Sell shares, buy Norwegian property

Not the best investment advice I'm pretty sure, but nevertheless that what I've done over the last week.

The big move
I have bought a house in Norway.  The price of houses in Norway is ludicrous, and the exchange rate is extremely unfavourable.  But needs must when the devil vomits in your kettle - I need somewhere for my family to live when we move, and renting is not exactly cheap out there.

Anyway, for the next few months I need every penny I can lay my hands on, and accordingly have today sold 80% of my investments.  Between now and July I will sell another 14%, leaving me with just the 6% of my portfolio which has an associated capital loss (which is deductible against income tax in Norway, and which I will sell later in the year).

Once the big move has come and gone (late July / early August) and we can sell our house in the UK, I should once again have some money available to invest.  When this happens I hope to be a better investor:

• I will have far less disposable income, and fewer liquid assets, so I will be more risk-averse and more concerned with liquidity (fewer micro-caps).
• My cost of funds will be higher (because I will move off my fantastically cheap UK mortgage), so I will set the bar higher in terms of the return I am looking for.
• My portfolio will be smaller and more concentrated - less like a closet tracker.
• My transaction costs will be higher (because I will have to use an off-shore or Norwegian broker), so I plan to trade less often.

We'll see.

Regrets

Of the shares I've sold today, I've been pretty sanguine about selling most of them.  The ones that have given me pangs of regret are:

• Berkshire Hathaway.  I think this remains cheap, and would like to hold it for many more years.
• De La Rue.  Personally I would have taken 935p from Oberthur, but I can understand why other shareholders were reluctant - I think De La Rue will trade north of £10 again in the not-too-distant future.
• Tesco.  Has remained cheap ever since I bought my first shares, and is another one I'd like to hold for the long run.

And some others that I'm not too unhappy about:

• Carpathian.  Has done very well, and probably worth a bit more than the price I sold at, but the easy money has already been made here.
• National Grid.  I never really felt I understood it well enough, and the scary balance sheet has made me nervous ever since I first bought shares.  Happy to have this one off my mind.
• Diageo.  Great business, but a bit too highly leveraged to be worth a P/E ratio of 19.

2010 / 2011

Looking back
On the whole it has been a good year for the Danfolio.  Over the year I've made capital gains of 20% and earned 3% in dividends, outperforming the FTSE 100 by about 10%.  Thanks to ISAs, capital gains allowances and my wife's basic-rate tax status none of the gains are taxable.  In fact, because this year I am moving to Norway (where capital losses can be offset against taxable income) I have earned about 1% in tax assets.

I've been a net investor over the course of the year, adding 18% to my portfolio, so as a result I have 40% more funds under management than at that start of 2010.

The 3 largest constituents of my portfolio (together making up about 35% of its value) are:

• Berkshire Hathaway, which rose by 25%.
• BP was up 41%.
• LLPC, the Lloyds preference share, returned 39%.

None of the 3 pay a dividend.

Some highlights from the rest of my portfolio.

• Carpathian, unfortunately one of my smallest shareholdings, returned a capital gain of 60% and capped it with dividends worth another 24%, for a total return of 84%.
• British American Tobacco returned 28% capital gain and a further 5% in dividends, for a total of 33%.
• Barclays returned 30% even though I sold it in March(!).  If I'd held it for the rest of the year I would only have broken even.

And just in case I was getting too smug, let's not forget:

• Rok, a complete wipeout in terms of capital, although it did pay 3% of dividends before expiring.
• Game Group, down 22% in only 8 months, slightly redeemed by 6% in dividends.

Looking forwards

As I said above, this year my family and I will move to Norway.  Property is rather expensive in the area we'd like to live in, and therefore I expect to sell off the majority of my shares to fund the purchase of a house.  I hope to continue investing, but (initially at least) my portfolio will be smaller and more concentrated.  Longer term I expect to build it back up to its present size and beyond.