Quarterly Passive Income Reports: Q1 2017 – £794.49

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.

March

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!

 IncomeTax / ExpensesTotal Passive Income
Interest
Kindle
January
£25.26
(£8.08)
£5
-
£20.26
-
Interest
Kindle
February
£25.31
(£8.09)
£5
-
£20.31
-
Interest
P2P ISA
S&S ISA
Fund Account
SIPP
Kindle
March
£22.86
£485.76
£166.07
£88.83
£77.39
(£3.83)
£5
£0
£35.32
£38.17
£8.50
-
£17.86
£485.76
£130.75
£50.66
£68.89
-
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 oneamongst many others. For a more extensive list, don’t hesitate to drop me a line at rory@ukdoctoronfire.com. 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.

3 thoughts on “Quarterly Passive Income Reports: Q1 2017 – £794.49

  • April 10, 2017 at 7:55 am
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    Hi Doc (not sure what name you prefer – or if UKDOF seems a bit long winded! :))

    Congratulations on a good quarter income – although still early in the journey it seems, that will help further compound over the years and increase. Great target to set to fill up this years allowance, and £20k is no small amount to get in.

    An expensive mistake to transfer between, but better to make a few early on when the overall impact may not be as bad as a few years down the line! I’ve found with a global diversification (disclaimer: currently I use VHYL), I honestly don’t care what the price is – I rarely even look at it in my portfolio but just see the dividends keep coming in and saves me worrying about dividend cuts in my HYP!

    Keep up the savings!
    FiL

    • April 10, 2017 at 3:19 pm
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      Hi FiL,

      Thanks for the follow. Yeah I’m hoping to create enough foundation in my 20s and early 30s to just let compounding take off thereafter but at this rate it’ll take a bit longer.

      The personal finance blogs I read are pretty much all American and their numbers are ridiculous. People retiring on $2 million + after a 7 – 8 years of employment!

      Will follow you though to get a UK perspective, especially in a challenging place such as London.

      And you can call me anything you like!

      Rory

      • April 10, 2017 at 5:42 pm
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        Hi Rory,

        A pleasure – I will watch with interest on your progress, cheering you on! You are definitely going about it the right way if you are still in your 20’s, with medical training and already generating over £700 per quarter and an aim of filling the full ISA. Depending on what you end up specialising in (and how contracts change over time) I think you have some great foundations there!

        It definitely seems that the US retire very quickly with a high level of savings compared to the UK blogs I follow, but in London the housing and transport costs do make it more of a challenge!

        I’ll go with Rory 😉

        Cheers,
        FiL

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