Anyway, good luck for the coming year - and do let me know about your successes in 2011 and any tips for 2012.
I am not a financial advisor and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.