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Diary of a Dumb Investor: should I invest in shares at all?

It's time to admit defeat, sort of, and seek advice from some share-picking pros.

 
Diary of a Dumb Investor: should I invest in shares at all?

Here are the facts:

1. My share holdings, with the exception of Standard Chartered STAN.L), are losing me money. That’s my long-term holding in BP (BP.L), as well as more recent purchases in Aurum Mining (AURU.L) and Hutchison China Meditech (HCM.L).

2. My fund holdings are making me money. They vary significantly, with my two emerging market equity funds making me a packet and my holding in RIT , an investment trust, technically in the clear (but after inflation I guess it’s losing me money – one to take a closer look at next time).

My portfolio: Click to enlarge

I also know for a fact that it’s too soon to call time on any of my share holdings. BP still needs to recover, and there is no point in selling it until it does. And I knew China Meditech and Aurum were high-risk choices when I bought them, particularly the latter which I only picked up a couple of weeks ago to add some zing to my portfolio.  I think they’ll both recover in price.

BUT. But! It’s not looking good. My confidence has been beaten down with my shares: I can’t help but drawing an early conclusion that an investor like me should instead be putting all of this money with the pros, that’s the fund managers with a proven track record of making money. Rather than trying to pick stocks that is.

However, that would be boring and uninspiring and I think I’d lose my interest in investing. So I need to find a compromise. I need to match what the good fund managers do (a strategy I alluded to last week).

So, I’m going to watch what shares strongly-performing fund managers buy. I’ll then do my own research and make a decision accordingly.

I’m hoping that using Citywire Top Stocks – a way of monitoring the shares held by five of the UK’s top fund managers – will help me here. Citywire used to run a portfolio based on these Top Stocks, but I’m told that they’ve since folded it, so the floor is mine.

I'm using this sensible strategy to convince my uncle to give me some more cash to invest – £10,000 just isn't enough to create a proper diversified portfolio.

24 comments so far. Why not have your say?

Lee Whitehead

Feb 18, 2013 at 14:21

for gods sake man, look at the timescales, you are in theory investing for your retirement pot, which is what? 30 years away? don't be impatient, I have been holding RRL for over 12 months and been averaging down during that time, now things are starting to turn a corner and I am poised to make a good return, its been testing but thats the name of the game.

check out the 1 year, 3 mont and month graph to see what I mean...

If you dont like the holdings, take a hit and sell them, if you like the companies and believe they are worth of the investment then dont be impatient and hold.

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kince

Feb 18, 2013 at 15:20

Crickey!

You sound like Fredo from the Godfather. ' What am I gonna do !?"

Didn"t your uncle tell you there would be days like this ?

And why would he give you even more money when you don't even know how to make money during a rally?

You've got two stocks STAN and SST up over 40%. Are you expecting them to go up forever?

Why not ring the register on your original stake and carry on playing with the houses money?

Then you will....

1. Have cash to buy back the shares on a pull back or invest in something else ( like AUR)

2. Not feel a fool when the rally fizzles and have something to show for it.

Ideally, selling a third would be best but I think your dealing charges would make this prohibitive.

good luck

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Tony Peterson

Feb 18, 2013 at 15:57

Young Faust would disagree with you. Haven't you ever wondered how he is doing?

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Alwaysright

Feb 18, 2013 at 16:09

Sell Aberdeen, Scottish Oriental and Standard Chartered on the basis that a profit north of 20% should be taken. Sell Old Mutual on the basis that Bond Funds are a cliff edge waiting for investors to fall off it.

Reinvest proceeds to a FTSE 350 tracker fund and go on holiday.

One serious point for any retail investors reading your posts: do not play this game with money you are serious about. This is a punt fund and should only be followed with "play money".

If this is all you have and you can't afford to lose it, keep it in cash.

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MattM76

Feb 18, 2013 at 16:13

Unless you are a day trader, then you need to accept that it'll take months to years to build up a decent paper profit. The market always tries to shake out weak hands. Prices go up and down like the tide of the ocean. You just have to make sure the waves are coming up the shoreline a little more each time.

