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?


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…

A Quick Aside

I started writing this post back in November 2013 (which is possibly one of the longest drafting periods in the history of blogging). Those ‘first shares’ I mentioned were bought then. I am pleased to report that the objectives I identified then remain the same now (just with slightly less time to achieve them). Onwards…!

Objectify (My Love)

The main objective of this share portfolio (which sounds pretty grand given its current status) is to grow a pot of wealth that will, in time provide an income. This income will supplement any paid work that I do in the future, and, if I get that far, the income derived from my pensions, personal and state (should such things exist in 35 years time).

It would be great if said pot of wealth could provide a significant chunk of income sooner rather than later, mainly because it would give me options over the types of work I do (or maybe don’t do) in the future. We’ll see.

As an aside (probably quite an important aside), when I say ‘me’ or ‘I’, in many cases I mean ‘we’ or ‘us’. The ‘we’ is me and my wife. The wealth is hers as well (although she misguidedly allows me to ‘deploy’ it) and so is the income.

I could also mention our two children, but since they don’t contribute to the increase in our family’s wealth (other than in a negative sense), I’ll relegate them to the back seat for now.

Imperial Wealth Destroyer

Having said I won’t mention our children, I’ll now mention them.

The only caveat to what I said above about wanting to build a chunk of capital that will pay us an income into our dotage (and there I go saying, us and our!), is that I may want / decide / be forced to help our children with the two major financial challenges that could face them in the future: the rapidly escalating costs of housing and university education.

In an ideal world, my kids (or maybe their grandparents?) will be so inspired by reading this blog and by the stellar returns (hypothetical for now) that I achieve, they will have their own Buffett-like investment portfolio and have sufficient for their needs.

However, I’m beginning to supect, dear reader, that this is not an ideal world….

Let’s sing…

Ac-centuate The Positives

Irrespective of whether the wealth pot provides an additional income source or is ‘invested’ in our children, the point remains that for the next 15+ years, I’m looking to grow our wealth through investing in individual shares.

Which brings me to my second objective. I’d really like to achieve a return that is better than simply investing in an index tracker.

I have nothing against index trackers. In fact, my entire pension fund is invested in them, and will likely continue to be for at least the next 20 years.

The thing is, if I’m going to invest the time and effort into researching shares, taking decisions and holding my nerve at times of market turbulence, I’d like to be rewarded for it.

I enjoy share investing, but if a simple fire-and-forget tracker is going to achieve better returns, I can’t bring myself to pay for the honour of doing all this work.

I haven’t given this a great deal of thought (the point of this blog is to help me with such thinking) but if, after 3 to 5 years, it is clear that I am underperforming a relevant index (likely either the FTSE100 or All Share), I intend to switch the funds into trackers and move on with my life.

Those Pre-Objective Shares

It was hardly a great cliffhanger, and this is hardly a great pay-off (or whatever the term may be).

The shares I bought, prompted by a well-known investing website and some ‘high level’ (hasty) analysis, were in National Grid, GlaxoSmithKline and J Sainsbury.

All large companies in stable sectors, with high dividend yields (4.5–5%)*.

(*Hindsight alert; I thought J. Sainsbury was in a stable sector with a stable dividend. I was wrong on both counts and if I’d done the research on the sector then, I may have been less bullish. Anyways, I sold the shares a few months ago, before promptly receiving a few back as a scrip dividend. I’ll keep these as a reminder to do more research in the future…)

Interesting, given what I just said about targeting growth over income, non? What can I say, I am man, with all man’s foibles.

Also, the portfolio is (almost) tax neutral (the shares are in an ISA) and I plan to simply reinvest the dividends in the shares from whence they came (for the time being).

In my search for growth, I’m not against seeing some tangible cash in the meantime, rather than having it all rolled into the share price.


… lusion. I bought some shares. I’ve decided I want to grow my wealth. I’ve justified to myself that my hastily-bought shares are a worthwhile investment that fit within my stated objectives.

Job done.

(Post-script: I continue to act too hastily in purchasing shares. A key objective of this blog is to help me SLOW DOWN and control my urges, both in the investing sense and otherwise….)

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