What caught my eye this week.
I sold a six-figure shareholding last week for a phenomenal capital gain [1] – over 1,000%.
For historical reasons the shares were held outside of an ISA [2]. This means I’ve got a big capital gains tax bill coming, despite years of defusing [3].
The sheer size and hence risk of this single position – and the awkwardness of trading it outside an ISA – meant something had to be done. Rumours that Rishi Sunak might raise [4] capital gains tax rates tipped me over the edge.
Like most taxpayers I remind myself I support an accessible health service and a welfare safety net. My sister is a nurse.
Thank you NHS.
But not to the tune of a mooted 45%!
To stash or not to stash the cash
The lessons of this investment – and of getting rid of it – will be fodder for a future post. As will be my specific findings from what happened next.
Which was deciding what to do with it.
Remember, I’m running a big interest-only mortgage [5], which through one lens is borrowing to invest. So somewhat risky.
Euphoria abounds in the stock market today – and elsewhere. Bitcoin [6] just breached $56,000. Bulletin boards are blowing up [7] hedge funds. Growth stocks seem unstoppable.
Even with nominal yields on government bonds sneakily rising, real yields remain very low and confidently predicting an imminent bust is folly. But it hardly seems imprudent to take some money off the table.
The trouble is where to put it?
I knew, of course, that rates were very low. I sort of assumed if I dug around I’d eek out something decent across multiple savings accounts.
But no, not to the extent it’s worth the hassle.
Long story short, Premium Bonds [8] seem about as good a place as any for the maximum I can put in them.
I will keep a further chunk in cash, despite inflation eroding its value [9]. I’ve felt too light on cash ever since I bought my flat, and I love Jamie Dimon’s description1 [10] of having a fortress balance sheet. It’s time to rebuild my walls.
Otherwise, I’m thinking I might actually throw a few pennies at that big interest-only mortgage that half of you hate so much!
I’d presumed I’d run my mortgage full tilt for a decade, at least. But it is looking like some of my expected investment gains have probably been front-loaded.
What’s more, my bank’s rates have already floated off the floor. I have two years left of my very low five-year fixed rate to run. Given the odd way I got this mortgage [11], the end of this term could be a non-trivial event.
It’s still tempting to stash the cash rather than lock it away forever by paying down some of my mortgage. Even at a cost of lower returns from savings. The set aside cash could cover several years of monthly mortgage payments in a pinch. Sunk into the mortgage, it only reduces monthly payments by less than £100.
Also it’s entirely possible I’ll never be able to get a mortgage of this size again. Not without buckling down and ramping up my earnings, and even that hasn’t helped in the past. (I’m self-employed, one way or another.)
On the other hand, repaying debt [12] charged at 2% looks sweet in a world that barely pays you for lending it cash and expects every share to go to the moon.
Lucky bastard
I’m aware this problem is plucked from the box marked Nice Problems To Have. Despite vast State support, many people and businesses have been hit hard by the pandemic – including several unlisted companies I’ve invested in.
How they’d love to have the headache of where to stash thousands of pounds in cash.
All I can say is I planted the seed of this windfall many years ago, when times were good and most people were spending freely. Now my investment has matured and blossomed. We all have to manage our own finances as best we can, whatever is going on in the world.
Luck won’t always go my way. That’s why I – like you – save and invest for the future. I fully expect to be hit by future tax rises, too, to pay for furlough and other breaks I didn’t get a penny of (but nonetheless supported).
But that’s more article fodder, I guess. Another dividend from reshuffling my assets!
Where would you stash the cash – or would you just save it for the mother-of-all post-lockdown parties? Let us know in the comments below.
Otherwise have a great weekend.
From Monevator
Our updated guide to help you find the best broker – Monevator [13]
Capital gains tax on shares – Monevator [1]
From the archive-ator: Currency risk – Monevator [14]
News
Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!2 [15]
Neil Woodford relaunch plans spark call for inquiry – BBC [16]
UK house prices rose by 8.5% last year amid stamp duty holiday – Guardian [17]
London landlords feel the burden of buy-to-lets [Search result] – FT [18]
Viral or vicious? Financial advice blows up on TikTok – Investment News [19]
How could Sir Keir Starmer’s British Recovery Bonds work? – ThisIsMoney [20]
Citibank’s $500 million lesson in the importance of UI design – ArsTechnica [21]
How the pandemic has affected global wages [Interactive] – Visual Capitalist [22]
[Click to enlarge the returns!]
