Wealth update – 31/12/2020

It’s the last day of 2020! Here’s a quick update of the last two months as I forgot to do one for November due to being extremely busy with work.

Gas supply saga

I still have no clue what’s happening with my gas supply switch. The new provider has confirmed they have made the switch but I’m still being charged by my old provider and haven’t had a closing bill…

British citizenship saga

Both me and my girlfriend have received an email from the Home Office notifying us that our British citizenship applications were successful. My email came a few days after my girlfriend’s – even though we submitted everything at the same time. I was worried for a little bit but am very pleased with the outcome.

In case you’re wondering, it took us 10-11 weeks to get the emails about the Home Office’s decision from the point we first made our applications (and we gave our biometrics a month after the application).

The final stage of the process is to attend a citizenship ceremony. However, coronavirus has made it difficult to arrange these and there seems to be a bit of a backlog. The councils might be able to arrange virtual video conference ceremonies… we shall see. I expect us to be British between March – May 2021.

It feels good to have one thing less to worry about.

Lifestyle inflation?

I have been shopping! And it feeeeeeels gooood.

I bought a new pair of pants for myself from Lululemon. Yep, it’s that overhyped expensive yoga pants shop. I bought office/work pants from them. These bad boys set me back £118 and are easily the most expensive pair of pantalones I’ve ever bought.

The main reason to buy them was the anti-ball-crushing (ABC) technology, which they promoted on their website. I was sold and immediately bought them.

You must be curious whether the ABC actually works as expected. Sadly, I don’t feel like there’s much of a difference and my crown jewels can totes be crushed when I wear my Lululemons. I wear them every day and it’s not because they’re my only pair of trousers… #ExtremeFrugalism. Seriously though, they are decent trousers but I would recommend going for something cheaper if you can.

The shopping spree didn’t end there. My 4 year old Pixel phone’s battery life was poor and the device felt slower by the day. Therefore, after lots of debating and online researching I decided to upgrade to the new Pixel 5 for £599. I thought this phone would last me another 4 years as it’s got 5G. So far, I’m very happy with the new phone.

Now for Christmas we also bought something for the body. As it’s cold outside and the pandemic is still roaring about (gyms are closed), we decided to buy an indoor exercise bike. We got the JLL IC400 Pro bike for £519.99. Neither of us knew anything about bikes so we bought something in the middle of the expense range hoping that it’s not crap. So far so good. I am totes getting a six-pack in 2021! 🙂 My only gripe is a sore bum from the seat.

Counting my beans

OK. Numbers! My wealth has gone up in both November and December 2020.

November 2020: My net worth as at 30/11/2020 was £142,616 – an increase of £25,064 or 21.3% from Oct 2020.

December 2020: My net worth as at 31/12/2020 was £161,239 – an increase of £18,623 or 13% from November 2020.

In both months I made a £1,600 ISA top-up and £292 pension top-up and £50 was paid into Premium Bonds.

So, both November and December have been positive months and my net wealth is closing for the 2020 year at an all time high. I’ve calculated that my wealth increased by £90,379 (from £70,860 on 1/1/2020) in the 2020 calendar year – of this £26,545 was new money and £63,834 was the investment return – that’s more than £5,300 of gains each month in 2020! Wow! I am very happy with this.

2020 has been a great year for my portfolio, I’m also almost British now and will get a six pack very soon! Pandemic aside, I hope you had a good year too and I wish you a fantastic new year!

Missing the best and the worst days

You may have come across some articles, which go along the lines of “if you missed out on only 10 of the best days in the market then your returns would drop from 8% p.a. to 2% p.a.”. This is usually followed by the conclusion that timing markets doesn’t work and you simply have to be in the markets through thick and thin. That way you are guaranteed to benefit from those best days in the market and make good returns.

What pisses me off is that this analysis is completely one-sided. It is a half-truth. What do you think the market returns would be if you missed out on just 10 of the worst days? Yeah, I just flipped that. Obviously, missing out on the worst 10 days but still benefiting from the best days, will massively increase your portfolio’s annual returns. I have proof!

