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Diary of a Dumb Investor: I won't be following America off a cliff

I've sold my Lloyds (LLOY.L) shares; next up I plan a shrewder move, drawing on my deepening investment know-how.

Diary of a Dumb Investor: I won't be following America off a cliff

I’m still trying to free up some more cash as well as shore up my position against the evil, squabbling forces of the eurozone, eating away at my profits and – to be frank – boring me senseless.

That way I’m ready for the Big Rally but also safe against the Big Crash, come what may.

Maybe, having just ditched my loss-making Lloyds (LLOY.L) shares, this time I should sell something that has made me money. That would mean, yes, I would make a profit.

Where I stood on Monday: Click to enlarge

So how about the cannily-named iShares III plc S&P 500 (ACC) USD (GBX) (which in non-robot speak is an investment that tracks the US stock market)?

Here are my reasons to sell, reaped from some shrewd Googling (I’m still to learn an alternative investment strategy – thoughts genuinely welcomed):

  • The US economy, which was looking good, is starting to turn a little peaky
  • If the eurozone continues to crash and burn – give me one reason why it won’t – then US shares will suffer in line with other shares (surely?)
  • Commodity prices are falling and 30% of S&P earnings are tied to global commodities (though how you confirm this sort of stat pulled by a random US website, dealt to me my Google, I don’t know)
  • City spinners say US shares are cheap – but so it seems is everything else available. Other City spinners say US shares are overbought – presumably that means when sentiment turns there’ll be a frantic orgy of selling.
  • As the euro falls, the dollar rises. This makes it more difficult for exporting US companies.
  • This ‘fiscal cliff’ business worries me. A City type quoted on this very website says that if the US does not fix its finances then ‘we go over the cliff Thelma and Louise style and we have a recession in the US’.
  • Besides, the presidential election is coming and who knows what that will bring?
  • In short, the politicians in the US seems as troublesome to my portfolio as those in Europe.

When do I sell though? Last week I gleefully recounted in this column about how I was going to ditch Lloyds, planning my move just when the bank’s shares were really soaring ('buy low, sell high' I chanted to myself).

'This guy's not so dumb after all', you thought – picturing me, I imagine, sat behind half a dozen flashing screens, shouting into two phones at once. In the event though I got nervous, distracted or something, and sold them the next day by which time they were back deeper into the stink.

It takes nerves of steel to see this stuff through.

9 comments so far. Why not have your say?

Lee Whitehead via mobile

Jun 18, 2012 at 18:28

In all honesty I would dump all bar BP, top up some of that before the settlement, and diversify your equity mix, adding dividend stocks for long term, Vodafone, RSA, Legal & General... Keep some cash back to pounce when you need to.

If you look at how long the portfolio has been held and where you are placed, I would say things like Personal Assets aren't really working for you, but kill a huge chunk of change for small share qty and smaller dividend.

Study the companies you like, look at the upcoming ex dates and you can gain some capital quite quickly relative to how things have progressed so far...

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Jun 18, 2012 at 18:44

I'm currently in profit on Lloyds (ordinaries and prefs), and Personal Assets continues to impress. However, last week, I was mostly buying European equities including REITs.

(BTW, I also hold RCP, TRY and that Old Mutual bond fund!)

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peter lai

Jun 18, 2012 at 19:54

There's really no point in buying and selling establish shares when your dealing in such small quantity, the fees and tax will be too burdensome.

To make profit, I think your best bet is to go bold and find some penny shares, or just something cheap, and invest about 2,5k in them, to minimize the impact of the fees. Yes it's alot more dangerous, but the buying and selling £1000 of shares that goes up 5% just mean you wasting your money on fees as your looking 3% in fees alone, if you are set on buying big comp shares, then at least give it a while and really let them raise.

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Jun 18, 2012 at 21:37

In your first posting you stated that you would be using a "scatter-gun" approach to share selection. Personally It would not be my weapon of choice if I had just £8,000 to invest. Perhaps an air rifle with telescopic sights would be more suitable. Anyways you will have to aim more carefully in future.

It could take another 3 to 6 months before we know which way the Euro is heading, for that reason I am not investing at the moment.

However I have the following companies on my watch list.

Rolls Royce. £1bn govt. contract awarded this week. (nuclear submarines) More likely to follow as they are in the frame for next generation nuclear power station contracts.

Renishaw. They make ultra-precision measuring devices which other companies cannot copy. Therefore they operate on a pretty healthy margin. Seems to me they will use the surplus cash to acquire more niche market companies.

Clarkson. Established and experienced ship-brokers. There are not too many around. It's a high margin business if they get it right.

Mulberry. Results were announced last week. The market was shocked and marked the shares down 22%!! I don't know why. They produced a healthy profit, by my reckoning, are holding plenty of cash, and declared plans to build a new factory in somerset. Maybe stockbrokers wives have enough handbags already.

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peter lai

Jun 18, 2012 at 21:53

When you investing in such small amounts on well establish shares, your going to have to wait long term to see real gains, buying and selling when they go up 5-10% on a £1000 investment just means more money for your broker.

If you really want to make profit your going to have to take more risks and start looking at cheaper shares and investing about 2.5k on them. 1k worth of shares mean you need a gain on 3% to break even.

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joe stalin

Jun 19, 2012 at 07:48

Last thing I would have done. Market is getting massive liquidity injection and Lloyds getting closer to being in a position to repay its investors. managed funds right now are a waset of time with small gains in some instances invariably wiped out be excessive fees. Dividend stocks are key. RSA, Prudential and even MAN at curent levels. For capital growth and income the nhouse builders are worth a look imo.

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Antonio VIvaldi

Jun 24, 2012 at 10:23

Do you have any real idea why you are "investing" at all? Instead of trying to copy people (most stockbrokers for instance) who think that gambling on share price movements is the way to riches, you should do something much more sensible. Find half a dozen or so investment trusts with low charges, substantial reserves, a proven track record of paying increasing dividends and a simple and sensible investment strategy. Buy them and hold them for ten years then watch the magic of compound interest do its work as the dividends are reinvested. A return of 7% a year (whether it comes from share price "growth" or dividends) will double your money in 10 years.

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Ian Pinkard

Jun 24, 2012 at 10:35

With the latest news I'm probably going to increase my holding of Lloyds. Softening of regulation, RBS disaster (Lloyds will gain market share), there is more potential upside than downside.

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Jun 24, 2012 at 13:23

Ian, he has ditched them, if the situation is real. I suspect this was a wheeze to write a few column inches each week. Money probably came from citywire to get the publicity, or the "portfolio" shown is a mock-up.

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