Diary of a Dumb Investor: a 30th birthday present to myself

30 really!

I imagined you to be much younger.

I have followed Di's deliberations throughout the year. Some of his decisions have been "surprising" to say the least. I find it difficult to understand why he thinks he can make money at short term trading, without narrowing and deepening his field of study. Such a random selection of investments is never going to perform any better than market average.

Earlier in the year I took a pessimistic view and gradually sold all of my equities, as I felt that any deterioration in the Euro-sovereign debt crises would precipitate a sharp fall in the markets. My fears have to some exent been borne out. However I try to keep up with events by maintaining watch lists, fantasy portfolios, and tracking the performance of companies I was previously invested in. Because I don't own the shares, I can quickly weed out the "dogs" and increase my scrutiny of the "stars" This year I have found dogs and stars in roughly equal numbers, so I am not about to go carol singing with the herald angels, but the difference between me and DI is that he invested for real. I still have the cash, plus bank interest.

Going into next year my watch list has shortened considerably. I am poised to make a commitment, but not before I see some movement in Europe. It doesn't matter which way, as long as its resolved and the markets can react accordingly.

ETFs that short the European situation are interesting however it leaves one at the whim of capricious politicians spending other peoples money because "something must be done".

A separate point is that some of these ETFs are only traded intermittently which comes though strangely on (say) Google Finance. Follow RITS for a week or two and you'll see the strangeness.

Absolute return fund is a great idea. With a higher level of continuous management (for better or worse) and correspondingly higher TER, and an aim of always generating profits (usually involving a considerable use of shorting) you will be certain to find one that provides a good return. The only question is - which fund will it be?

Of course you could look at past performance ...

no lets just face it absolute return funds will always perform worse on average than any fund with a low ter - like a tracker.

You've got 2k, your current strategy (if you've got one) isn't working, why don't you think about actually making some real money with that 2k? I know you seem to like bargains and keep thinking you've caught the bottom of everything but you now you know that doesn't work (in the short term anyway), my advice is try buying something that is and has been actually going up, yes it won't be dirt cheap, but there's a reason for that - its going up! Just try it.. before you haven't got anything left! Personally I like small/mid cap US stocks, loads to choose from that are going higher and higher all the time, its not rocket science..

For goodness sake buy some Tesco, Vodafone, Royal Dutch Shell or even Aviva. Forget you own them and just enjoy their dividends.

You could do much worse than Ruffer or by following Spotdog`s sensible advice. Or as another conservative suggestion buy Personal Assets Trust ( read its latest Quarterly Newsletter) which you can access via its website or the LSE.

Oh I forgot. If you reinvest the dividends you receive from either Tesco, Vodafone, RDShell or Aviva (average 5%) your shares will be paid for within 13 to 15 years.

Havent you heard the story of Vivian Nicholson. She won 154,000 pounds 50 years ago on the Pools. Barclays Capital has done a calculation. If she hadnt spent any money, and bought 5% Blue chips with her winnings and reinvested the dividends, she would have 34 Million pounds today.

Makes you think.

@Spotdog:

Your calculations may well be correct, but I do not share your simplistic view of investing. There is always capital gains tax liability to consider. Plus the fact that capital and income growth has been far from incremental. There have been enormous peaks and troughs during the last fifty years. If you look at the FTSE 100 (blue chip index) for ten years to date you would discover that it has gone nowhere, and what appeared to be solid investments ten years ago such as commercial property would have lost you a bundle of money.

There are many strategies an investor can adopt. Blind faith in the market is not one I would associate myself with.

As regards your recommendations I'm so sure; for instance Tesco has developed its business from pure food supermarkets to out-of-town department store hypermarkets. It admits in its trading statements that non-food sales have shrunk, due to disposable incomes declining. Their huge warehouses, distribution networks, and massive superstores cannot adjust quickly to the present downturn and may find that their facilities will be under-untilised. Also recent press coverage of Aviva has not been complimentary.

Vivian N. wasnt all that young when she won .I am guessing late 40`s. So she would be almost 100 now. What do you suggest she would do with her 34million.

Question is...have you lost more money through your "investing" or more money on your birthday shindig?!!!

DI's too young/impatient for stocks like Tesco, Vodafone, Royal Dutch Shell or even Aviva, I'm sure he doesn't want to get to 80 before he can start enjoying his money.. everyone on here seems to have forgotten the old saying 'you have to speculate to accumulate' - if he wants to make money he has to do the work, just sitting there year after waiting for divs is one way to not go poor but doubt you ever get really rich from it either, aim for stocks that can go up by 10x..

Vivian was only 25 when she won the pools, which makes her 75 today. My late mother who died at the age of 79, loved spending money and indeed spent with great enthusiasm right up to her death. Anyway, even if Vivan had invested only half her winnings into shares and spent the rest she would still have approx £19 million today.

Believe me I have my fair share of speculative shares most of which are going nowhere fast. The ones that form the basis of my portfolio are good old boring Tesco etc. etc. which I feel perfectly safe with and which also pay me a dividend for my troubles.

Bloody Nora. Will you calm down! Your itchy execute finger has cost your dearly already, and now you have released 2K, it appears to be burning a hole.

I find sitting in a large cash position just as exciting as being 100% invested. You could be losing out on potential gains, but there is nothing quite as satisfying as watching the markets crumble when you have crystallised your profits.

Right now the volatility of all the indices means it could go one way or another. If you can’t hold your nerve, get out and wait for a smoother ride to come along.

The way to grow your wealth is to add cash and positions on a regular basis. I have said it before to you my friend, but you really need to start putting more money in. Just plonking 10K in an account and trying to make it work is not quite as exciting as adding a little more every month and coming up with new investment strategies.

NEVER EVER buy on a tip.

So here’s my tip. Stick it all on Afren. I have.

DI, don't forget about the need for asset allocation between sectors.

How's about a punt on your fellow scribe David Kempton's latest hot tip, Wildhorse Energy ? You can buy them for about half what he paid for his - must be a bargain (??!)