Look back on first year investing

31st Dec '18 by heregoes18

10 comments 1971 reads

I somehow feel compelled to share a look back on what has been my first year investing in individual companies.

Whilst I've not posted on the discussion threads, I regularly look in to see what others are up to, picking up any tips/advice along the way - thanks to all that contribute (Ed, Graham, and Paul need a special mention).

I decided to jump in back in January - bad start already as it turned to be the peak of the year (mistake 1). Not really having any idea how to value a company I decided to jump in and 'figure it out' as I went along (mistake 2). In the first two to three months I'd deployed something in the region of a third of my cash in to two companies I now would not have touched with a barge pole as they were way over valued (mistake 3). Guess I was caught out by 'the fear of missing out'.

One of those companies is now down 79%, the other is down 42%. Thanks to a video Ed posted that covered cutting losses after profit warnings earlier this year, thankfully I was sensible enough to bale out at a losses that were 'just' about bearable (lesson learnt 1). I now have a much better understanding on how to value a company (lesson learnt 2) all much aided by the information/ranks found here (n.b. I bought in to these two before joining here). I've also 'traded' much more than I thought, it's surprising how these costs can add up (lesson learnt 3). More generally (lesson 4) 'be patient'.

On a positive note - whilst it's been a bit of a baptism of fire - I've probably learnt more in the first year than if the market was 'playing nice'. Surprisingly I've just calculated my percentage loss for the year at 10.6%. Equally surprisingly (for now at least) I've not got despondent, and I'm looking forward to 'round 2' in 2019. Happy New Year all.

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doug2500

31st Dec '18

There's much to agree with there, and I'm sure you'll do fine in the future with such common sense and quick learning.

A 10% loss this year will be about par so you're learning experiences haven't been that costly really, and it sounds like you'll be a much better investor next year.

heregoes18

Thanks. Indeed, I've pretty much taken the view that the volatile nature of this year has done me a favour in terms of gaining real world learning experiences.

I went in to this with the view that my money was doing nothing sitting in the bank - if I could increase it over five years by investing myself and enjoying the ride then great. If I ended up even - then nothing ventured/gained (I tried). If I ended up taking a loss - I may well regret it (let's hope common sense prevails though, and one of the former is the outcome).

jared007

1st Jan '19

Thanks for sharing your experience this year - not often people will so openly talk about their non-success. I too am investing seriously for the first time this year only dipping in at October during the fall.

As said above, you are not alone with your experience this year - many of my holdings are also down 10% or more just since October. But like you, my motivation was my money earning nothing in the bank and if I take a loss - then I'm happy to treat it like a hobby in that regard. Hobbies cost money but I'm having fun and I try to see the positive side in it. And I am taking a very long view with my investment strategy - 15 years worth of growth to come. So in the grand scheme of things, this year will be but a footnote soon enough.

I think it's been a great year to learn from. And I'm glad this kind of volatility has happened very early in my investing career. Much prefer it now rather than making mistakes with a lot more money in the future.

Mike888

If you haven't already, I'd recommend investing in some books :

I'd suggest the Zulu Principle (Jim Slater), Uncommon Sense for the Thoughtful Investor (Howard Marks). I'd also suggest reading what you can on technical analysis, ignore the more complex nonsense though, ie Fibonacci Retracement, I'd struggle to advise a book, maybe one of Minervini's, he uses some common sense TA with fundamentals.

martinji

Thanks for sharing.

I made so many mistakes when I first started managing my own investments approx 12 years ago. My biggest issue was not having an overall strategy, so I ended up just buying a hotchpotch of shares with no real rationale, just that each share in isolation I considered "good". My main source of ideas was tips and idle chatter, from the media, and I bought shares tipped by friends (honestly, a friend said he'd met the chairman of a certain company at a BBQ that weekend and they were dead certs, there was also a reasonable narrative behind them, I bought in, they ended up bust).

But just look at this list I bought into: Woolworths, RBS (including doubling down when they did capital raises), Partygaming a few days before the US banned online poker (!), Tesco then at about 440p, a Bulgarian property company that I ended up about -90% on, a small co called AT communications that also lost nearly all my money, Petroneft which is currently about -95% on when I bought, and a few other similar ones.

(NB the power of compounding on the success stories is that even with all that - and at one point my overall portfolio was at about -65% - just by holding on to the few winners I had (Dragon Oil, Victrex and Aveva), that particular portfolio got back to breakeven after a few years and is now actually about 30% up on what I initially put in)

It really taught me a lesson, that I needed to develop a strategy so that I had something to judge each potential buy against, and also that I needed to think about my portfolio in total rather than as a collection of individual shares. I then developed what I would now call a value income strategy (growing dividends at a reasonable price), and overall have been modestly outperforming the ftse on total return since. This year though I have made a total return of -10.5% which I think is about equal to the all share.

Looking back I'm now quite grateful for that tough beginning as I think it made me a much better investor .. otherwise I might have bumbled along essentially buying random shares for another 2-3 years and lost a lot more!

