Critique my Investment plan

grey_gym_sock

how can you say they're to be held for 20 years? a moment ago, you were saying said you'd started in february and already sold part of 1 holding?

you'll also find that sometimes companies get taken over, or they change and it no longer seems like a good idea to keep the shares, etc. so whatever your approach, 20 years is unlikely to be the average holding time. i hold share for quite a long time, but i usually assume 5 years as an average.

Bazofts_Revenge

20+ years is my aim but I have no rules set in stone that would be just plain daft. If I see an opportunity (sudden falls) and I see a quick profit (sudden gains) I will take it. With 'Man' I had pushed my holding to 8% of the portfolio and that sort of exposure was outside my comfort zone. Once I had made good the previous paper loss I reduced my exposure. I don't really care about the charges as I make the decisions. If I only hold a share for 30 minutes it won't bother me if there is profit in the trade. If I had the time to day trade I would and maybe one day if I have a big enough buffer or decide to retire then maybe I'll do it then. Maybe I'll start a separate account with £5k and have a play.

grey_gym_sock

well, i'm not clear exactly what your strategy is ...

a possible problem with being prepared to take a quick profit is that you'll end up holding on to all the shares that have done badly. as often the same shares will keep doing well or badly for a long time.

you're correct to watch for 1 share becoming too high a % of your portfolio. though i'd suggest buying a small enough amount that they have room to grow - e.g. if your limit is 5%, only buy 2.5%, so it has room to double before you'd have to trim it.

Bazofts_Revenge

If a share grows and becomes a higher % then I am not too concerned. I am refering to my actual original capital exposure. £4k in one company when I only had say £1.5k in the others was then too high.

No one can say what is wrong or right. I'll just keep playing the game whilst I enjoy it. I played a similar game through the bust of the dot com bubble and patiently made a small profit after some spectacular losses.

racing_blue

This is a comment about the 20 year buy and hold idea

http://www.fool.co.uk/news/investing/investing-strategy/2009/05/27/25-years-of-the-ftse-100.aspx

Here is an article looking at what happened to the initial 100 companies of "FTSE-100" fame between the inception of the index in 1984, and 2009 (25 years)

Status Number of original constituents
Survived 34
Acquired 50
Relegated 7
Broken up 6
Bankrupt 3

In that time the FTSE100 rose from 1000 to 4539

It would be interesting to know what the value would have been for a basket of the original 100 companies, simply held for 25 years

Although I have no evidence that this is correct, I would expect a FTSE100 tracker to outperform? As it would be shedding declining blue chips as they left the FTSE100 but while they still had considerable value.

Bazofts_Revenge

BLB53 wrote: »

Some good companies there, also some - shall we say average.

My personal view would be you appear to compromise on quality in the quest for higher yield. Over 5 yrs this may pay off but over 20 yrs the total return on quality shares - Diageo, Reckitt and BSKYB for eg - will probably be a lot better than the likes of ICAP, Tullett, Halfords, Aviva and Man (just my opinion of course).

I would also be looking at some overseas exposure via investment trusts and also some smaller companies eg Aberforth.

Good luck with it though!

ICAP had some good results today. The share price rose by 14%

Halfords have given me a 30% rise since the start of the financial year.

Severn Trent have also risen by 14% today had I just bought a tracker such a rise would have been heavily diluted by the other shares in the FTSE whatever index.

Maybe these gains will be gone next week! maybe not.

grey_gym_sock

Bazofts_Revenge wrote: »

Maybe these gains will be gone next week! maybe not.

but do you care? no, because you're holding the shares for the next 20 years!

The_Thrilla

No problem with what you are trying to do, but 33 is a hell of a number of companies to look after.

racing_blue

Over the market cycle from 2004 to 2008, the S&P 500 outperformed 71.9% of actively managed large cap funds, and the S&P SmallCap 600 outperformed 85.5% of actively managed small cap funds.

If the incoming tide floats your ships preferentially, what happens when the tide turns?

bowlhead99

racing_blue wrote: »

Over the market cycle from 2004 to 2008, the S&P 500 outperformed 71.9% of actively managed large cap funds, and the S&P SmallCap 600 outperformed 85.5% of actively managed small cap funds.

If the incoming tide floats your ships preferentially, what happens when the tide turns?

The argument from fans of passive investing is that the active managers are outperformed by trackers on average in both up and down markets, due to fees and expenses, and that greater returns made by some active managers or some private small portfolio shareholders over a longer term are simply attributable to greater risk. So it doesn't matter if the tide is coming in or going out.

So goes the theory. Of course, having a portfolio tilted towards the largest companies in an index at a time when the index is at high levels, is not always a great thing - the construction of the index means it is overweight tech firms in 99/2000 and financials in 2008.

Just because an index represents every dollar of the investible market, it does not mean one has to follow those splits and not some other measure. You might prefer to invest equal amounts in 500 companies and not 200-250 times as much in the largest as you have in the smallest. It would lead you to have a different result from what you heard on the evening news that the 'market' was up or down x%, but not necessarily 'wrong'.

Personally I would not want all my holdings to be in UK largecaps to the exclusion of smaller companies with growth potential and the 90% of the world markets which are outside the UK. But I get that you would have to access the non-UK markets through funds, which are inherently less 'fun' than picking Halfords or Greggs in the current UK economic environment and seeing if it lives or dies.

You mentioned Greggs falling and potentially being an investment. I wondered if they would have anything insightful to add about trading conditions at the AGM but the RNS today says there will be no update. So you're just left with the comments from the warning at end of April that they were "experiencing lower footfall across much of the estate" and that they "do not expect a significant improvement in the difficult underlying market conditions in the short term"