Woodford Concerns

Reaper

DennisTenus wrote: »

I have over 30% of my portfolio in Fundsmith, that too much/too risky?

Possibly. The fund aims to invest in 20-30 stocks so it is quite concentrated.

But if the remaining 70% is well diversified you probably don't have to worry.

cogito

bowlhead99 wrote: »

If it helps, I mentioned paying 66.5p to add a few thousand shares to my pension earlier this week. On Friday my Dad added some to his ISA at 63.18p.

You can buy it for less than 60p today. Will you be doubling up?

AnotherJoe

DennisTenus wrote: »

If any good can come out of this it would be that we would evaluate our portfolio's and attitude to risk..

I have over 30% of my portfolio in Fundsmith, that too much/too risky?

Theres no such thing as "too risky" in isolation. Whats too risky for you might be dull as ditchwater for me whilst Bowlhead might be outrisking us by buying penny AIM stocks on an app whilst base jumping. Or to make it even riskier, investments in a company that think that Cold Fusion is not a scam.

I'd say that 30% in one investment is probably slightly imprudent for most but if the rest of your investment are UK government 1% gilts redeemable in 2100 * then you are probably OK.

*(for the avoidance of doubt I just made that investment up)

Reaper

cogito wrote: »

You can buy it for less than 60p today. Will you be doubling up?

I'm sure Bowlhead can answer for himself but I think it highly unlikely. It is fair enough to have a small proportion of your funds allocated to speculative and risky investments, but doubling up is a mugs game. It moves the investment from a small gamble into mainstream.

As he said previously:

bowlhead99 wrote: »

Clearly there is risk and it is not a one-way bet, which is why we are only putting in thousands as a small part of a portfolio, rather than tens of thousands. No need to bet the farm.

AnotherJoe

EdGasketTheSecond wrote: »

Well 4.53% actually but still, that is only in the most favourable scenario; the other three scenarios expect to lose between 2.64% and 12.7% pa. Not a very attractive proposition based on these figures and scenarios.

I agree.

And who on earth put the 4 and 5 right next to each other on a keyboard? Asking for mistakes.

bowlhead99

cogito wrote: »

You can buy it for less than 60p today. Will you be doubling up?

Not a lot less than 60p though, so not substantially different from what we were paying last week. As I mentioned in an earlier post, if it falls to 55 or 50p I might have some more. 50p would be a quarter less than I paid last Tuesday.

But as Reaper implied, to pay ballpark the same amount per share as I already paid, would just increase my exposure to a risky holding that I already decided I was happy with. If the price is lower it might be worth looking at again, and I do have some spare 'risk' money - because having money for opportunities is one reason not to be fully invested at all times.

seacaitch

Reaper wrote: »

It is fair enough to have a small proportion of your funds allocated to speculative and risky investments, but doubling up is a mugs game. It moves the investment from a small gamble into mainstream.

A sensible way to open contrarian positions in highly volatile (including plunging) securities is to scale into them over a period of time as part of a considered trade plan that helps remove the emotion from the process.

At the outset you decide upon the size of the maximum position size you're aiming to build and an appropriate timeframe (chosen to build patience into the process), then break the purchasing money into chunks to be deployed over that timeframe, so long as the price remains attractive to you and the investment thesis remains valid, in order to scale-in and obtain an average price over the period.

So, a 2nd (or 3rd or 4th etc) purchase (at say, a lower price) following an earlier 1st purchase would not be "doubling up ... mugs game" etc. but simply a pragmatic way to go about steadily building your position.

Clearly, this isn't really what the vast majority of retail punters do who like to gamble on buying things that are rapidly falling in the hope they quickly bounce. Hence, in the face of continued falling prices after their purchase, (a) plenty of punters will be fearful and immediate buyer's remorse will cause them to bale out crystallising a rapid loss; while (b) others will be greedy and buy more (notably, more than they ever originally intended to buy unlike our sensible buyer above who has a plan to scale in), which if further price falls ensue will take them outside of their risk tolerance causing some/many of them to be like the people in (a) and bale out, crystallising a larger rapid loss; unless there's a rapid bounce-back in prices, which after all is what most are hoping for, many of the remainder (c) will lose patience and sell, again crystallising losses. If the security does go on to eventually recover, few ("almost none") of the people who enjoy that price appreciation will be those who bought during the rapid price plunge.

NB none of this is a comment about bowlhead.

Fatbritabroad

bowlhead99 wrote: »

Not a lot less than 60p though, so not substantially different from what we were paying last week. As I mentioned in an earlier post, if it falls to 55 or 50p I might have some more. 50p would be a quarter less than I paid last Tuesday.

But as Reaper implied, to pay ballpark the same amount per share as I already paid, would just increase my exposure to a risky holding that I already decided I was happy with. If the price is lower it might be worth looking at again, and I do have some spare 'risk' money - because having money for opportunities is one reason not to be fully invested at all times.

Speaking of opportunities and purely as a punt I'm considering hl after their shares being down 20% over the last month

EdGasketTheSecond

Fatbritabroad wrote: »

Speaking of opportunities and purely as a punt I'm considering hl after their shares being down 20% over the last month

If they are found to have been selling their own holdings in Woodford while at the same time promoting Woodford to PI's, that might not be such a good idea. Could be the next mis-selling scam.

aberlyfid_2000

PCT: i dont think that its a case of catching falling knives, its more apt to say that you are trying to catch an Exocet missile.