Investment management - Christmas Edition

RobHT

Hello,

I hope you are all having nice holiday.
It's a very long message, so relax before to start .

Recently we were discussing in another thread about investment management, here the Christmas edition is just a funny title, but be prepared to hear a funny story too .

I started with funds like an idiot, but in every sense, then moved to only to 2 funds, useless even that, it was right to have only VLS80 and maybe other funds that cover commodoties, gold, bonds etc...

Now I own more than 40 stocks and no funds/ETFs, and I think it's time for a change.

I'm facing issues to manage all them, and gladly now I'm working from home otherwise I wouldn't be able to adjust my portfolio and follow the market properly...

Recently we've seen an interesting drop in BABA and that blinked in my mind, till you don't live it, you don't take actions, but it's also true that I may need to use a good part of the funds allocated in stocks soon, therefore I need to be protective in this period anyway.

I want to pursue a different strategy at this point, investing only in different funds/ETFs, my ISA (20k) is maxed out already but as said, I'm ready to switch all to funds/ETFs, outside I have other 30k.

I was thinking different strategies, I list them below and I wish to recieve a feedback on them (just os you know what I'm asking ):

1. 50/50 with funds/ETFs and divident funds (more consumer cyclical and safer, I also reinvest all I gain), the rest all in penny stocks, the percentage allocation would be therefore 50-45-5 (at the moment it would be 2500 pounds for penny stocks, and every month I load up the 5% in penny stocks from 2500 pounds monthly budget, these 2 numbers match casually for now that my total budget is 50k)

Dividents should be definetly mostly in UK or EU, otherwise they will be taxed 32.5% + 15% in my tax band... I need to verify if the 15% tax addition is for only US or every foreign divident received.

All this should give me a safer portfolio and potential retun in the future, exponential growth only through penny stocks, or if I don't find penny stocks to load up every month, I can easily buy shares of badass companies like AMD etc, anyway these companies have also a sort of exponential growth, but less than penny stocks, especially in short term or the next couple of years.

5k are allocated to options trading (outside 50k), we'll see how that goes in the future and how to rebalance or stop this experiment.

Many of my investments are from SPAC, mergers etc, also ALPP that casually makes the most of my gains, I saw it well on this one .
I believe that I have enough budget on penny stocks that can beat the big asses very easily, in fact that is what's currently happening.
Certainly there are risks with Penny stocks, but with high diversification it shouldn't be a problem.
I don't buy penny of weird companies anyway, only from companies that have strong patents, no legal matters behind, constant cash flow and contracts that can last, for example the case of ALPP.
If I had to buy risky penny stocks, I wouldn't allocate more than 20 pounds each in 1 year of investment.

Doing in this way it makes me feel much more safe, which is also an important thing, but let's be serious in general, the stock market is pumped like crazy, a pullback is highly expected, therefore I don't think I can be wrong investing in ETFs trackers of stocks, commodities, gold etc, plus divident ETF and a 5% in penny stocks.
The risk is managed and is heavily controlled, what do you think about it?

2. I rebalance my portfolio as soon as BABA come back, and I think most of it will go in a divident fund anyway just to be safe, or I need to put shares in many more companies, but the truth is that I can't manage a portfolio of 200 companies... So at that point I would mix up with SPY500 ETF, gold ETF (iShare....), Fidelity divident fund and probably some other, for sure not ARKK ETFs because I do that already with all my stocks manually, their exponential growth is not useful for me.

This message is from a no-expert.

Basically my goal in general is to leverage the short term drop as much as possible, as well as right now I may need liquidity, probably 50% of my investment portfolio soon, that makes the maximum priority right now.
I would of course sell outside my ISA, otherwise I can't re-insert the money there until April 2021. Taxes don't bother me, I don't think to gnerate more than 12.3k even with this liquidity requirement.

Kind regards.

Old_Lifer

You have a portfolio  of £50,000   and  MORE than 40 different investments  ?

You have penny shares and you  assume all are  going to increase in value  ?

You are considering putting just £20 a year into a penny share  ?

You  expect to generate a profit of £12,300 a year.  ?

Perhaps I may have misunderstood your post  but do you not think you are being a bit too optimistic  ?

RobHT

Old_Lifer said:

You have a portfolio  of £50,000   and  MORE than 40 different investments  ?

You have penny shares and you  assume all are  going to increase in value  ?

