Apologies for the infrequency of posts lately but work has just taken over since starting ST3 in February. Completely new job, new city and lots of new people requires some time and adjustment to.
Unfortunately since my last income report I’ve not managed to invest any more time towards creating new passive income streams.
January and February
The usual bank interest continues to trickle in every month and although it’s only £20/month, which can hardly buy anything nowadays, another way to look at it is that the gym membership is sorted.
Kindle income has been relatively stable, averaging around £8/month for the last few months. This month was a disappointment. All of this is going towards charity and maintenance of this blog, and therefore will continue to be discounted from the income report.
If we rank investments solely on the amount of passive income generated then my P2P ISA would rank number one, firing another £485 cheque my way this quarter. Although attractive and without charges to the investor, this mode of investment has numerous risks and shouldn’t be entered without caution. I’m going to opt for a less adventurous approach for now and plan to invest more into P2P only when I significantly increase my holdings in other investments.
Although I’ve invested more into S&S this quarter, the return on investment (yield) has actually dropped due to a conscious switch to a more globally diversified passive fund that pays a lower yield. Why would someone opt for a lower yield on their money?
In S&S investing returns mainly come in two forms: capital gains and/or dividends. In a hypothetical example, imagine a yearly ROI of 6%. If 3% comes from capital gains then your dividends must be 3%. Increase your capital gains to 4% whilst fixing the ROI and your dividends have to drop to 2%. As a personal rule, be cautious when dividends are suspiciously high because the most likely result is that your capital gains will suffer. With a reduced dividend yield I’m expecting more attractive capital gains in the long term. The only problem is that it doesn’t make this quarterly report look good!
|Income||Tax / Expenses||Total Passive Income|
|Q1 2017 Total||£891.48||£96.99||£794.49|
One important concept I wanted to stress before I wrap up was the impact of trading costs on our red line. Switching from my initial fund to the more globally diversified fund meant initially buying fund A, selling it and then purchasing fund B. Three trading costs at almost £12 apiece, in both accounts means I spent almost £72 on a silly mistake this quarter. Several more mistakes this year and I’ll essentially be paying for other people’s holidays. £100 in costs this quarter and I’m still not really sure what I paid for.
I’ve also not included the 50 months worth of NHS pension contributions as I’m not entirely certain it’ll still be around when I retire. I started work in August 2012 so I’ve almost been a doctor for five years!
In conclusion, progress has been made this quarter despite the numbers telling us otherwise.
Looking ahead, I’m going to fully utilise my 2017/18 ISA allowance, hopefully break through the £1,000 per quarter barrier, publish a second Kindle book and continue working hard towards becoming a good doctor.
P.S. I learned everything I know about finance from this book, this book and that one, amongst many others. For a more extensive list, don’t hesitate to drop me a line at firstname.lastname@example.org. If you prefer learning through listening use this link to earn a free audiobook of your choice by signing up to their 30-day free trial. Simply cancel with the click of a button if you decide later on that the service isn’t for you, no questions asked.