It's not terribly complicated if you're looking to build a retirement portfolio. Do some research, pick companies with solid financials that pay out a decent dividend. Get to know the companies. Read their trading statements.Tell your broker to re-invest those dividends automatically. Most brokers have this service and the trading charges should be substantially lower as they'll process many orders at once.

I realise this column is meant to entertain more than educate and that in reality the average investor barely trades from one month to the next which would make for dull copy but chopping and changing investment strategies when the wind blows differently will only make your broker richer.

By all means have the odd fund/ETF/trust in your portfolio if you want different exposure or diversification but make a calm well researched decision. Take your emotion out of it.

Perhaps the column would be better re-invented as the "Dumb Day Trader" if you want to entertain us with regular trades.

All that said, I find this column a lot of fun!

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peter hart

Feb 18, 2013 at 16:18

You must be doing something wrong. With dividends reinvested the value of my holdings have increased by 60% since 2009. 50/50 split between equities and bonds. Of course it could all fall apart anytime soon.

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Anthony Tinslay

Feb 18, 2013 at 16:24

I presume that your rather daft comments and suggestions are made merely to attract a robust dialogue rather than a serious response. Just face it, you are not and seemingly never will be an INVESTOR. If serious you appear to be a bag of nerves and should take a long holiday

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Geoff Downs

Feb 18, 2013 at 16:34

peter hart,

If you are worried about it falling apart, just speak to Tony Peterson and he will have the answers. LOL

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Chris B (Slough UK)

Feb 18, 2013 at 17:04

Probably best to buy real gold bars and hide/bury them somewhere, where the government or anyone else can't get hold of them for the next few years! The markets may push higher yet, but there is a big storm just around the corner. In the end the QE fuelled bull market will turn very sour, especially as people lose confidence in bonds (which most likely many will become worthless bits of paper). Buffet's technique is largely the best one, wait for the markets to go down to a good low level then jump in fill your boots with low debt companies with good fundamentals, then grit your teeth and hold there for a few months. The markets will likely carry on further down before they begin to turn, then you 'just' ride the wave back up. Holding on for another year or so, or so. Its was really a simple no brainer approach, but that is the beauty of it. When interest rates are high and they start talking about recession, its time to head for the exits and sit on cash for some good amount of months. There is much talk about recessions now as well, but interest rates are being held artificially low, which as we know is killing savers and creating an anemic future for many. More QE may still stimulate the markets but it is getting harder to do this and currencies are getting more and more devalued in the process and storing up trouble for the future. You might miss the markets bottoming or topping out, but at least you don't get smashed trying to chase things. Cash is a valid position good in the short-medium term. Buy things that are relatively very cheap with good fundamentals too. Most short term investors wash out. You can't time the market perfectly, but you can get as close as you are able to, by using the longer term swings and price levels. The good thing about shares, is that there is no time limit/penalty on owning them, unlike many leveraged vehicles available. Well if nothing is working then its time to try something else. Short term investing isn't investing, its speculating. All anyone can do is stack the odds heavily in there favour and even then you need a little luck. In my view there is so much QE money wafting around that the markets have become hideously distorted and as a result it is hard to put a true value on anything and nothing is what it seems. Technical Analysis also won't show you that a crash in price is just about to happen! Good luck...

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Dividend Income investor.com

Feb 18, 2013 at 17:09

It is rather simple; focus on high quality dividend paying companies and ascertain whether they are trading at historically undervalued. If not don't buy. For more on all this, see: http://dividend-income-investor.com/dividend-growth-investment-strategy/

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snoekie

Feb 18, 2013 at 19:06

There is much to be said for realising your gains in Standard Charter and Old Mutual and sitting back and waiting. As Chris B has put it it is likely that the market will turn sour, but then you are going to have to be patient and not let the money burn a hole in your pocket.

