Monday 28 April 2014

Spring Cleaning: The Trilogy (Portfolio Sales)

After the original Spring Cleaning and the follow-up, Spring Cleaning Part Deux, the DIY Income Investor portfolio started to look more like a more effectively managed operation. Removing the bulk of 'legacy' losses dating from the time of the financial crisis in 2007/08 has refreshed the 'feel' of the portfolio - and by a quirk the overall net profit/loss position was reset to zero.

Although it seemed like a big step at the time - taking long-standing losses on the chin - it did not, in fact, change anything much. Since those 'spring cleaning' sales, the portfolio has hit new all-time highs in terms of both capital value and level of income generated. The net profit/loss in the few days since the sales is currently over 3% - although this clearly has little to do with the sales, which made up a small proportion of the total.

But it was not yet time to put away the yellow rubber gloves...

To recall, in order to deal with a behavioural gap in the DIY Income Investor approach (related to 'loss aversion' and 'anchoring') I am focusing currently on the ratio of capital loss to current annual income, putting a limit initially at 10 - in other words, when the capital loss exceeds 10 times the annual income, seriously consider selling it.

On that basis I have already cleared out RBS and LLOY - the two worst offenders. Now I've got a taste for it, so this time I was emotionally more ready to tackle a bunch of them. The latest 'disappointers' for the chop were:

One major associated benefit of these sales is to reduce the number of companies (with dividend shares) that I need to be aware of: this is now down to 14. And this will shortly be 13, when I decide whether or not to sell the rump of my Home Retail Group that is currently the sole remaining candidate on my 'sell' list.

[Sale prices: FGP. £1.29; WMH, £3.38; BARC, £2.49]

I am not a financial adviser 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.

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