You are considering putting just £20 a year into a penny share  ?

You  expect to generate a profit of £12,300 a year.  ?

Perhaps I may have misunderstood your post  but do you not think you are being a bit too optimistic  ?

Thanks for the answer.

1. Yes
2. Almost
3. 20 a month in risky penny stock, in others I consider more to be honest
4. I mean that the tax allowance won't be bothering me this financial year
5. Optimistic on what? I think the last  questions are based on wrong assumption, I know the post was long but yes, there is optimism, not to generate 100x in 10 years though , 10x as minimum. What do you mean precisely?

masonic

My vote is for less in penny shares so your proposal to buy some broader mainstream investments would be a step in the right direction.

I do think you need to manage your expectations. 10x in 10 years is possible with luck, but not within the grasp of most mortals. Even less so if you dilute your penny shares with more pedestrian alternatives. Your best chance is trim down your current 40 shares to just the few you think have the best prospects and accept the massive downside risk of such a gamble.

RobHT

masonic said:

My vote is for less in penny shares so your proposal to buy some broader mainstream investments would be a step in the right direction.

I do think you need to manage your expectations. 10x in 10 years is possible with luck, but not within the grasp of most mortals. Even less so if you dilute your penny shares with more pedestrian alternatives. Your best chance is trim down your current 40 shares to just the few you think have the best prospects and accept the massive downside risk of such a gamble.

125 pounds a month for penny stocks is ok if the budget is 2500, but I didn't mention one important point, new penny stocks don't pop up every day, even if I would go for all them , so at a certain point I would drop and consider that budget in ETFs for growth and small return in dividents (always compounded), untill new good penny stocks pop up.

Reducing the risk of manual investments with just few companies, it actually increases the risk, most probably you wanted to say to reduce the portion allocated for manual stocks, what do you suggest in percentage? I honestly can't see a resonable value, I would choose a simple concept like (I balance with the ETFs return in case all the rest goes busted).
Certainly that can happen in a very long time and that's the worst case ever (how top 40 stocks can go busted for example), therefore I would have all my funds locked for a long period, maybe years, but if may goal is to reach high returns, that seems the safest way, otherwise I don't care if I fail to do what I have to do, the most important thing is that I don't loose my money completely, ideally they need to stay the same cash value when I'll withdraw, if I have to.
Then if the life is against me in the wrong moment for the market, amen.

I'm able to take a risk because I need to risk to reach my goal, othewise it's not worth the pain and I'm fine to remain with the same amount in 10 years, considering always that between ETFs, dividents and global growth, I don't see much risk to do in this way, I just need to think an easy system to balance the investments every month, and most of all, choose a percentage allocation .

Voyager2002

Some points that strike me:

Firstly, what makes you believe that BABA will just jump back? If you mean the Chinese firm Ali Baba, the fall reflects tough regulatory action (probably prompted by political factors) that will seriously reduce its profitability. While it is possible that the political conflict might be settled smoothly and the action withdrawn, no one in the western world could possibly have any information suggesting that this is likely to happen. It is more reasonable to believe that the current market price of BABA reflects its value.

Secondly, if you are going to achieve reasonable diversification with penny stocks then you will face some pretty hefty dealing costs. Unless you are able to go into this with some serious money (six figures, preferably seven figures) those dealing costs will represent an unacceptable proportion of your budget and will eat up any possible profits. This is a game that is best left to those with serious budgets.

Thirdly, while dividend stocks are great for people who need an income, growth stocks are more likely to provide growth and hence total return. Do you have any good reasons for believing that dividend stocks are safer than others?

csgohan4

40 indiv stocks, is too many,  spreading yourself thin potentially. 

Why those 40 stocks, just because they are 'penny'stocks doesn't mean they are good value. Look at BT, Lloyds e.t.c. 

Quality not quantity. But personally an index tracker would be the best way forward. BTW why do you think funds are bad? I hold a variety of funds, ETF's and a few stocks. My return to date excluding stock is a modest 10% which is far more interest I am getting paid or paying on my mortgage interest

Others may hold more stocks, but their research far transcends mine and they have had large Profits, 400-500%+, but it is risky investing in stocks. 

barnstar2077

csgohan4 said:

40 indiv stocks, is too many,  spreading yourself thin potentially. 

Why those 40 stocks, just because they are 'penny'stocks doesn't mean they are good value. Look at BT, Lloyds e.t.c. 

