The story of my ARF for the first 50 weeks of 2024 was much the same as previous years: keep turnover and costs as low as possible. The only transactions in the first 50 weeks were two small sales, amounting to €2,010 in total for every €100,000 at the start of the year. The other €97,990 was left untouched. This changed dramatically in weeks 51 and 52.
Cash of €623 at the start of 2024, plus sales receipts of €2,010 in the first 50 weeks and dividends of €4,666 were sufficient to cover pension withdrawals of €6,403 and expenses of €522 (all per €100,000 at the start). I was particularly pleased with the low costs, which included not only the ARF provider’s fee and the costs of share purchases and sales, including the activity in weeks 51 and 52 (of which more below), but they also included a once-off fee to my pension advisor for sourcing a better-value ARF provider at the start of the year and for overseeing the handover.
With the benefit of hindsight though, it is clear that sticking to the “buy and hold” strategy for the first 50 weeks was a big mistake. I hope that my activities in weeks 51 and 52 will show that I learned my lesson.
When reporting on AAM about performance in the first half of 2024 (see #43 above), I wrote that Novo Nordisk was the star performer: its value then was almost five times what it was at end 2020, at which time it represented under 7% of my fund. By mid-2024, without any further purchases, it accounted for over a quarter of the fund.
I closed my July 2024 update as follows:
with advancing age comes a greater degree of caution, so I may shift the balance of the portfolio towards more defensive stocks. That could mean selling some of my Novo Nordisk holding. Overall, though, the strategy of staying invested in equities and keeping transaction costs to a minimum will remain unchanged.
Sadly, I didn’t follow my own advice! I held on to all my Novo Nordisk shares. The price fell sharply in the second half of 2024, falling by over 20% in a single day in December. By 31 December, the price was down almost 40% since 30 June. Not a happy experience, but I’m not complaining. Novo Nordisk owes me nothing: I’ve done well out of it. I’m not selling, not for the time being anyway, but I did learn to watch out for shares that had overperformed, which brings me to what happened in weeks 51 and 52.
On 18 December last, in the course of doing research for another AAM discussion (in the thread "Should retirees be 100% invested in equities") I looked at some metrics for Apple, one of my biggest holdings. At the time, it accounted for almost a quarter of my ARF. Here’s how I documented my conclusions:
One of the "growth" shares is on a P/E multiple of over 40. I bought shares in the same company in 2015 at a P/E multiple of under 20. I don't think its prospects are much better now than they were in 2015, so I'm thinking of selling some or all of my shares in that company. I only did this analysis now, when drafting this post. It's very - VERY - superficial, but it seems to support the impression that came through a few times during the current exchange, that the current hype about AI etc. has many similarities to the dot-com bubble that ended with a bang in 2000.
The “growth share” in question was of course Apple.
Here is what I wrote about it back in 2015, when I had a “Diary of a Private Investor” column with the Sunday Times. The contrast between 2015 and 2024 shocked me and caused me immediately to offload more than three quarters of my Apple holding at an average of $252.82 a share. I used some of the proceeds to buy Nvidia at $137.20 a share but left more than 50% in cash, so the cash portion of the fund at year-end was much higher than usual: 11.7% of fund, compared with just 0.6% at end 2023.
Total fund value at year end was €103,834 for every €100,000 at the start, so the return for the year (net of expenses) was €10,237, which equates to 10.6%. I don't have figures to hand, but I'd say it was quite a bit below the market average, which can probably be explained largely by my Novo Nordisk experience.
In the 14 years since starting the ARF at end 2010, I withdrew €114,000 for every €100,000 invested at the start (average withdrawal around 6% a year), and the value of the fund at end 2024 was over €193,000, which equates to an average return (net of costs) over the entire period of 10.8% a year.
. Have you ever calculated your overall return on the strategy or compared it with where you would be if you had not applied the strategy?