IncomeShares Challenge: August Returns Snapshot

IncomeShares is running a live investing challenge with four well-known Italian investors. All four of them make YouTube videos about markets and income investing. Each participant opened a real brokerage account at Directa on 15 June with €3,000. They can only buy or sell IncomeShares exchange-traded products (ETPs), but they pick their own holdings from the range. The challenge runs for 12 months, and this is its second monthly snapshot.

This article explains how each investor's portfolio performed up to 20 August – and what changed since July.

How the IncomeShares Challenge works

We've partnered with Directa to give investors commission-free purchases on IncomeShares ETPs, subject to certain conditions. Directa is an independent Italian broker, and its platform gives the four participants direct access to IncomeShares ETPs across European exchanges. On Euronext Amsterdam, it charges them no commission at all on IncomeShares purchases of €1,000 or more. Every sale still carries a fee, wherever it happens.

• Gianluca Ranieri Bandini held three of our ETPs on 20 August. Between them they cover European equities, US Treasuries, and gold.

• Andrea Ferrante publishes as Andrea getquin. He still held a single ETP, the same one he started with.

• Federico La Torella is better known as Il Re dei Dividendi. His three ETPs kept their aim on technology.

• Lorenzo Boiardi runs Investire in Borsa a caccia di dividendi. He held three of our ETPs, split close to evenly.

The figures below come from their monthly Directa statements. That means every number here is a real account balance rather than a simulation. This snapshot covers 15 June to 20 August.

All four investors received their second round of monthly distributions on 12 August. A distribution is the cash payment an ETP makes to the investors who hold it. IncomeShares ETPs aim to pay one every month.

Note: we've shown everything before withholding tax, so the four investors compare like for like. What each investor pays in tax depends on their own circumstances.

Where the four investors stand after two months

The chart below shows each investor's total return on his €3,000, measured from 15 June to 20 August.

Gianluca stayed in front, though he slipped just below his starting capital at minus 0.16%. Andrea was down 1.26% and Lorenzo down 1.71%. Federico was still the outlier at minus 9.13%, yet he was the only investor to gain ground on the month. He was down 9.39% in July. July's snapshot had one investor above €3,000, and August has none.

Income and capital kept pulling apart

The next chart sets the income each investor has earned against the change in value of his holdings.

Federico has collected €254.65 in income since the challenge began – an 8.49% yield on his starting €3,000. His holdings have also fallen furthest, down 15.88% against what they cost him. Lorenzo collected the least income at 3.67%, and his holdings fell the least at 5.24%.

Our ETPs sell options and collect an upfront fee, called a premium. We aim to pay those premiums out as monthly income. Premiums have tended to be larger where implied volatility is higher. Higher-volatility assets can also lose more value when markets fall. Neither the income nor the price tells the whole story on its own.

What each investor holds

The next chart shows how each portfolio was split on 20 August.

• Gianluca had 70% of his money in our EuroStoxx 50 Options ETP after his August switch. 20+ Year Treasury took 19%, and Gold+ Yield the last 11%.

• Andrea still had everything in our S&P 500 Options ETP.

• Federico held the same three ETPs as last month: 75/10/15 Multi-Asset at 52%, Semiconductors Leaders at 31%, and Taiwan Semiconductor at 17%.

• Lorenzo stayed close to an even split, with Gold+ Yield at 36%, 20+ Year Treasury at 34%, and Magnificent 7 at 30%.

What the four investors bought and sold

Gianluca made the month's one big move. The other three investors barely touched their accounts.

• Gianluca sold all 377 shares of our S&P 500 Options ETP on 17 August, for less than they cost him. He put the proceeds into our EuroStoxx 50 Options ETP the same day. The sale carried a €2.87 commission – his first dealing cost of the challenge. Sales pay commission even where purchases don't.

• Andrea made no trades, and his August distribution stayed in cash.

• Federico didn't trade either. His €130.23 of August distributions also stayed in cash.

• Lorenzo added one share of our Magnificent 7 ETP on 23 July, and another on 17 August.

Two months down, ten to go. The September snapshot will show whether Gianluca's switch into European equities was well timed – and whether Federico's recovery continues.

Key highlights

• Gianluca stayed in front at minus 0.16%, but no investor ended August above his starting €3,000.

• Federico was the only investor to improve on the month, and he did it without making a single trade.

• Gianluca paid his first commission of the challenge – €2.87 on his S&P 500 sale, after buying commission-free for two months.