You can watch a youtube video (by Financial Choices Matter) about this – the analysis was done over an investment period of 107 years (Jan 1900 to Dec 2006) and the results are below:

As you can see, it holds true that missing out on the best days will reduce your returns. But it’s also true that avoiding the worst days massively increases the investment returns. (For clarity, the buy and hold approach turned $100 into $25,746.)

There’s also a good paper by Mebin Faber about this. I found it very interesting.
Excerpt from Meb Faber’s analysis:

He makes very interesting conclusions such as:

  1. the best and worst days tend to cluster together (volatility clustering) – the majority of both the best and worst days happen when the markets are in a down trend (below a 200 day simple moving average) -> therefore, the ride is much calmer when you’re invested during times of the market being above the 200 day simple moving average.
  2. if you miss both the best and worst days, then your annual returns are better than buy and hold.

The above analysis would suggest that market timing can indeed work and that there is HUGE value in eliminating the bad days. Investing during times when the market is above its simple 200 day moving average could eliminate 60-80% of the volatile days (both best and worst days) and then allow you to benefit from the uptrend. It would be a smooth and relatively boring ride, but the data suggests it would work better than buy and hold.

Bi den! 🙂

Becoming British

We had a day trip to East Croydon today to sort out some stuff for British citizenship. This is the last step you need to go through prior to the naturalisation application being sent off.

We’ve never been to Croydon. It’s a shame the first impression was of a hobo asking for £2. Wow, inflation much? What happened to “spare change please”? They go straight to £2 these days.

The experience at the Home Office (or was it SopraSteria?) wasn’t great but not awful. The email, confirming the appointment, stated that we needed to show up with ample time to spare. We showed up around 9:20 for my 10 AM and my girlfriend’s 10:30 AM appointments.

It was easy to find the building. It was the one with the queue out its door. We’re in lockdown now and hardly anything else was open on the street.

It was cold and we all had to wait outside as we slowly made progress in the queue. I disliked that people who didn’t show up early but right on time always got to cut to the top of the queue. An old chap in a high-visibility vest was calling out “anybody here for 9:30” and then all the 9:30 people went straight to the top of the queue…

That was frustrating. What was the point of instructing us to show up early – to spend the time in the cold? Why was the queue needed at all? I’m glad it wasn’t raining.

We were also instructed to bring all of our original paperwork along with us to the appointment. However, they only checked our passports, nothing else. I spent around £30 printing everything in a Ryman having already uploaded all the documents to a portal. What a waste of time and money…

I’m glad the appointment was free of charge. I can’t believe that if we opted for an earlier appointment (i.e. not in 4 weeks’ time) it would have cost us £90 each. All they did was scan the passport, take fingerprints, record a signature and take photos – no more than 10 minutes per person.

Anyway, we’re glad we’ve dealt with the bureaucrat. Let’s wait and see to hear back from them. Fingers crossed the Home Office doesn’t need any additional information and we get a positive answer soon (apparently this can take up to 6 months, Covid-19 will probably increase this timescale further).

Also, I hope Joe Biden wins and Donald Trump goes away. The stock market seemed to like the idea of Joe winning – this almost reversed all of my drawdown from the last two months and I’m back at £140K net worth.

Bye now!

Wealth update – 31/10/2020

Wall saga

Our building now has both a new wall and a gate (although the lock is not yet working). We have actually noticed that the wall does its job – we saw a junky a week ago “hanging out” in front of the building next door, not ours. Yay! We’re both feeling much safer now.

With the second nationwide lockdown looming, I am more worried about the increase in crime and anti-social behaviour than a Covid-19 infection here in Holloway. In my view, the wall and gate in front of our building are very valuable additions.

Gas supply saga

I think I’m now able to switch my gas supply over to a cheaper provider and have requested the transfer. I’m glad to see some light at the end of this tunnel.

British citizenship saga

We (me and my girlfriend) have now paid £1,330 + bits each to apply for British citizenship and will need to meet with a bureaucrat next week on Friday to scan our passports I guess. I’m not too sure what that appointment is about other than scanning our passports… but it’s something we need to appear for in-person and need to bring along all of our paperwork. We almost booked this appointment at a cost of £90 per pop only to then find out that if we book one a few weeks later it will be completely free. What a massive government money grab!