Best of luck for 2019, to all.

paulhunt999

It took me about 10 years to get a balanced although concentrated PF of 10 stocks. However a tip I got from a friend of a friend who knew a director turned out to be my best ever share - about 1/3 of my profits in 10 years. however I sold it at 57p hen I realised that it was wildly overvalued. It eventually sunk to 2p so i was very lucky there. From a personal point of view I like to know as much as possible about my stocks which is why I find 10 is plenty. However from a beginners point of view I would recommend 20-25 at the most otherwise you might as well invest in a fund.

Thanks for the replies all. Some common themes running through them (good to know I'm not alone).

Interestingly I've settled on around 10 positions - I was up to 15 or so at one point but found that too many to track at once - a smaller number of (hopefully?) longer term quality positions that pay a reasonable dividend in most cases feels much more manageable.

I've been getting in to the technical analysis side of things quite a bit the past few weeks. I can foresee 2019 being a mix of fundamentals and technical analysis. And it is all more and more starting to feel like a new hobby as such. I guess my strategy/style is still evolving - it will certainly be interesting to look back on this discussion in another years time..

My advice on TA is to use it only on stocks that meet your fundamental criteria, use it to guage market sentiment and understand potential entry and exit points. On its own TA is fools gold, you always need a good foundational stock to start with.

That's exactly where my head is at. Anything additional to the fundamentals I can glean through TA to get some more confidence on entry and exit points, and if sentiment looks to match what I'm thinking in terms of the fundamentals - then all the better.

ds1980

2nd Jan '19

Thanks for sharing. Here’s my start in investing. I have a very different approach to most. I basically trust my gut. I’ve been investing in one way or another probably all my life. Starting out when I was 5 buying a pair of clippers after going to the hairdressers and realising that at 50p a go it wouldn’t take long to recoup the outlay. Mum paid me 50p every time she cut my hair. We still have the same clippers 33 years later and she still gives me 50p and cuts my hair whenever I go home to see family. I moved on to wholesale sweets selling them at school along with anything I could get my hands on. My first shares were in kcom in the dot com era. Being from hull you could partake in the offer and the swiftly went from £2 to £18 I think. I sold for a good profit. At 18 I bought my first house with a friend whilst starting uni. The money I put down as a deposit was virtue of years of saving, investing and working since I could remember. Paper rounds. Milk rounds. Stacking shelves. Car washing etc. We sold a year later for 100% gain. I bought about ten more houses with proceeds and sold about half. All the while doing very well in a time of property boom and still own 4 which bring in a nice return. People kept telling me to buy more but I only ever bought stuff if we had the money and never leveraged to points I knew we would suffer from. After I bought a few shares in last minute and egg which both ended badly and put me off ipo’s for 15-20 years until I recently bought into ajbell. At uni I started dabbling in art and started buying and selling contemporary art as a hobby. I did very well because I could buy things for less than what the market price was because I would phone email or check every web dealer and there was always someone who still had stock. This was the start of how the internet became so useful but was hit hard when Rolf got busted for his paedo ways. I got quite lucky when a friend tipped me off he’d been to arrest him and I sold most of his stuff I had the day before it all came out. A lot of people start to think at this point that I’m lucky. I’m not I’m on the ball and although extremely laid back about life and money I make my own luck and will protect money first and foremost. I gamble a lot and make good returns on horses and greyhounds. People ask me for tips and the only one I ever give is it’s not about how much money you make it’s about how little you lose. At this point I had started reading the motley fool and was taken by the HYP approach. My first proper shares invested in ISA came at this point. Lloyd’s. Persimmon. IUKD and BT were the first shares I bought and basically forgot about them until Lloyd’s went belly up. First mistake was putting all my eggs into so few shares. Luckily persimmon had done well (bought at £5) and I was able to sell some to start buying different shares. Again no rhyme or reason. I don’t look at accounts. I don’t use anything other than a gut feeling. I realised I needed to diversify and after reading monevator and other blogs started realising that costs were also key. I was annoyed that I’d spent £12.50 buying a shares rather than use the regular investment route which would cost me £1.50. I now have about 30-35 shares. Mainly ftse 250 shares. I have never sold any of them except for the persimmon ones which have since doubled but such is life. My returns are about 15 % annualised for the last 10-15 years. I rarely check the accounts but have started to take more of an active approach in recent years and still have the mantra of trying to ensure yield and income goes up each year knowing the power of compounding. We’re fortunate in so much that we’ll never need the money hopefully so its all about giving the kids the best they can have. They won’t see any of it though until I know they’re responsible. The main thing I think that I read through people’s strategies is that actually I don’t think any of it matters. Life is way too short to study shares and it’s very possible to make good returns by doing nothing. Concentrate on fees. I’m not convinced an active approach is any better to passive and my time is far far more precious to me than any amount of cash. Read as many views as possible. Good and bad and form your own opinions. Don’t follow the herd and trust your instinct. Good luck to all in 2019.

Look back on first year investing

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Heregoes18

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