Monday 4 August 2014

Digital Detox - and the 'ETF Effect'

DIY investors of all flavours probably find it difficult not to check the latest prices of their investments - I know I have that problem. Most mornings I sit in bed, on my laptop, and wait for the London market to open - or more accurately, I wait for 30 minutes after the market opens, given the delay that is inherent with free-of-charge market data.

So, the annual holidays - being out of touch for weeks on end (this year, 12 days on a cruise around the British Isles) - is a bit of a challenge to this probably slightly compulsive behaviour. But being out of touch is like a digital detox - for a data junkie.

Yes, I could use a Smartphone and, with roaming data services, keep in touch with the market wherever I happened to be. But then again, it is good to 'switch off' every now and then.

Being 'away from it all' has a major advantage; it allows you space to reflect on the strategy that you are employing - putting it into context, and perhaps allows some new ideas to bubble to the surface. For me, the biggest lesson that it brings home is the need to invest for medium and long term. Although I do invest in the riskier regions of the stock market, I do try to avoid those situations that seem to present more extreme risks - not always successfully, of course.

So coming back to the data stream after a period away is always a mixed experience. Have there been any disasters?  Or has one of my holdings hit a winning streak?

The first day back was Sunday, so there was no 'live' data - just the closing prices from the previous Friday. On the basis of these prices, the latest valuations of the DIY Income Investor portfolio looked very satisfactory, with the portfolio hitting a new record high. The value of the portfolio has stormed ahead by around 1.7% in July; however, the increase in value since the beginning of 2014 is only around 9%, which is a bit disappointing (considering that you can get an apparently virtually risk-free 6.1% return on cash lending with Ratesetter).

So, no disasters, which is, of course, a major relief. But also no star 'risers': the portfolio seems to have just grown in value 'across the board'. In the wider scheme of things, this is akin to a gentle 'pat on the back' for the portfolio strategy.

And lessons learned? Perhaps just a confirmation that owning a core of income-oriented ETFs does seem to provide the basis for a less volatile portfolio (and less stressful holidays) - but at the cost of lower returns. These ETFs currently make up one-third of the portfolio - a medium-term goal is now to raise this proportion to 50%, assuming I can find some reasonably attractive yields in the worldwide range of bond and dividend income ETFs.

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.


  1. Hey DIY,

    You can get 6.4% on rate setter. They have a useful supply and demand statistic on their website. Ive not tried to get higher than 6.4% (5 Year)


  2. Mmm ... virtually risk-free perhaps ... but I wonder how risk-free it will stay when interest rates begin to rise and households start to feel the pinch? A peer-to-peer loan might be the first thing to default on, once the mortgage arrears begin to mount, and the Provision Fund may come under pressure ...

  3. I use Ratesetter as well but have not been brave enough to go for the 5 year rates, preferring to stick with 1 and 3 years. I'm pretty sure that any interest rate increase will be very small to start with, but the world's a funny place. General election, possible referendum on leaving EU, ISIS seizing Iraq oilfields, tension in Ukraine and China sea, US debt....etc. Know any good 3 year cruises with all internet banned? ;-)