An emergency

I had to use my emergency cash this month as I developed a toothache and had to see a dentist. It was a stressful task to find a dentist on short notice (I don’t have a dentist in the UK) and I was lucky to get an appointment for a Saturday. It felt good to know that I will be absolutely OK paying for the treatment out of pocket if I had to because I had £5,750 in emergency cash. I expected to have an expensive trip to the dentist but felt calm about it as I had the funds available. Luckily, my dental issue (dental abscess on the gum) was quite mild and I only needed some antibiotics – the whole thing only cost me about £60-£70 (including the antibiotics).

The piece of mind from having some cash set aside for emergencies is an amazing thing and I would recommend it to everybody. I managed to convince my girlfriend to do the same and now she’s joined the club and has £5K set aside for this (£2K in Premium Bonds and £3K in a pot with Monzo).

Counting my beans

OK. Numbers! My wealth has gone down this month again as we saw the worst week since March 2020 in equity markets. My net worth as at 31/10/2020 was £117,552 – a decrease of £10,730 or 8.4% from last month. This includes a £1,600 ISA top-up and £292 pension top-up and £50 into Premium Bonds.

My second EIS investment – Morpher – went tits up as well. I invested £500 a few years ago and got £150 (30%) back in tax relief. The rest i.e. £350 is now eligible for loss relief when I do my tax return… so I should get a further £70 (20% x £350) back from the taxman.

I have one EIS holding left. Time will tell if it’s another flop. 🙁

Working from home – claim tax relief from the government

Both I and my girlfriend are eligible to claim some money back from the taxman. From HMRC:

You may be able to claim tax relief for additional household costs if you have to work at home on a regular basis, either for all or part of the week. This includes if you have to work from home because of coronavirus (COVID-19).

You cannot claim tax relief if you choose to work from home.

Additional costs include things like heating, metered water bills, home contents insurance, business calls or a new broadband connection. They do not include costs that would stay the same whether you were working at home or in an office, such as mortgage interest, rent or council tax.

You can either claim tax relief on:

  • £6 a week from 6 April 2020 (for previous tax years the rate is £4 a week) – you will not need to keep evidence of your extra costs
  • the exact amount of extra costs you’ve incurred above the weekly amount – you’ll need evidence such as receipts, bills or contracts

You’ll get tax relief based on the rate at which you pay tax. For example, if you pay the 20% basic rate of tax and claim tax relief on £6 a week you would get £1.20 per week in tax relief (20% of £6).”

The way it works assuming you won’t bother with getting any receipts/evidence etc: if you claim it, your personal allowance is increased by £6 x 52 weeks = £312. This means that the highest £312 of your earnings are now taxed at 0% instead of the current 20%/40%/45% – depending on how much you earn. Thus you save £62.40/£124.80/£140.40 depending on which tax bracket you’re in.

It is very easy to apply for this – it takes 2-3 minutes. However, if you fill in annual self-assessments, then you have to apply for this on your self-assessment tax return and need to wait for the current tax year to end before you can claim it. So, please make a note to include this on your tax return for 2020/21.

Until next time!

Wealth update – 30/09/2020

The wall in front of our building has been built but it has no gate. Therefore, the anti-social behaviour continues to plague our Holloway home. Oh well… at least the rainy weather keeps the hobos away for now.

My gas meter is now being updated on the National Grid database (could take up to two weeks I was told)… and following that, I will be able to switch to a cheaper provider. It’s ridiculous how long this is taking and no wonder why people don’t bother switching.

Our security deposit compensation claim has found a quick end as well (I can’t share any details about this, sorry.)

We have a new expense on the horizon as both I and my girlfriend will be applying for British citizenship in the coming weeks. The application fee is £1,330 per person. It seems to be a good investment as this will give us more security here in the UK and enable us to continue working & living in the UK and EU.

OK. Let’s talk about numbers now. My wealth has gone down this month as we saw a drop in equity markets. My net worth as at 30/9/2020 was £128,282 – a decrease of £11,646 or 8.3% from last month (this includes £1,600 ISA top-up and £292 pension top-up and £50 into Premium Bonds – so the investments actually dropped by £13,588).

Until next time!