Will Private Investors do the honorable thing for their portfolio and resign?

28th Jun '16 by Dearg Doom

28 comments 16565 reads

Re: Football

As I watched England play last night, one could see Roy Hodgson, England's Manager on the sidelines with an exit plan in place. His body language showed a man condemned. His resignation speech had certainly been prepared beforehand and his speech was duly delivered directly post-match.

Re: Investors

How many investors based on their recent performance in last two weeks will admit defeat and resign themselves and retreat to mutual funds or at least to specialised ETF's?

Private investors increasingly require more time to spend on in-depth analysis on companies. There are always balance sheets, adjusted earnings variations, pensions liabilities, increasing regulations changes, not forgetting currency exposure to be checked out. Is it worth it? Has the world of the private investor become too academic?

Full-time enthusiasts enjoy the work but I suspect that part time investors are struggling. Private investors are being swamped with modern media access to information. Endless hours are often spent in a futile attempt to keeping abreast of 20 or so companies in their portfolio with a watching brief over ten other share possibilities.

Are investors being rewarded for their efforts with above market returns? Are investors receiving at least minimum wages for hours spent on analysis?

Your opinions welcome!

Regards

Dearg Doom

PS (Article wrote for amusement and momentary distraction and discourse only)

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Edward Croft

28th Jun '16

Stop losses did not work last Friday.

That's not strictly true. I think you're focusing too much on some of the brand name / popular stocks which had the most vicious moves (e.g. banks ) - which is a form of availability bias - just because we know about the worst moves doesn't mean that reflects all the fallers in a portfolio. If a portfolio was reasonably diversified then there wouldn't have been too much exposure to the very worst intraday performers as they tended to be sector specific.

I tend to use manual stops as otherwise you can get trades triggered at the moment of worst panic. There's nothing wrong with keeping a calm head and choosing sensible exit points rather than setting automatic stops. Stocks don't tend to go to zero overnight. Next is an example of a stock that's been downtrending for a long time before it's big fall on Friday. Most stocks have ratcheted down rather than collapsing all of a sudden... e.g. the housebuilders which have seen vicious reversals but via stepwise moves. BDEV has had a nasty time...

57725dcdd0eb8Image_2016-06-28_at_12.21.0

My NAPS folio is down about 9% year to date... and seven are showing a more than 20% loss. There's been ample time to cut losses on those names which could have protected about 3% of overall capital - not exactly a big win, but rule number 1 is don't lose ! Will write a fuller update on that portfolio this week.

Anyone who has lived through bear markets will know that stocks don't go straight to zero overnight... you get a lot of opportunities to raise cash as things decline. Contrarians will say this is a buying opportunity... but I'm more of a buy high, sell higher kind of investor. The trend is your friend, but at the end of every trend you've got to give up some of the gains. It's impossible to avoid drawdowns.

I'm sure investors using Stockopedia in the past have done well, but most who have joined in the last year are probably nursing large losses.

Yes that's likely true... the last 12 months haven't been pretty in the markets. I've been trying to promote a strong risk management focus editorially over this period... no matter how much you tell people that stock markets can fall 20%, 30% or 50% it's still a big shock when it finally happens !

I'm still a bull on Britain whatever happens with the Brexit fallout. I think we're a crafty bunch, we'll keep innovating and a certain subset of the market will outperform...

@fred6060 u gt mee thur :-)

Rusty2

Barratt Developments (LON:BDEV) did not racket down it fell from 580p to under 400p, I did not have that one but I had Persimmon (LON:PSN) which also fell about 27%, a 10% stop loss would have done nothing, apart from you selling at near the day low price, you would not have got that price because on opening the price was already marked down. I had Next (LON:NXT) as well. It's my experience I'm not just picking out banks which I don't have anyway. It's not just BDEV most builders were down 30-40% over Friday and Monday. Manual stops can work better, as long as you happen to be watching the prices which many people can't do all the time.

