And now to something completely different: Mentoring

7th May '13 by CPinvesting

7 comments 3118 reads

Dear Fellow Stockopedians,

as you can see by the title I wonder about your experience of mentoring when entering the sphere of investing.

For myself I was spending the last couple of months with educating myself, executing first investments, analysing successes and losses and getting back to educating myself more and... You see that where I am heading might be where you have been long before.
And this is where I wonder how mentoring helps and if either you are interested in mentoring or know a place for me to look. (The US for example has a good support page of their private investors association.)

I am familiar with the philosophies and concepts but find myself struggling with more operative tasks when it comes to investing for example how to weight portfolio positions, how to allocate the next savings batch to existing or new positions etc.

So please share with me your views on mentoring in the investment area and if you are up for it to support a fellow London investor in his beginnings please PN me.

Thank you for reading!

CP

Unlock with Email

Unlock with Google

Already have an account?
Login here

Edward Croft

7th May '13

Hi CP,

A post like this suggests to me that in spite of all the efforts of the hive mind on the internet, there's still too little structure to help people get started in investing and 'over the hump'. We ourselves here have written a ton of blog posts about subjects like the ones you mention, but still they are too hard to find ;-(

One of our big goals here over the coming couple of years is to bring more structure to some of these topics and provide more learning tools and self-serve courses.

In the meant time - here's a brief blog post I wrote about position sizing with respect to the costs http://www.stockopedia.com/content/when-does-it-pay-to-be-your-own-fund-manager-70557/

That though doesn't address the exact number of stocks you should own - here's a ramble I wrote a couple of years ago on the subject - http://www.stockopedia.com/content/the-5-ways-diversification-can-kill-your-portfolio-returns-63448/

On the subject of investing strategies in general - I fundamentally believe that there remain persistent anomalies in the stock market that allow private investors to generate outsize returns. There are many routes to the top of the mountain, but if investors can follow a disciplined value investing philosophy or a GARP (growth at a reasonable price) philosophy, don't overtrade and stick at it during good times and bad I have no doubt that they can outperform the market and generate great returns.

I hope that helps for starters. I'd appreciate others who could contribute to the debate and please do continue to ask questions like this to the community.

toddwenning

8th May '13

I am familiar with the philosophies and concepts but find myself struggling with more operative tasks when it comes to investing for example how to weight portfolio positions, how to allocate the next savings batch to existing or new positions etc.

Hi CP,

First, congratulations on taking a serious step toward improving your financial well-being. Jumping into the investing world can be intimidating, but it sounds like you're on the right track, so well done!

Never stop reading and learning. If you need some reading recommendations, I've listed some of my favourites on my blog: http://cleareyesinvesting.blogspot.com/2013/02/a-list-of-good-investing-books.html

A good next step for you might be to develop a sort of investment policy statement outlining your objectives, risk tolerance, time horizon, etc. This will help you keep a long-term focus during swings in the market and help you figure out what type of investments you'll want to own and (perhaps more importantly) which ones you'll want to avoid.

As Ed noted, do keep asking questions -- even if they seem elementary. Experienced investors know how difficult the early stages of learning can be and, in my experience, most are very much willing to help out.

Keep it up!

Best,

Todd

marben100

Let me echo Todd's congratulations on taking the first steps!

The US for example has a good support page of their private investors association

The UK equivalent is ShareSoc (which I am a director of). Whilst ShareSoc is a relatively young organisation and we have much work to do to build up our educational resources, we have some decent introductory material here.

I also commend the efforts of Ed and the Stockopedia crew. There's some great material if you rummage around the website. :0)

I was spending the last couple of months with educating myself, executing first investments, analysing successes and losses

Whoa! Now hold up there a minute... a "couple of months" is (usually) far too short a timeframe to judge whether any individual investment has been a "success" or not. Ultimately, any company you might invest in has an "intrinsic value". The secret of investing success is buying good companies when the market offers them below their intrinsic value and selling when the valuation gap closes or is exceeded. That's the theory - but, of course, intrinsic value is generally impossible to deteremine accurately - but that doesn't mean you shouldn't try!

By taking a view on the intrinsic value of a company, you can resist the temptation to buy into "hot stocks" that may have risen too far, too fast (but whose share price could tumble at any time). Conversely, a lower share price can be a good opportunity to add to your holding (rather than a "failure") - assuming there has been no news or other information that affects your view of the company's intrinsic value.

Unless there has been significant news that affects your view of a company's intrinsic value, what the share price has done over a couple of months is fairly irrelevant to the ultimate success or failure of any given investment. The ultimate test is whether the business continues to perform and this becomes evident to the market by the valuation gap closing. It can take many months or even years for that to become clear.

A classic mistake is "overtrading": buying into a stock on a "tip" and then selling again when the share price declines in a short timeframe.

Once you have completed your intitial studies, the place to start is by constructing a personal investment strategy that suits your own circumstances, including:

Life stage: are you young with many years of investing ahead and expecting a rising income that will add to your investment pot over time?
Amount of cash available to invest
Time you have available to research & manage your investments
Knowledge of business and accounting - does studying your investee companies in depth "float your boat"?

Good luck with your investing career and do post here with any more questions.

