Wednesday 27 July 2016

Splashing the Cash (Portfolio Buys)

Cash sitting idle is no part of an investment strategy - it should be producing capital gain or income, one way or another.

A key feature of the DIY Income Investor approach is that it throws off a lot of cash. Add to this any additional ISA or SIPP contributions and there is enough to gradually re-shape and re-direct the portfolio.

A lot of the DIY Income Investor 'offline' cash (i.e. not invested in ISAs or SIPPs) is invested with Ratesetter peer-to-peer lending with a current rate (for 5-year loans) targeting 6.1%. (Contrary to what you might expect, the money is not actually tied up for that long, as there are many early repayments.)

By an interesting co-incidence, the DIY Income Investor portfolio is currently earning around 6.1% as well (capital gains put the total return at around three times this). 

But back to the cash. As noted in the previous post I am currently minded to 'fill out' existing holdings, rather than look for anything new. Having already topped-up the highest yielder in the portfolio, I have now added to two more holdings.

The first is Maven Income and Growth VCT (LSE:MIG1), which I also first bought in 2014, a Venture Capital Trust. Like REITs, VCTs also have to pay out a lot of their income. The yield is a hefty 9.2 and their latest Annual Financial Report is quite positive.

The second is Redefine International (LSE:RDI), which I first bought in 2014 - a REIT (Real Estate Investment Company). They invest in both the UK and Germany, so have been largely insulated from the current downturn in the UK housing market. The forecast yield is 7.6% and it seems to be doing well with the Aegon UK proprty portfolio that it purchased. A key feature of REITs for DIY Income Investors is that they have to pay out most of their income as dividends.

Following these purchases, the DIY Income Investor portfolio has hit another all-time high valuation with a total return for 2016 of nearly 20%.

[Purchase prices: RDI - £0.67; MIG1 - £0.435]

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. I don't recall you ever showing much interest in general UK retailers.

    Currently Brown(N) Group - behind Simply Be, House of Bath, Figleaves etc. is yielding 8% (LSE:BWNG) and

    Marks & Spencer is yielding 6% (LSE:MKS)

    With interest rates set to fall in August and the UK love affair with shopping unlikely to diminish anytime soon - are these on your radar?

  2. The yield on MIG1 is missleading. Two of the four divis per year are actually returns of capital. On the plus side these are not eligible for divi tax. On the down side you don't get any richer as eventually the fund will be wound down. The indicated yield is approx 2%.