I think there are 3 main factors now, trade deal with EU so our companies can trade freely with the EU. Our Government, new Tory PM, will there be an election. Our economy, I predict we will have a recession, so sectors such as builders and retail are going to suffer but then they have been already priced down. Small caps are probably not the place to be right now, large caps with foreign revenue probably are.

jjis

Hi Ed, you mentioned availability bias in your post. I just note in passing for all the fans of stop losses (traders?) that when I logged on to one of my brokers on Friday to see if their systems were working there was a message saying they had suspended limit orders due to the likely volatile pricing! Thus while this didn't bother me as I don't tend to use them, I guess it might have meant those relying on them didn't get out as they hoped nor by the same token did they get taken out at the lows I suppose.

Maybe highlights in extreme market conditions they don't offer much comfort perhaps?

Noodle Hat

I'm also not giving up!

Im also down but actually being only a year into active investing (was passive investing for 3 years) I think this Brexit, although painful is very good for me as investor and has / will teach me many lessons. Hopefully will help stem losses later in my investing career where, again hopefully, i'll be managing a much larger pot of money.

TangoDoc

Perhaps the biggest problem for us all is that this is not all over, by a long chalk. The country is bitterly divided and the Remainers are showing no sign of just accepting the loss. That would be bad enough but both main political parties are riven and,essentially, dysfunctional. Differences between right and left wing of politics are relatively insignificant. I have never before seen Cameron speak in such simple, honest and measured tones in the house as yesterday. Gone was the old, smart-arse, soundbite PR approach. Here was a man who clearly knew we are all in deep trouble from here on. The mood is as it must have been after Chamberlain broadcast that we were at war. That there is little stomach for invoking Article 50 immediately (apart from Farage, that is) means that even if we really are going to leave, there is still a possibility we won't so the hatches cannot yet be battened down for the storm. Who predicted it? Almost everybody, including Mark Carney.

but you wouldn't want to listen to those "experts " types would you!? Honestly why listen to people who have spent their careers in very niche areas and know them in depth? much better to think that the article you read last week in the mail and the sound bite you heard yesterday gives you a good understanding of the largest and most complex trading block in history...the mind boggles..

Fangorn

We did listen to the experts.

Bootle, Mellon, Minford.

Niche experts, Economists.

Largest trading bloc by GDP/Value is NAFTA surely? We'd be better off as members of that no?

It's also not a trading bloc in terminal decline, as the EU Customs Union is - We have decent two way trade with USA(&Investments) despite no trade deal.Imagine how much higher that could be with a trade deal.

The mind boggles you want to tie us into a declining protectionist trade bloc that wants an ever increasing say in how we govern ourselves, for an ever rising slice of our money,

This is precisely why this matter should never have been put to the public this way. As one who has earned a living being asked for technical advice by worried people, I have no problem seeking opinions of experts in areas outside my expertise. If the problem I face is within my own remit, I am even more inclined to seek a second opinion. The start of wisdom is knowing you don't know. You have to be quite bright to realise you're under-informed. MY annoyance with the present raft of politicians is that they have cynically played the public for fools and it's not brave to leap into the dark when torches exist.

Braam53

Ed,

You made my day you said your NAPS down 9%

My UK NAPS portfolio down 7.94% down since Jan not counting dividends

My EU and US NAPS is showing £174 profit without dividends since Jan today!!! And dividend there for this years near £3000 - was lucky got a special dividend for Quest gor Growth

And I was hiding in the bushes thinking I'm rubbish

Braam

Braam - that's brilliant about your EU and US NAPS.... it totally makes the case for international diversification. I've been net-long Europe and net-short the US for the last 18 months in a strategy that nearly doubled the UK NAPS returns. Through a stroke of immense good fortune, (entirely unrelated to Brexit or any crystal ball) I closed the positions in my entire portfolio about eight weeks ago.

Everyone in the UK should be seriously considering the huge risks taken by investing in a single home market. Sure you might get some exposure to foreign markets by investing in Glaxo or Unilever, but there's nothing like owning international stocks. And it's getting cheaper and easier to do so all the time.

Now you are saying there are huge risks in investing in the UK, I do find this contradicts your first post, where you criticised Dearg about buying shares in the UK market.

Buying foreign shares is not so easy as UK ones for various reasons and many on here are more UK focussed.

Hi Ed,

“I did not realise when I kicked the football away in the above article I hit your glass house.”

