Folio Management | My Beginners Portfolio - Update

18th Mar '18 by pjk15

10 comments 5846 reads

Hello All,

I recently joined Stockopedia a few months back and as a complete beginner I’ve found most of the material in these forums very interesting, there’s a lot to read and get my head around.

I don’t get the time to contribute as much as I’d like and to be honest I’m not sure I’d have much to offer but just wanted to give an update on my beginners’ portfolio for anyone else out there who’s just starting.

Currently use Barclays Investment ISA to trade. It costs £6 per trade plus stamp duty reserve tax at 0.5%

The goal was to buy a different share every month at £500 worth + fees in a different sector each time to help with diversification. I did have a 10% stop loss on each share but I've removed that now and i'm not sure it's the best course of action, prices seem quite volatile and i'm worried i could get sold out when i don't want. Since i work all day and don't have time to check or sell i need stop losses, i'm still debating what to do here.

Here’s where I currently stand:

Energy –
Basic Materials – Forterra – bought at 276.89p
Industrials – Communisis – bought at 66.64p
Consumer Cyclicals – SCS – bought at 216.68p
Consumer Defensives -
Financials -
Healthcare -
Technology -
Telecoms -
Utilities -

Forterra is performing very well i think, up almost 8% since i bought it, i have no benchmark to compare it to but i bought it in February and i'm pleased so far.
The others not so great with SCS giving me my biggest loss and completely negating all the gains from Forterra.
The biggest lesson learned for me here is diversification, i look forward to the coming months to see what i'll find and how it will affect my portfolio.

Trivia: I also have my first ever ex date coming up with CMS next month.

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The Third Man

30th Mar '18

Hi pjk15

You say you have been reading posts on here for some time. That being the case you cannot have failed to notice that the use of a stop loss is one of the most hotly debated issues at Stockopedia!

For what it is worth I think they are crucial and I fear you may regret removing your stops.

I use them all the time. Quite apart from anything else they enable me to take a number of holidays each year with no need to worry about returning home to find I have lost a good deal of invested money. Obviously that is the equivalent of you being at work. Fortunately I am not :-) And I totally refuse to follow the shares when I am away!

Yes you run the risk that a stop that you would not have wanted will be activated due to volatility but you have to set the chance of that alongside the benefit of knowing that you have stops in place for all your holdings. A frequent criticism of stops on Stockopedia is that the stop will not be acted on at the specified level but at something much lower. My experience has been that the stops are activated very close to the price set.

I really like the system that is often adopted by the Naked Trader of a tight stop on the buy price (7-8% I think) and then when the share has, hopefully, increased in value it is relaxed somewhat.

Changing the subject, discussing your results with Forterra you say you have no benchmark against which to measure it. I always compare my holdings to the FTSE All Share - a bit crude perhaps but it does the job for me.

pjk15

Thanks Third Man,

I have read the naked trader, i had a 10% stop on everything, I've had them removed this last week and found myself checking prices more often at work, even though there's nothing i could do if something did happen.
I think you're right, i'll be putting them back, they offer me peace of mind.

I'll put this down as another experience, a stop loss helps you think clearly, or not think about it at all (At least it does in my case)

Mike888

31st Mar '18

Firstly well done for starting a portfolio.

Regarding stop losses, over time you will develop a style that works for you.

Personally, I don't have automated stop losses, but I do have rules for every stock that I own in respect to why and when I would sell it. I develop these rules at the moment I buy the stock, and each stock has a different set of criteria. Having rules when you buy makes it a lot easier to sell when the criteria are hit. It also helps determine the profit and loss you anticipate, don't buy a stock unless you know what your profit and loss expectations are of it, this information is invaluable in making future investment decisions when you may be faced with selling a stock to buy a better one.

WarrantStar

2nd Apr '18

Hi Pjk My idea would be to drop the idea of picking a share from Financials.

The reasoning for this are:
1) There is very limited transparency
2) It's often very hard to see how and from whom they are making their profits
3) It's very hard to see the scale of the risks that they are running
Good luck.

jonesj

3rd Apr '18

There are different approaches to strategy.

I've NEVER used a stop loss, well not until last week when trying my first ever short position (no need to rush into these things). My first stock was purchased about 31 years ago, although the current portfolio was started only 18 years ago.