Mark

harryr

So you want to learn how to make money on the stockmarket.
You require low cap companies that can grow very fast, from a tiny base.
Try to make 30% compound per year.
The city funds will return around 7% P/A .
Only buy a stock if I think it will rise 5 -10 fold within 30 months.[not all do, some will go bust]
Go to stockopedia and pull up all the stocks with a market cap under £5M.
Do not look at the accounts,99% of investors are looking at them. Just work out what kind of profit you think the company could make.
Can they turn a loss into a profit ?
Is the company upbeat.?
As profits show the company gets re rated, stocks can double in a day and do the same again within a month or two.
As an investor you want to be in at the start and sell a few years later for many times your investment.

I have learnt time and time again that if a company has lost 95% -99% of its value over the previous 5 plus years [and its still trading] then its worth a look.

Then you have to be brave and buy all the cheap stock you can get your hands on.
The seller would have given up and wants out [at a large loss.].

Good luck and have fun.

corrsfan

I actually agree with most of what harry has said but its not for the faint hearted. i would also add. that microcaps, and fallen near penny stocks also need to have something that gives hope otherwise it is destined to languish exactly there for a very long time many years), as the same thing that made people want to dump it is the same that will keep them away. that something could be a new director, a new sale/contract win, a new resouce find. these companies may typically have been below most peoples radar for some time and news does take time to get round the [funding] houses in these cases

It does take time and patience to find these gems at the right stage but even in this bull market i picked up 100k shares of anr @ last week @ 1.1p each (currently 1.5p) for £1100 total. on the face of it it is one of many spent out exploration companies devalued so much from its peaks, and trading at below book value, but it has a plan to generate revenues in china over the next few months, and beyond to get the money to complete its aussie longer term goal without further dilutions of a coal to oli conversion thing for the aussie market going to really do well. Even if it only does the chinese coal mining bit it'll still generate relativley lots of profits and give a nice return. if it can complete this aussie phase i really wil be quids in.

emptyend

9th May '13

I was spending the last couple of months with educating myself, executing first investments, analysing successes and losses and getting back to educating myself more and... You see that where I am heading might be where you have been long before.
And this is where I wonder how mentoring helps and if either you are interested in mentoring or know a place for me to look. (The US for example has a good support page of their private investors association.)

I am familiar with the philosophies and concepts but find myself struggling with more operative tasks when it comes to investing for example how to weight portfolio positions, how to allocate the next savings batch to existing or new positions etc.

The main thing I would say is that investing techniques are always a "work in progress". So you can't "learn" it all, tick that box and move seamlessly on to investment riches.

People will often represent to you that they have found "the secret", but the reality is that there is no such thing.

Even the specific point you raise is a matter of three things -

the mathematics of diversification and transaction costs in the context of portfolio size
personal preferences and objectives
personal risk tolerance

For example, theoretically one can achieve the full benefits of diversification by owning 10-12 stocks, carefully selected in different (relatively uncorrelated) sectors or markets. But if you portfolio is small, you may choose to have fewer stocks, because transaction costs are high in relative terms; similarly you may have a small number of stocks if (like me) you have a high risk tolerance and a strong view on sectors and the macro environment.

OTOH, if you are risk averse you may decide to have more stocks than theoretically advised for diversification purposes - or you may have more simply because you have a very large portfolio and the quantum of risk in individual stocks would otherwise be too high.

And then there is also the question of how much time you want to spend (or can afford to spend) in monitoring your portfolio and adjusting/trading it.

It is only by some practical experience (as with so many other things in life) that you can identify where you personally stand on such matters. And, when starting out, that probably means erring on the side of caution in terms of position sizes - so that the impact of individual losses is reduced. Because you will make some losses, at least on a mark-to-market basis.

Experiment a bit with "money you can afford to lose" in appropriate sizes and over a period of 4-5 years you should get a decent idea of what works for someone with your own preferences and constraints.

On the subject of investing strategies in general - I fundamentally believe that there remain persistent anomalies in the stock market that allow private investors to generate outsize returns. There are many routes to the top of the mountain, but if investors can follow a disciplined value investing philosophy or a GARP (growth at a reasonable price) philosophy, don't overtrade and stick at it during good times and bad I have no doubt that they can outperform the market and generate great returns.

I would make a couple of points

If "persistent anomalies remain" then you won't get the return you think you deserve. And I can tell you (from recent personal experience!! ;-() that "anomalies" can persist for far longer than one might expect!
You say that you "have no doubt". Whilst I agree with your basic value/GARP approach, I would suggest that you should never completely dismiss "doubt".

Good luck

Monty9

10th May '13

Of course there are many approaches to direct investment, any of which can be successful and equally can fail. Probably certain of them suit particular individuals better than others. Part of the pleasure in the process is undoubtedly unstructured reading and contributing comments on sites such as this to discover better opportunities, or, equally importantly, learn of the dodgier ones. However I found a book called Free Capital by Guy Thomas very helpful. It documents detailed interviews with a considerable number of successful private investors, each of which has been dramatically successful using their own particular style. Pretty much all strategies available to a private investor are covered.

And now to something completely different: Mentoring

Unlock the rest of this article with a 14 day trial

About the Author

CPinvesting

7 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...