My modest intention was to get viewers to pause from talking about Brexit and to get back to stocks which I love. Internal squabbles on Brexit and Europe while interesting cause friction in the community. Too many comments appeared to be going around in a circle. I had hoped to give a readers a new discussion thread to talk about stocks.

I was expecting a few Brave Heart speeches with battle cries in the comments section! Some excellent share tips possibly could be mentioned to cheer up the recently wounded. The thread would be great use of eyeballs when the market is so volatile.

Active private investor numbers are declining I suspect. Regularly, private investors fall foul of pump and dump stocks in resource companies and jam tomorrow tech or pharma stories. Once bitten those same investors will never to return.

You have no need to justify this website. Its usefulness to investors goes without question.

"Finally, can’t primose anything about future typos or gremmar". I enjoy spontaneity, freshness with honesty of expression in whatever form. I don’t recall whether EU regulation already has or Brexit will have regulations to govern the written word.

vik2001

I invested this year doing a NAPS, which is down. aside from NAPS all my other shares have been hit hard due to brexit. its been a terrible year to start investing, and I wish I never started this year, if only I had a crystal ball. lol.

I also bought 3 funds to hold:
Lindsell train global: went up by 8% following brexit
Fundsmith went up a further 9% following brexit. so these 2 funds done really went due to brexit.
Woodford Equity UK - down 3.5% following brexit.

Apart from the woodford fund, I'm glad I bought the funds - they hold up well during volatile times, and don't drop as much, also this year apart from Woodford they all been up nicely, and have helped to balance things out in the portfolio.
but yes diversification is essential I believe, even if you buy abroad using funds.
Also more recently I bought the JPM Emerging markets fund 2 months ago and that's up by 5% in total, and actually went up during brexit.

Yes they probably went up because the £ went down?

Its a good idea to spread the risk and I think in foreign markets funds can be the best way of doing that especially for smaller investors. Wish I had not sold my Legg Mason Japan IF fund now that is up over 115% in just over a year, its high risk though.

I remember looking at the Legg Mason Fund early this year, was hesitant to buy it and also wish I did add it.
I think emerging markets will continue to do well this year

mgallear

29th Jun '16

Had a look at Grammarly they are a US IT company – do they have a stock rank? I am giving the free version a go but I have to wonder if they do English-English and if they do is it any better than Microsoft's efforts. (Just checked there is a British-English version but is it any good!) You are charged monthly for the Pro version so like MS-Office more than a bit of a rip-off.

Here's to more glamorous posts in the future. g

I'm trying that also, but I don't understand why it underlines certain words in red and at other times it does not pick up mistakes, maybe it's American grammar?

Must be American because it accepts nite.

Hope Ed is not trying to Americanize everything on here.

Humour aside, on the web version, when you click on the Green G a box appears. 3 lines down it says "I write in" change to British English.

It picked on one 'fault' in the above sentence - I should have used say instead of says - it was happy with me starting a sentence with 3!

I think Ed better give it a low Stock Rank.

OK I found it but it was already set as British English.

Hmmm.

Still thinks nite and te are english words.

Cuthbert C

Dearg

"...I don’t recall whether EU regulation already has or Brexit will have regulations to govern the written word…."

Yes, indeed. They are called syntax and grammar. They are not imposed/controlled by the EU nor the UK but have evolved over centuries in an early demonstration of the power of open source development. They are not, as sometimes portrayed, the fixation of small minded, mean spirited people. Nor are they a vehicle to enable pedantry and enable constraint.

Instead they are simply a set of protocols which enable the information content of language to be encoded and decoded with precision. Their misuse results in ambiguity, imprecision and a lack of clarity.

I tend to read very quickly and whilst I can decode standard/conventional grammar at high speed, I have to slow down and work much harder to decode text which uses non-standard/unconventional grammar.

Sometimes, as with Hilary Mantel's "Wolf Hall", the use of unconventional grammar is a deliberate choice made for artistic reasons. In such cases, the extra work and slow speed which is required is compensated by the additional rewards obtained by the reader who is using his/her reading/decoding muscles differently from normal and finding the experience enriching.

However, when writers ignore grammatical convention wholesale, for no obvious reason, then many readers simply give up and abandon the text. That's presumably not what the writer would like to happen.

Will Private Investors do the honorable thing for their portfolio and resign?

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Dearg Doom

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