He also makes a point about the interest rates and here I can only quote was an old headmaster said at exam time, and I'm paraphrasing, the longer and deeper you hold down a cork (interest rates) the higher it is going to jump when you let it go. On top of that, there are still a number of stormclouds on the horizon, which haven't gone away, and which people on both sides of the Atlantic, including across the ditch (channel), have not even begun to address, the massive debts still outstanding. In the US the politicians will play football in an effort to score points off each other. In Europe Spain is playing fast and loose and France is ignoring the problem. Why? Perhaps because Germany doesn't want to catch pneumonia, which it undoubtedly will if France came clean.

In the UK, Osborne has hardly scratched the surface, no doubt because of pressure from the GLibDems, in part, and perhaps also because he will get a thorough kicking from the Cyclops student Balls. Mind you, my view is that he, Balls, talks as his name implies. Perhaps a more accurate description would be male bovine excrement, BS.

I am still sitting on some cash, buying only certain shares when they dip, and then only in small chunks, generally much more than your individual purchases.

Finally, as for your headline, you depart the market at your peril. Risks, for sure, but look at the profits made on 2.

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J Bewey

Feb 18, 2013 at 19:38

Can anyone recommend a physical gold etf please?

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Chris B (Slough UK)

Feb 18, 2013 at 19:58

PHAU in the UK, priced in Dollars though.

GLD in the US

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Michael Hellman

Feb 18, 2013 at 21:26

Ive just watched Blandings on iplayer.... Funds are sooo much safer and need not be dull, just look at your Oriental Trust. BP pay a nice divi, and in order to take more of a relaxed approached and continue to make money dont be a Chronic Investor, you will go bust.

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walkup

Feb 19, 2013 at 03:59

Gold would have been a Dead Duck a l'Orange for Dumb investor.

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Dividend Income investor.com

Feb 20, 2013 at 09:54

Just released an introductory article with regards to the differences between Bond income and Dividend income investing at: http://tradingresearchpoint.co.uk/2013/02/20/dividend-income-versus-bond-income-investing/

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philip gosling

Feb 20, 2013 at 18:03

Thanks for the articles - I enjoy them and come on everyone lighten up - the articles are educational and entertaining enjoy them.

Surely you don't just read an article and then think 'Oh that's a good idea/bad idea" and go and invest your money.

I used to invest only in shares but now find myself almost 95% in funds only hanging on to Babcock now.

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Cheryl Mara

Feb 21, 2013 at 12:52

Shares are an essential part of any portfolio.

You should focus on only 10 key shares (Standard Chartered do look good) that should do well over the long term and keep them! Wait for takeovers and take dividends. @TheShareTips

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Onup

Feb 24, 2013 at 09:44

Apart from general market dips look at longer term perf,graphs of funds 5 or 10 year and you will see the steady value of staying in .look at longer term fund perf. Against its peers.

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Onup

Feb 24, 2013 at 10:10

Staying in longer term as 5 or 10 yr perf graphs show pays off but also diversification is crucial think outside uk and Europe as our probs do not always impact the wider picture and vice versa

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Dave P

Feb 24, 2013 at 13:31

Yep, let's all just continue to enjoy the comment.

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rik

Feb 27, 2013 at 22:39

You should remain dumb.

Buy high, sell low,

and entertain us all with your ineptitude!

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sil

Mar 02, 2013 at 23:46

'Reinvest proceeds to a FTSE 350 tracker fund'

ft250 is far and away better. BP and others need to have the dividend included in the returns.

Answer to this article is stick to unit trusts is much simpler

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Anonymous 1 needed this 'off the record'

Mar 05, 2013 at 10:56

Is this a good time to move from a cash isa 2.25% to a income fund , or shares that pay high dividends ,i am worried the market is in for a correction.

as a dumb investor, i not sure , income funds, its been said its a bit of a bubble at the moment ?.

strategic bonds or high yield bonds.for higher income ?

or just transfer and buy high dividend paying shares in a isa wrapper.

£52g to play with, suggestions welcome.

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