Neil Hopcroft

A digital misfit

[Money] Current situation

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Currently I have three asset classes, in roughly equal measures: property, cash and shares.

I don’t own the flat I live in, mostly because I don’t anticipate staying for long enough for that to be worthwhile, this has been the case in most of the areas I’ve lived in. The property is a house in France owned with two others. This is currently being renovated. The house is roughly 25% funded by debt, which I’ve borrowed from a company I (mostly) own, I am recording its value as being the amount I have spent on it, this is perhaps not acurate but will be a good enough measure for the purposes of these discussions. I anticipate a further expenditure of 20% of the properties cost every year for renovation and improvement, this expenditure will be added to the ‘book value’ that I record.

Cash is mostly sheltered from tax by ISAs. This isn’t very exciting.

I have a portfolio of 16 shares, most of which I’ve held for more than a year now. These also live within an ISA. I intend to hold these until the time is right to sell them. There have been a couple of shares I’ve sold when the company changed from the company I was thinking I was investing in. The current companies are Amstrad, Castings, Charter, CareUK, Evolution, Goodwin, Helphire, Hornby, ICAP, nCipher, Premier Foods, Psion, RBOS, Spirax, SCS and Trifast. Some of these have done better than others – the best is up around 200%, the worst down around 40%, overall the portfolio is up around 20%, compared with cash which is up around 10% over a longer period. Of course the volatility of these shares is significantly higher than cash. This portfolio hasn’t had any rigorous allocation strategy or risk management thought – it has been more a case of finding shares I believe will do well and investing a reasonable amount in them, it has to be enough that dealing costs are easy to recoup.

This whole lot totals to less than a years salary, but it is positive. I have two bits of debt, both of which are covered by cash, they happen to be better run as debt than spending the cash (mostly this is more tax efficient) – a loan from my own company for part of the cost of the house and a credit card bill I forgot to pay this month (min payment covered by direct debit). The loan from the company needs to be repaid before June because there will be some tax implications if it isn’t.

So, this isn’t about getting out of debt….what is it about? Well, the aim is to get my finances in such an order that I can live off them without having to work full time – obvious not having to work at all would be great, but thats a bit further off. Perhaps the ‘not having to work full time’ actually means taking some months each year and living in the house in France. Right now I’m covering around 30% of a months salary per year in passive income – this is clearly nowhere near independence.


Categories: Memories.

/ 13 Comments

13 comments

        • neilh

          Roughly, I don’t remember exactly, they were about 80p when I got them and they’re, what, 230 now? So I got lucky because I had no idea at all what I was doing at the time, they were the second shares I got after Psion which had plummeted by then.

          Now I’m a bit better placed to understand whats happening – I’m not sure I’d buy them now, given the current state of things, but also there doesn’t seem to be any point selling either. Though one thing I considered was selling one third of them so I got my original stake back and everything beyond that was pure profit.

          Reply
  2. neilh

    Not 30%, its closer to 30%/12 (30% of a months income per year, which is roughly 1.5 weeks a year), which I probably didn’t express very well. Thats *income*, which I’m turning into growth by leaving it in the funds producing it. There is some capital growth beyond this, but I’ll be talking a bit more about that over the next few posts in this filter.

    Tracker funds are a reasonable compromise on risk/return if you’ve found some with low management fees. Exchange Traded Funds are another interesting approach which might give easier access to more indices through standard UK stockbroking accounts.

    Yes, you’re right, I do have some pensions somewhere…they amount to roughly the same as the above investments put together, they are deliberately ignored from this because they aren’t useful at the moment. If by some freak chance I live to the point they are useful (and they remain useful by that time) that will be a nice bonus, but I’m not planning my financial future based on their presence. I will, however, take up the offer of a pension if an employer is going to be putting money in the pot too.

    Reply
  3. incy

    First got to say I am not a finacial advisor even who i work for…

    OK that out of way.

    There is not enough detailto get into spefics and lj is probably not the place for it. The main one being the amlounts you want. However things look sound. Though vague rules is that you should have three months income in cash ideally as well sheltered as you an so an ISA looks like a good place.

    The main thing is to make sure you are geting the best return on the cash, this means that you will probbaly have to change where you save each year, a pain, but banks cut rates for customers who stay loyal… tha majority never move, best rates are to attract new clients. It might not amount to much but it all counts (I think mine got me another 100 or so a year). Ditto with current account alliance and Lecister pay 6% on current accounts most pay 0.1. Ok there is a limit ot 2,500, but sweep the rest of it into a savigns account. Ok only 150, but it is still 150 GBP a year (and if you tell me they do a reccoment a friend and give you another 5 for signing up).

    You have no debt, which is mainly good. However again it only brings ina little money, but it is worth getting an American Express credit card (as opposed to charge card) they pay you back each year a proportion of what you spend. And no fees and if you pay it off each money. OK not everywhere takes Amex so get a Morgan Stanley mastercard they also do cash back nto quite as good a rate, but acts as a good back up. Again this gives me not a fortune, but we are talking somehwere between 150-200 years or so a year. You do need to be discplined to not end uppaying an interst, but you can do it allby direct debit.

    None of this is goign o solve your problem but suddenly it is 300-400 a year for a little effot.
    http://www.moneyfacts.co.uk/
    http://www.moneysupermarket.com/

    But the main rule is to check you are getting best value for the money.

    Onto portfolio. You do nto say what part is capital growth and what is dividend payments. Considering your picking stargety then just find the lowest cost broker and reduce costs. You have to think about what risk you are prepared for. It is probably working out the valuation of the property are you looking for rental income or sell it for profit? Untily ou realise it though you cannot live off the money, but then you do not have the property either.

    The last thing you do not mention is the word pension, though I am guessing part of it is to have enough income not to worry about it.

    hope some of this helps.

    Reply
  4. davefish

    Is the not working full time so that you can devote more time to personal projects, such as your nanotech software, or more as an avenue to laze around a little bit?

    Reply
    • neilh

      A bit of both, really its to have the freedom to decide without having someone else decide for me. Mostly it started from wanting to take a break for ‘regular’ work so i could concentrate on writing some software, but its now taken on a life of its own.

      Reply
      • davefish

        Hmm, small projects often do take on their own life and get out of control, don’t they!

        (Dave is currently a frantically unburying himself Dave)

        Reply

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