The markets turned at the end of January - at least for my unusual collection of investments - and have provided three months of solid gains, totalling around 12%.
There are a couple of lessons I take from this....
The great recent results mean that the portfolio's poor results of 2015 (-3.3%) have morphed into a small gain of 2.7% for the Financial Year 2015/16. And 2016 is off to a great start - but it's obviously early days yet.
The first lesson is fairly obvious: markets go up and go down. This causes us problems as investors as we get unsettled when the value of our investments is falling - we think we have made a mistake (which may well be true) and all-too-often we rush to sell (usually at a loss). The key feature of the DIY Income Investor portfolio is that all the holdings generate income: usually this income stays pretty constant, no matter what the underlying price of the security does. So you can afford to wait and the income gives you a psychological support to continue holding something that has lost value. My advice, when times are hard, is leave it alone and do something else.
The second lesson is: you do not need to obsess over your portfolio. If you have made a reasonably careful selection of what to buy initially - and do not exceed a limit of 5% (of total portfolio value) for any single investment - it is unlikely that you will experience a catastrophic loss by NOT checking your account several times a day.
Of course, the selection of 'high-yield' investments (that is the basis of the portfolio approach) IS inherently risky - but my thesis is that these risks are over-estimated by the manic-depressive Mr Market. And, of course, sometimes things happen that need action from you. But usually you can go away and play - your portfolio should 'tick over' perfectly well without you.
The final lesson I draw from this little episode (holidays, followed by a nice financial surprise on return) is profound gratitude for our family's good fortune. We travelled through a lot of the Far East, on a cruise ship staffed (mainly) by people from poorer countries; we saw how a lot of ordinary people struggle to survive.
We are very, very fortunate. A large part of this is due to where we were born (as Warren Buffett points out) and into which family. But that is not the full explanation. As I look back, in 2002 - just 14 years ago - I had a small portfolio that just made it into 5 figures. Today, thanks to modest expenditure, focused saving and and some good investment decisions (and yes, some inter-generational family contributions) this portfolio is now over 3000% larger!
Finally, the income-producing nature of the DIY Income Investor portfolio means that there is a regular need to reinvest the cash it throws off. More about this in the coming weeks!
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.