Investing, beach style

   As all investors know there are lots of different styles of investing; value, growth, GARP, indexing, following tips from the man down the pub etc. Each professes to be the best way and it's easy to get bamboozled by the choice of strategies and the advice out there. For what it's worth, I don't lose any sleep over this. Finding an investment idea is the easy bit, staying patient is more difficult. One of my favourite investment styles is Dividend Investing. It's a form of value investing and works well if you are that stage of your life when you are a regular investor.
   The way it works is this. Every month of the year, I invest the same amount into a different company until I have a portfolio of 12 shares. This is done through my maxi ISA contributions. The next year I start again afresh. Diversification is the key, but I do allow myself a rule of 2's. I am allowed 2 companies from the same sector per year, but can only have 2 sectors traded like this in total. I can also have 2 foreign companies in each portfolio. Otherwise the shares have to be from different sectors and listed in the UK. The reason I allow the 2's is, it highlights the sectors or countries with more value that year. It's riskier than rigidly diversifying in LSE listed companies and I don't know if it's better.
   Each company must have a large market cap, say about £1 billion, a history of stable dividend payments, a high % Yield and acceptable levels of debt. The usual financial measures are scanned and compared to make  the final choice.

   In my version of it, it's particularly easy to stay patient, because once you choose the investment you let the market do any future trading for you. It's not necessary to think about when to sell, because you never will, except if you want to run down the capital. The market trades the portfolio on my behalf with mergers, acquisitions etc., and most likely will do a better job of it than I could.

Think like the Gambler

 



 Although no one can predict the future, we can all plan for it. This is one of the most important aspects of investing. Before opening a trade/making an investment, I spend as much time thinking about what will make me close it, as I do about researching the idea in the first place. Investors seem obsessed with finding fantastic investment ideas and give little thought about what may happen to them. As a result, they often do not behave sensibly when the price wobbles.One of the great advantages of being a private investor is you don't have to be pushed around by the vagaries of the markets or other people. The key to staying calm is to think through each investment, both individually and as part of your portfolio. Let's go through an example. At the moment, the market looks toppy and I don't think anyone would be surprised if 30-40% was wiped off the value of equities in the next few years. So do you buy or sell now? The answer lies in the old adage of expecting the best but preparing for the worst. I'm 80% invested in equities and 20% in cash, not including property or commodities. If and when the market falls, I will use the cash to add to my positions. Why 80% invested? The honest answer answer is, it feels right for now. The only thing I know for certain is that I want to be fully invested near a market bottom. It's tough opening your broking accounts and seeing a large loss. Bear in mind though that you're buying real companies and remember what Ben Graham had to say about Mr Market.
   It's funny that in all the years I've spent reading about investing, very little is written about this aspect of it. To me it's the most important part. I guess I follow Kenny Rodgers advice when he sung about the gambler and something about there's no such thing as a good or bad hand, just the way you play it.

The Long View

One of the advantages that  the private investor has over the institutional investor is the ability to take a long view. As there are no hordes of policy holders banging on the doors demanding a redemption, the private investor can sit and wait. It would of course be encouraging to have  a percentage increase in one's investments on a yearly basis, but this is not always possible. Those who claim such an ability are like the sirens. Take B Maddoff for example. Patience is a virtue few investors have.
The past 12 years has been a great time to be an investor, if you are actively saving and are willing to take a long view. As long as you make some sensible investment decisions and don't be panicked into overtrading, the future looks rosy. The reason that I am confident of this, is that major markets move in cycles. These cycles tend to last about 17 years, the last boom beginning in about 1983 and ending in 2000. We are 2/3rds of the way through the present secular bear market for equities and as an active saver at present, I am  happy. In 1983, as modern economies were emerging from an horrible period, the foundation of a major stock market boom was becoming established. Inflation, albeit high, was reducing and economic growth was progressing. Low inflation combined with economic growth is ideal for equities. The tech crash in 2000 ushered in the start of the secular bear market and since then we have had low growth and relatively high inflation; bad for equities, which have gone nowhere. Since then, valuations have been gradually reducing to levels associated with the bottom of secular bear markets and we have the added bonus of industrial revolutions occurring in many populous nations. If the cycle theory is wrong, it sure doesn't look like it from where I'm lying.

Ignore the "experts"

Welcome friend(s). I'm going to share my investments/trades, whatever you want to call them, with you. I've no ulterior motives for doing this other than sharing information with interested readers. It's meant for interest only and not advice, but I eat what I cook. I've been investing since 2001, so these are my thoughts now. My present investments will become apparent over time. I work from my couch, shared by my 2 dogs and cats, and like to spend as little time as possible studying the markets.