Quality not quantity. But personally an index tracker would be the best way forward. BTW why do you think funds are bad? I hold a variety of funds, ETF's and a few stocks. My return to date excluding stock is a modest 10% which is far more interest I am getting paid or paying on my mortgage interest

Others may hold more stocks, but their research far transcends mine and they have had large Profits, 400-500%+, but it is risky investing in stocks. 

The use of a solid global diversified tracker fund has been mentioned many times, but I fear that RobHT views them as too pedestrian, when he can simply outsmart the market himself, and succeed where thousands of other beginners have failed. 

RobHT

Voyager2002 said:

Some points that strike me:

Firstly, what makes you believe that BABA will just jump back? If you mean the Chinese firm Ali Baba, the fall reflects tough regulatory action (probably prompted by political factors) that will seriously reduce its profitability. While it is possible that the political conflict might be settled smoothly and the action withdrawn, no one in the western world could possibly have any information suggesting that this is likely to happen. It is more reasonable to believe that the current market price of BABA reflects its value.

Secondly, if you are going to achieve reasonable diversification with penny stocks then you will face some pretty hefty dealing costs. Unless you are able to go into this with some serious money (six figures, preferably seven figures) those dealing costs will represent an unacceptable proportion of your budget and will eat up any possible profits. This is a game that is best left to those with serious budgets.

Thirdly, while dividend stocks are great for people who need an income, growth stocks are more likely to provide growth and hence total return. Do you have any good reasons for believing that dividend stocks are safer than others?

Thanks, for the 1st point I can't do anything, for sure I'll watch the market to cash out and try to lose as much less as possible, if I lose btw.

I don't understand your second point, what do you mean?

Divident stocks don't grow much, the fluctation is very little compared to growth stocks, if you consider funds/ETFs is even more visible.
The whole point about dividents funds and growth funds is that I think is better to start to build them together, rather than taking growth only, if I do only one of them I may miss growth or dividents growth. Very difficult to calculate honestly, considering that you can't predict anything in the future, I'm just going by concept on this.
Also, the taxes on dividents stocks will eat up what I could better achive without taxes on a growth fund, 45.5% of taxes for dividents is crazy.
Unless I put 40k into my ISA on April all in divident funds, but honestly my platform east up quite a lot from these funds (HL), and I may nee dto pay taxes when I sell to bring them inside.
If I reinvest all my stocks into a fund in less than 1 month, will I pay taxes?
This is also another critical point, I didn't find info in UK.

RobHT

csgohan4 said:

40 indiv stocks, is too many,  spreading yourself thin potentially. 

Why those 40 stocks, just because they are 'penny'stocks doesn't mean they are good value. Look at BT, Lloyds e.t.c. 

Quality not quantity. But personally an index tracker would be the best way forward. BTW why do you think funds are bad? I hold a variety of funds, ETF's and a few stocks. My return to date excluding stock is a modest 10% which is far more interest I am getting paid or paying on my mortgage interest

Others may hold more stocks, but their research far transcends mine and they have had large Profits, 400-500%+, but it is risky investing in stocks. 

Wait , just few for the moment are penny stocks , the others are major companies of the SPY500 or NASDAQ, when I said to allocate 125 pounds per month it means that after I've reached something like 300-500 pounds in investment of penny stocks, I stop there on them and I move on on the next ones, even though this may not happen every month.
Let's say that now 36 are not penny stocks, majority of them are exponential growth stocks like AMD, NIO, XPEV, PLTR, and many others.

RobHT

barnstar2077 said:

csgohan4 said:

40 indiv stocks, is too many,  spreading yourself thin potentially. 

Why those 40 stocks, just because they are 'penny'stocks doesn't mean they are good value. Look at BT, Lloyds e.t.c. 

Quality not quantity. But personally an index tracker would be the best way forward. BTW why do you think funds are bad? I hold a variety of funds, ETF's and a few stocks. My return to date excluding stock is a modest 10% which is far more interest I am getting paid or paying on my mortgage interest

Others may hold more stocks, but their research far transcends mine and they have had large Profits, 400-500%+, but it is risky investing in stocks. 

The use of a solid global diversified tracker fund has been mentioned many times, but I fear that RobHT views them as too pedestrian, when he can simply outsmart the market himself, and succeed where thousands of other beginners have failed. 

You need to bear me