The FTSE 100 is showing signs of life, but the big cap index is still about 7% (500 points) lower than it was three weeks ago. Judging from my Twitter feed, many investors have sold into this market wobble. Some are hoping for bargains, while others are fearing worse to come.
I thought I’d start this week’s piece with a brief look at how I approach selling in my portfolios, before going on to take a look at the (battered) state of my International SIF folio.
How I sell
As a general rule, I never sell during market wobbles. There are four reasons for this:
1. It’s too hard: I’ve learned over the years that I’m not particularly good at the kind of rapid, instinctive decisions needed to trade in and out of the market.
2. It’s too expensive: Trading stocks costs money. I’ve no desire to pay my brokers any more than necessary.
3. Lost dividends: A second consideration for me is that being out of the market means missing out on dividends, which form a big part of my personal investing strategy.
4. It’s against the rules: In recognition of my own strengths and weaknesses, I’ve developed two investing strategies. Neither of these require me to sell shares on an ad hoc basis.
Income: The larger of my portfolios is focused on high yield income and is normally fully invested. I very rarely sell stocks from this folio, and only then for serious fundamental reasons. Market movements are irrelevant to me here, as they don’t affect my dividend income.
During market sell offs, the only strong emotion I feel is frustration at not having enough cash available to top up my holdings. However, I feel that my decision to remain fully invested is justified by the minimal returns available on cash.
SIF Folio: My second portfolio is a mirror of the SIF Folio fantasy fund I run here at Stockopedia. This is a rules-driven portfolio where my stock picks are drawn from the results of a screen.
I only sell shares at predetermined times, when they no longer pass all of my screening tests. The only exception to this is that I now also sell stocks after a profit warning.
Stocko fantasy funds are currently only visible on the old version of the site, but here’s a snapshot of…
