There is only one place to start this post and that is the recent general election victory by the conservatives. I’m not going to go all political by analysing why the conservatives had such a large victory. Instead, I will focus on the economic side and assess what this victory means from an investors point of view.
Certainty. In a word, that is what the conservative win has brought. For too long there were delays in parliament caused by the bitter infighting from all sides of the house causing uncertainty for business and investment. The conservative majority will certainly bring an end to this chaos.
For one thing, the future of Brexit is significantly clearer. The withdrawal agreement negotiated with the EU this autumn will now pass through parliament, leaving the UK on track to exit the EU at the end of January 2020. (Having said this, some political worries still remain. For one, the UK still needs to negotiate a trade deal with the EU. There is also the small question if a Scottish independence. )
Investors have cheered on this majority and the clarity it has brought. Even though markets were pricing a conservative victory, it appears that the scale of it took many by surprise. There was a relief rally after the election as a result.
Naturally, domestic focussed stocks were the biggest winners. There were a number of double digit risers after the election such as Virgin Money (up 18.7%), stagecoach (up 16.6%), Taylor Wimpey (up 14.7%) and Barratt Developments (up 14%). On the whole, house builders, utility companies and to an extent the financial sector were the biggest beneficiaries post-election results.
The internationally exposed FTSE 100 reaction was much more muted due to the rise in value of Sterling. A strong pound affects the relative value of the overseas earnings which dominate the large cap index. But the FTSE 100 has rallied too as a result of the US and China negotiating the outlines of a trade deal.
All this has meant a good end to the year for stock markets. The FTSE All-Share has risen +18.7% year-to-date.
Looking at the FTSE 100, it’s performance over the course of the year is a very respectable 13%. The FTSE 250 did even better with a year to date performance of 29%.
Whilst the UK markets had a very good year, it was by no means the best performance. That accolade goes to Russia as it stock market jumped 42% this year. Other country markets that did well were Greece, up 40%, Brazil, up 28%, and the US up 27%.
This year has been a complete turnaround from the last where many markets had negative returns. In fact, in the last quarter of 2018, there was panic amongst investors. But those who stayed calmed and thought rationally have received their rewards for remaining invested.
This is exactly was I preached last year – I want you to go and read the piece I wrote . I’m sure if you wrote down your feelings as described in the article, you would be laughing at your past self right about now.
Markets have a funny way of surprising us. It is controlled by human emotion at the end of the day. There will always be fear and greed. That is why it is best to have a formulated approach when tackling the market. For me it is investing every month regardless of what is going on. This method has so far served me well. I haven’t missed out on any bull markets as a result. And when the stock market has one of its wobbles and falls, I am simply able to hoover up more shares in quality companies.
For the month of December, I bought the following stock for my portfolio
- IMB – Bought 11 shares at £16.82 each.
- RB – Bought 7 shares at £59 each.
These purchases have added £32 in annual dividend income to my portfolio.
Looking at my portfolio as whole, it is now expected to generate £3,926 in passive income over the next year. That is £980 a quarter. £327 a month. £74 a week. And over £10 a day (LINK).
I feel truly blessed to be in this position. I have gone from earning £0 in dividend income three years ago to now having a decent four figure dividend income stream.
It is a wonderful feeling knowing my money is working hard for me. The money is pouring in from all parts of the world. If someone drinks a coke in Australia, money comes in. If someone eats a Doritos packet of crisp in China, money comes in. If someone transacts using a visa card in India, money comes in. If a company in South Africa uses Pastel, money comes in. If someone uses Fever tree as a mixer, money comes in. If someone buys clothes from Primark , money comes in. You get the picture.
The greatest part of all this is that the money is purely passive. The money gushes into my account regardless of what I do. If I wanted to sleep all day, the money would pour into my account. If I spent my days playing video games, the money stream in. If I was to go on holiday, I would find money in my account upon my return. This is the power of passive income.
The goal is to use your money to make money instead of using your time to make money.
Spending your time as you see fit will bring you more satisfaction than spending your money.
Many think clothes and accessories make you look rich, but I believe a man who is debt free wears the confidence on his face. The ability to be patient, thoughtful and unhurried in decision making belongs to the man whose time and money is his own.
As we close the chapter on one decade and move into the next, my goal will be the same, to keep growing my passive income and to hopefully one day be able to cover all my expenses from pure passive sources.
10 years looking forward feels like an eternity. 10 years looking back feels like yesterday. Make financial decisions today that you can look back on with gratitude instead of remorse. The future is coming faster than you think!
Have a good new year and stay safe!