2020 was a big year for me as an investor. My plan for building passive income from dividend income was blown off course, firstly by the markets as dividends were cut and then latterly in the year by myself as I used a lot of my ISA investments to put down a deposit on a first house.
2021: rebuilding my portfolio and dividends
In 2021 I aim to rebuild my portfolio. That’s objective number one and a big focus. I’ll aim to be adding as cash at least 33% of my earnings into my ISA each month. Anything I can afford on top of that will go into my SIPP. This will be easier to achieve during lockdown and may well be more like 50%.
I remain committed to focusing on dividends as part, and just as part, of my investing strategy. 2020 has given me a greater appreciation of growth shares, which helped me a lot during the recovery from the indiscriminate March 2020 market sell off. When it comes to dividends, I want to increase the level of dividends I get in 2021 by 50% over 2020, this should be helped by fewer dividend suspensions this year – fingers crossed. I’ll use investment trusts more than funds or individual shares when it comes to income. The former seems the most resilient.
This year I’ll be looking for shares that combine income and growth potential. On top of that, I’m likely to add some funds, trackers and investment trusts that give me exposure to shares from beyond the UK. I’m particularly keen on US Smaller Companies, Asia and those that can provide a higher dividend yield.
So overall, there will be an ongoing hunt for sustainable yield but increasingly also I’ll look to do direct more of my investing in individual shares towards ‘growth at a reasonable price’ (GARP) opportunities with some more speculative punts accounting for no more than 8% of the total. Companies I have my eye on at this more speculative end of the market, at least in my mind, are shares like ReNeuron (LSE: RENE), Gattaca (LSE: GATC), IXICO (LSE: IXI) and a number of others.
New processes and targets
The key to effectively rebuilding my portfolio is to focus on getting better at creating a rules-based investing approach while perhaps paradoxically taking more advantage of short term opportunities. In practice, this means keeping an investment diary, planning most longer-term investments well in advance and creating a thorough checklist for investments, better recording of my results but also being prepared to use some of my capital to respond to special situations.
To try and do this effectively and manage my risk, I’ll employ the mindset of the assassins in Lee Freeman-Shor’s The Art of Execution book – a book I highly recommend. This means on short term opportunities especially I’ll look to crystallise small losses if I make the wrong call, rather than average down or let losses get bigger. It’s worth remembering if you have a 50% loss it takes a 100% gain just to get back to breakeven.
I don’t have a target as such for portfolio growth, but given it’s starting from a lower base this year I’d be happy if I achieve 15% growth as a minimum and targeting 25% growth. Primarily this will be through adding cash I think, but if half the performance can be driven by investment returns and dividends that would be ideal.
Other investing and finance objectives and plans
On top of this I want to:
- complete the purchase of my first home
- start a business outside of my full-time job
- monetise this blog
- increase my earnings from my full-time work
If I can achieve all these things, which are in order of priority, then it’ll have been a good year.
Lastly, I’ll look to put much of the extra money I earn into the stock market which has made a good start to 2021. Hopefully, that can continue. I’d say investing is very much still my focus and the way I expect to be able to retire early.
If you like this post, please read my most recent post on investment trusts for 2021.
I’ll provide a roundup on my new leaner, smaller portfolio in the coming weeks.