I've also never bought stock in a furniture retailer. To be honest, they fail with such frequency I'm even loathed to even leave them with any form of part payment or deposit for furniture, just in case they go bust before I take delivery. Ikea avoid that problem, since I can leave the store with the merchandise.

Nevertheless, it takes different opinions to make a market & I think you're going about this in more or less the right way, being prepared to start small & diversify over time.
Just remember to keep notes, so you learn from every purchase & also stick at it, since there will be both failures & successes along the way.

4th Apr '18

Thankyou for the feedback.

Warranstar - That sounds interesting, i'll look in to your points. I suppose all 3 link together, i'd never thought of it that way. In my mind a clear audit trail would encourage investment which wouldn't if there's a lack of transparency and unknown profit origins. Would you say your second point is more of a moral issue? or a criteria on which you would base a purchase?

Jonesj - Another point taken, since i bought SCS it's done nothing but drop. Your ikea example also gave me light bulb moment. I recall when thinking about buying this share my thoughts went to ikea where i can just pick what i want and leave I never thought about deposits and part payment.
Does that not make them more attractive since they have a regular stream of income coming in from monthly payments? or am i thinking too small?

Also just a note, i've held off on buying anything for April. Everything seems to be going down and Communisis is nearing it's stop limit. Forterra is also dropping but i replaced my 10% stop at their 300p mark so effectively its at 2.5% below the price i bought at. Not sure what my next step is here, i'll have to think on it.

I've never even entertained the idea of buying stock in a furniture retailer, so please bear in mind that my analysis is rather shallow.

I'm not sure how the financing works for furniture. However, they need a certain amount of capital tied up in stock to fill the showroom. Then any customer orders need to be paid for. If they are offering consumer credit, I imagine it's all done via an outside credit company. If the retailer is arranging the credit themselves, I imagine the supplier would have to be paid before the majority of the sofa is paid for. Difficult to envisage that.

Buying a sofa on 60 days payment terms, or whatever the retailer does & then getting paid back over 24~36 months would be tying up a lot of working capital. The accountants would not like that. Not to mention the problems of chasing bad debts.

Then the business is most likely rather cyclical.

5th Apr '18

Hi PJK
Yes all three of my points are linked. It's not a moral issue for me. It's more like I stay within my circle of competence. Financials are outside of that. For example, I can't handle it when an insurance company makes more profits from its investments in other companies shares, than from collecting insurance premiums. For me to work out whether or not I like the look of its investments would take for ever (or I might not be able to find out what those investments are). It's far better to keep it simple and only to invest in companies whose business model is not too difficult for me to understand.

sharw

6th Apr '18

pjk15 -

You mention that you have your first xd coming up ( Communisis (LON:CMS) 1.77p on 19/4). All other things being equal the price will go down by that amount on that day and if you are close to a stop loss you could find that the xd effect knocks you out even though your total return remains the same so you may wish to adjust it beforehand.

You will have seen from other comments on here that there is a wide range of opinions on stop losses so I will not add to them other than to say that you should do what you are comfortable with (which may change over time).

I would personally not take the sectors so rigidly as some, such as 'Industrials', are so wide-ranging. I would not worry if holding shares in airline International Consolidated Airlines SA (LON:IAG) and geotechnical company Keller (LON:KLR) meant that you had two in the same sector. Further, neither of those have any overlap with Communisis (LON:CMS) .

There is almost too much advice around on 'How to pick stocks' and different styles suit different people but I think one of the best pieces of advice is as follows: when you buy something write down why. When you sell it or it gets taken over or goes bankrupt write down what lessons you have learned - positive and negative - and refine you future selections accordingly.

gregpark

22nd Jul '18

Hi Pjk

Great question and something i've just posted myself. I'm putting together all sorts of watch lists and reading both the articles on here and Investors Chronicle.

I'm quite risk averse so I will be making a portfolio of mainly balanced and conservative shares with only a few slightly riskier options. As my knowledge increases I might change the risk profile.

I've found watching the vides on here really useful ad will probably be following the NAPS portfolio idea however I will only be investing a small amount each month so i like your idea of choosing a stock and putting £500 into it as opposed to smaller amounts and broadening my selection.

My beginners portfolio - update

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Pjk15

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