Category Archives: Shares

How Not To Set Investment Objectives

Setting Your Share Portfolio Objectives: A Lesson In How Not To Do it

In the spirit of more responsible investing that this blog is meant to represent, you’d expect me to have set out my objectives before I buy my first share. Right?

Erm….

I’m human. I try to avoid impulse purchases. I know the sales techniques that companies use to get you to buy RIGHT NOW. I can see the techniques being used. I can feel myself being used.

Despite this, I succumbed.

Actually, it’s not quite that bad (I hope). I’m pretty sure the shares that I’ve bought do fit with my investment objectives. But let’s come back to that later. First, those objectives… Continue reading

Why I Am Persuaded That Long Term Investment In Shares Is The Right Choice For Growing Wealth

(Which is about the worst and most boring-est title for a blog post I’ve seen in quite some time.)

Long term, the stock market, whether that’s the UK or the U.S. has given a return higher than any other asset class (probably… I think…).

I am 36. I anticipate the money that I’m saving to build my portfolio will locked away, dedicated to generating me investment returns for at least 20 years.

My (initial) intention is to invest in dividend paying shares.

Show Me The Money

Leaving aside the argument that returns are higher on dividend paying stocks (perhaps because management that prioritise the payment of dividends are less likely to go off on ‘bet the farm’ style M&A adventures), I’m hoping that I will be encouraged by the sight of dividends pouring dribbling into my account each month, and therefore distracted from spending each and every day looking at the market prices of my shareholdings (and therefore any paper gains (hooray) or losses (boo!).

In the short (and probably medium term), the plan is to allow these cash payments to build up in my dealing account and use them to buy new shares when I have enough to make dealing costs a sufficiently low percentage of each percentage (probably around the 1-1.5% mark).

Go Compare Dot Com

Gradually, I intend to compare these dividend cash flows to my and my family’s monthly outgoings.

Of course, at the beginning and for some time thereafter, they will be a minuscule proportion of what we need. But over time, hopefully (hopefully!) the amounts will grow and give ongoing encouragement, even when conditions in the wider stock market are volatile and disheartening (for when I haven’t quite achieved the Buffett mindset, “Stocks are on sale!”).

[monthly results update: show %age of estimate outgoings amount covered by dividends]

My Biggest Risk Is Not Being Invested

I’m working on the basis that my biggest risk in building my savings is not volatility in the stock market. It’s inflation.

The fact (hypothesis?) that volatility in stock market prices does not equate to risk (or a poor return on investment) has been borne out for me by personal experience (which I will write about another time).

On the other hand, inflation over a 20–30 year period will knacker cash (and fixed income) savings. I can’t see the need for having more than a ‘rainy day’ fund in cash.

Same goes for bonds really.

Don’t Get Me Started On Property…

I can’t be arsed with property. I don’t think you need it for diversification. It’s a real hassle to deal with repairs, insurance, agents and tenants. It ties up your capital in a pretty illiquid asset.

One of the main reasons that people* have made money from property (and I’m mainly talking buy-to-let residential) is that they’ve been leveraged (in some case highly).

(* Lay people, rather than professional property investors.)

And since property prices ‘always’ go up, and buy-to-let seems the only asset class where it’s acceptable to borrow in order to invest, people have not realised the level of risk they have taken on.

That said, if you like Homes Under The Hammer (which I do), and you enjoy wielding a circular saw (again, I do), don’t let me stop you from a little property development on the side.

As you might have gathered, property investment is not for me (though I might consider the odd REIT for the Investicles share portfolio).

Share and Share Alike

So I’m all in on shares.

I’m all in within my pension fund (albeit in global index funds) and I’m all in with my ISA.

I intend for shares to form the main part of my family’s savings over the next 20-25 years and probably beyond.

Now. Who’s with me…?

Buy a business not a share

Lessons in Creating a Share Investment Portfolio: Buy A Company, Not A Share

“Just as it would be foolish to focus unduly on short-term prospects when acquiring an entire company, we think it equally unsound to become mesmerized by prospective near term earning or recent trends in earnings when purchasing small pieces of a company; i.e. marketable common stocks”

Warren Buffett (who else?), Letter to Berkshire Hathaway shareholders, March 1978

I’ve been interested in share investment since the late 1990s, I’ve spent 12 years working for an investment bank (albeit on the debt side of the business), I’ve owned trackers, managed funds and individual shares. But I’m not sure I’ve ever really thought about shares in the way described in Buffett’s quote above. Continue reading