Products and services
Five big energy firms hike prices by £96 a year from April, in line with price cap – ThisIsMoney [24]
MoneyBox: a long-term review – Much More With Less [25]
Sign-up to Freetrade via my link and we can both get a free share worth between £3 and £200 – Freetrade [26]
Goldman Sachs launches a Marcus-branded robo advisor [US for now] – Fast Company [27]
Mortgages for 10% deposits have made a comeback in 2021 – ThisIsMoney [28]
Homes for sale in the super suburbs, in pictures – Guardian [29]
Comment and opinion
Remembering Dirk Cotton – Oblivious Investor [30]
Respect the base rate – Of Dollars and Data [31]
Why markets are still efficient even with Tesla’s gains [Search result] – FT [32]
[Some] US government bonds are getting crushed – The Irrelevant Investor [33]
Remarry by all means, but don’t forget the pre-nup [Search result] – FT [34]
My financial origin story – Cent by Cent [35]
How to value equities in a post-pandemic economic boom – Abnormal Returns [36]
Frozen – Indeedably [37]
One day at a time – Humble Dollar [38]
Naughty corner: Active antics
The beach bum who beat Wall Street and made millions on GameStop – TheRinger [39]
Maybe you’re overbought – All Star Charts [40]
10 years of Lindsell Train Global Equity – IT Investor [41]
Digging into ARK Innovation’s portfolio – Morningstar [42]
Crowdfunding: why its returns suck – FireVLondon [43]
How to donate small unwanted holdings to charity with ShareGift – ThisIsMoney [44]
Economies of scale in banking? Negative – Klement on Investing [45]
Fraud and deception detection: text-based analysis – CFA Institute [46]
Howard Marks & Joel Greenblatt: Is it different this time? [Video interview] – RealVision [47]
Covid corner
Whitty at odds with Johnson over ‘big bang’ reopening of schools in England – Guardian [48]
Escaping lockdown: when will life go back to normal? [Search result] – FT [49]
The UK is infecting people with Covid-19, for science – Wired [50]
Why are US Covid cases falling so dramatically? – The Atlantic [51]
Kindle book bargains
Total Competition: Lessons in Strategy from Formula One by Ross Brawn – £0.99 on Kindle [52]
Black Edge: The Quest to Bring Down the Most Wanted Man on Wall Street by Sheelah Kolhatjar – £1.99 on Kindle [53]
Quit Like A Millionaire by Kristy Shen and Bryce Leung – £0.99 on Kindle [54]
The Six Conversations of a Brilliant Manager by Alan J. Sears – £0.99 on Kindle [55]
Get a Kindle [56] and fill your shelves with framed Monevator quotes instead.
Environmental factors
I let an eco warrior loose in my home… and he slashed £700 off my energy bills – ThisIsMoney [57]
Heating Arctic may be to blame for snowstorms in Texas – Guardian [58]
Workers clear ‘huge, disgusting’ fatberg from London sewer – Guardian [59]
The snowy countries losing their identity – BBC [60]
Million-year-old mammoth genomes shatter record for oldest ancient DNA – Nature [61]
Off our beat
Best story wins – Morgan Housel [62]
Planet Money: We buy a superhero [Podcast] – Part One [63] and Part Two [64]
Publishers, curation, and algorithms – Seth’s Blog [65]
Why do we even have dogs? – Slate [66]
And finally…
“You will become way less concerned with what other people think of you when you realize how seldom they do.”
– David Foster Wallace, Infinite Jest [67]
Like these links? Subscribe [68] to get them every Friday! Like these links? Note this list includes affiliate links, such as from Amazon and Freetrade. We may be compensated if you pursue these offers – it will not affect the price you pay.
- Possibly pinched from Warren Buffett. [↩ [73]]
- Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. [↩ [74]]