Profit-taking - by selling some of my largest holding APF - means the opportunity to buy something new.
It's trite to say but the 'buy' decision is what makes you money - coupled, of course, with selling at the 'right' time. Which is to say, it's difficult.
It helps to have an investing strategy. The DIY Income Investor strategy has developed over time but is still based on the early idea of the Income Pyramid that I came up with over five years ago - layers of different types of income-producing savings and investment.
Setting aside the cash component (which today is actually quite large - around a quarter of all the financial assets) the strategy is pretty simple:
- high-yield investments with a (hopefully) sustainable income profile
- diversification (<5% in any one security)
- 50/50 split between dividend shares and fixed-income securities (e.g. bonds)
- geographical and currency diversification, particularly using Exchange Traded Funds
- 'sell' rules (to avoid selling too early but to allow profit-taking)
So, a first consideration when buying is to look at the profile of the portfolio. After a recent spate of buying dividend shares (to take advantage of the new Dividend Tax Allowance), the fixed-income portion of the portfolio was slightly under-represented.
This presented a bit of a dilemma. Given the recent fall in the value of Sterling, I did not want to buy overseas bonds, as this would lock in the current low value of the currency. I preferred instead to look for good UK options. After a bit of poking around I found something new to me that seemed attractive - a UK bond fund giving access to a wide range of commercial debt.
CQS New City High Yield Fund Limited (NCYF) is A Jersey closed-end investment company run by NCIM, which mainly invests in high yielding fixed-interest securities. It is currently yielding over 7%, with a management fee of 0.8%. The dividend yield has been steadily increasing over time and the Fund has a limited gearing, which is reassuring.
Of course, the danger with this type of vehicle is that the dividend is paid partially out of capital or borrowing - which does seem to be the case for 2015; but 2015 was a bad year (as I can testify from my own portfolio experience).
Although I am generally wary about 'funds' I haven't found a more attractive UK-based diversified bond ETF, so I'll watch how this performs.
[Purchase price: £0.60]
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.