Help constructing portfolio

16th May '20 by Cub101

2 comments 271 reads

Hello, I am looking for some advice and tips when it comes to constructing a portfolio.

I have been investing through passive index funds for several years, saved up an emergency fund and saved up around £6000 to now invest in individual shares. I feel I could keep on top of around 10 - 15 shares which should hopefully offer me some diversification.

I have been using Stockopedia now for a few weeks and have been playing around with the different filters and search tools.

From reading, I have read that QV and in particular Value companies can offer great long term - my strategy is to be a long term investor - I am not looking to day or swing trade.

My question is this - when constructing a portfolio, is it a good idea to have a mix of different styles - such as contrarian, supper stock and high flyer - or as a long term investor, is there a share category which might be better to emphasise.

Thank you for any tips you can give.

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Carey Blunt

16th May '20

Its a difficult question to answer in a short reply but I would recommend reading the "NAPS" articles and the articles on Diversification. I think you have picked a difficult time to start off because its a big period of instability right now.

An obvious answer would be to diversify across sectors but pick super stocks with high ranks in each sector (which is what NAPS does).

Value is what many new investors go towards because there is a satisfaction in finding something that seems undervalued and then being right about it. However, Value is hard to find and has a lot of risk associated with it and actually hasn't done well for the last 10 or more years. Having said that, historically value is a winning strategy after a big event such as CoronaVirus and at the start of a recessionary bear market (which could be where we are now but who knows!)

Personally I think I would dip my toe in with a few mid cap shares which seem safe and have some dividend then work out your style from there. If you have £6k then I think you can only really afford 6 or 7 shares now in positions of £750 to £1000 each. If you buy smaller than that then trading costs and Stamp duty will mean you will already be down 5% on everything you buy. I think 6 purchases of £1000 each buying 1 a week having researched each pick thoroughly would be a good start.

Maybe buy the Naked Traders book and read that before you start.

Cub101

Thank you for your rely Carey, I feel I have started my investing journey at either a good time or the worst time ever a recession looms. It is making it difficult to make a decision.

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Cub101

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