Happy New Year and welcome to 2017. I don't know about you but as an investor I'm quite glad to see the back of 2016 as on the whole at the headline index level returns were good it was not an easy year for investors generally with all the twists and turns and volatility. Indeed with all the noise and fear around it would have been easy for investors to panic out at the bottom or waste time and money trying to hedge, although no doubt some super clever market timers or traders with very focussed portfolios may well have done extremely well if they timed all that perfectly.
With that said I'm pleased to be able to report that the Compound Income Scores portfolio (CIS) had another positive month in December with a total return of +4.15%, although this lagged slightly behind the return of 5% for the month from the FTSE All Share which I use as a benchmark.
For the year this left the CIS up by 4.34% but this was way behind the 16.75% produced by the FTSE All Share, although the portfolio is still ahead of the index by 9.5% since inception or a little over 5% per annum on an annualised basis based on the short 1.75 years so far.
In absolute terms it has produced a total return of 21.05% since inception which works out at 11.5% per annum on an annualised basis. This may not seem that spectacular but I would regard it as satisfactory against the real returns of 5 to 6% which have been seen from investing in UK Equities over the very long term. This is a figure I would use to judge my own performance in the long run as my own portfolio and that of the CIS differs substantially from the headline FTSE indices.
On performance comparisons and Benchmarks I note what Ed Croft on Stockopedia had to say in his NAPS annual review and his thoughts about an equally weighted benchmark, which would be pretty easy to do, so I hope they do go ahead and introduce those. Aside from that I also note that his random set of 100 portfolios of 90+ Stocks on the Stockopedia stock ranks did between -5% & +5%, see histogram below.
One other crumb of comfort I take in this years performance is this report which says that Neil Woodford and his highly popular income fund underperformed the FTSE All Share index by 13.56% with a total return of 3.19%. So at least I can say the CIS Portfolio beat Neil Woodford on a one year view. This just bears out the point that any portfolio which is markedly different from the index in terms of its make up will be likely to diverge from it significantly in both directions - that is to be expected. So overall while the returns seem a bit disappointing this year on the face of it, I take some comfort from the above and I don't get too hung up about performance relative to the benchmark in individual years as it is a marathon and not a sprint.
As to 2017 my crystal ball is a bit frosted up at the moment, but at least for now it seems that investors are giving Trump and his policies the benefit of the doubt and seem to be discounting a pick up in growth and inflation which may or may not be helpful to equities depending on the extent of it. They do however seem to be ignoring some of the risks to World trade and the potential for further protest votes against other political regimes in the year ahead, but as ever time will tell. For now it seems an economic slowdown in the US has been postponed and the market timing indicators I follow are still positive, so it seem sensible to keep calm and carry on investing in equities. Good luck with your investing in 2017.
Finally please note this report and these returns are based on the Compound Income Scores which are designed to help identify attractive income growth stocks and an associated portfolio. These are a subscription based, although they are currently closed to new subcribers. If you would like to add your name to the list for when they are next available for subscription then please get in touch using the contact form.