As always I never seem to have enough time to really think hard and focus on a Blog and I have one formulating in my mind about the Evolution of an Investor which should cover how we mature as Investors (and Traders to some extent) as the Years go by and what this means in terms of how we behave and how we deal with the Markets from a psychological and practical viewpoint. Hopefully in the Blog I eventually produce there should be a lot more to it than that but as things stand I am just not in the mood to start on that one so I am jumping into what I think will be a much more straightforward one and I can bash it out with little (if any !!) preparation.
This is one I have had in mind for years but only now am I finally getting round to it - silly really cos in truth it isn’t all that complicated although it is a hugely important Subject and I suspect Readers (especially Peeps early in their Investing Evolutionary Journey) will find it a really valuable and insightful concept.
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I’m really fortunate (and it could be viewed by Readers who enjoy my scribblings as fortunate - although much less so for those who detest them) that some off the wall ideas for Blogs just seem to spring into my mind from time to time and I have got in a good habit of somehow recording the ideas so my ‘Slate’ is pretty lengthy and full of stuff that is challenging (and therefore enticing) to write and I like to pretend it is often of a nature that cannot be found anywhere else.
I think this idea came to me a few days ago and it is late at night on the Friday 2 Days before Xmas that I come to be working on the initial Blog Draft and I was trying to find something that was reasonably easy to produce (I am defo in Seasonal Holiday Mood and really can’t be arsed to work on anything too difficult that entails much research etc. - this is simply off the top of my bonce which is the easy and fast way to write.) The basic essence of my thinking here is that when it comes to the Financial Services Industry in all its various incarnations and nooks and crannies, a very simple and ultimately valuable stance for Retail Punters is to take the view that all Advertising and Marketing material is a potential danger to your wealth and that you need to have your Brain turned up to ‘Full Scepticism’.
No, this is not a Blog about Michael Jackson…..
You would have to be living under a Pile of Stones to not have noticed that Bitcoin and other ‘CryptoCurrencies’ are attracting huge excitement and frenetic activity in recent Weeks/Months - to my mind this is a classic Bubble and it is only a matter of time before we hear the ‘Pop‘. One of the best and simplest pieces of evidence came about from my mate @Conkers3 on the Tweets who was up at a London Underground Station the other day and some geezer shoved a paper Flier into his mitt saying “Buy Bitcoins from us and be a gazillionaire !!” or similar wording to suck in the gullible punters. And since writing the above paragraph I have heard from a mate who got scammed when buying some Bitcoins (the real Money was handed over and the Bitcoins that appeared to be in their ownership did not exist); and just last week a mate who doesn’t do much on Stocks or anything was asking me what I thought of Bitcoin. It is classic Bubble stuff.
Earlier today our Australia Correspondent @nicktudor100 sent round a link on the tweets to a YouTube video by Tony Seba entitled ‘Clean Disruption - Energy & Transportation’, which lasts slightly over 1 hour but I strongly recommend you grab a brew of some sort (or a FEVR enhanced intoxicant if you prefer) and take a bit of time out to watch this:
https://www.youtube.com/watch?v=2b3ttqYDwF0 It covers how ‘Disruptive’ technologies can grow exponentially (the ‘S’ curve) with plenty of examples like Smartfones and it makes the point that once the economics of switching make sense to the End-User, then adoption is extremely rapid. As always he cites the usual example of how fast Kodak declined - believe it or not they reported record Results in just the year 2000.
This article is about entu (UK) PLC (ENTU) and my experience of purchasing a share without a proven market track record that had only recently come to market through an IPO.
entu (UK) PLC is a company that markets 'energy efficiency' products. It sells heating boilers, double glazing and solar products. It was floated on AIM in October 2014 with a market cap of £65.6m with shares valued at £1.00 each. The company had produced accounts for the previous years prior to floatation showing increasing turnover and increasing profits and made claims that it was going to pay a future dividend of 8%. Simon Thompson in the Investors Chronicle wrote an article about the company published on 10 November 2014 analysing the figures and suggesting that the share would make a decent income buy. One of the strengths highlighted by Simon Thompson was that the company merely sold the products and did not manufacture any of them and therefore did not require much capital expenditure.
To set the scene I just need to do a quick refresher on the way I use Spreadbets in order to gain Leverage and boost my Returns. In essence, the Theory is that I ‘mirror’ my Normal Trading ISA Portfolio in the form of Spreadbets and this should give more “Bang for my Buck“.
Probably the easiest way to illustrate it is by using a simple example. Let’s say I have £100k in my ISA which is composed of various Share Positions. I then ‘mirror’ this ISA using Spreadbets to get pretty much the same Exposure to each of the Shares so that the total Spreadbet Exposure is also £100k. Now let’s say the Normal Shares Portfolio in my ISA goes up 10% in a year - so there is a £10k gain. Everything being equal, the Spreadbet Portfolio should also rise by 10% and £10k but we need to appreciate that there is an Interest Charge on the Money used so we can for theoretical needs in our example say that the Return on the Spreadbet Portfolio EXPOSURE would be probably 7% rather than 10% (the Finance Charge is something like LIBOR plus 2% or so), so the monetary Return is £7k.
This is the 2nd Part of a Series of Blogs - if you haven’t read Part 1 or need a refresher, then you can find it here:
http://wheeliedealer.weebly.com/blog/enjoy-the-silence-cut-out-the-noise-part-1-of-3 Looking for ‘Excuses’ to Sell This is very much a danger that is linked to what I have been talking about in Part 1 with regard to being unfocused in the Information Sources you use, and it is also a key Psychological failing that I know I suffer from although I hope I am slowly healing from this terrible and expensive disease. We all know the infamous and sadly banal Market adage “Run your Winners and cut your Losers” and I wouldn’t be surprised if the latter bit about “cutting Losers” gets 98% of attention from Market Players where as the bit about “Running Winners” barely gets a look in. I am always reading/hearing about how we must “Cut our Losers” but very rarely hear anything about how to practically “Run your Winners”. I am personally useless at “cutting Losers” after many years of trying to cure this ‘Bad’ habit, and I have pretty much given up on even bothering now - I have a partially written Blog all about my current thinking on Stoplosses but it probably won’t appear on the Website for some time - however, I now take the stance that “Running Winners” is by far the more important part of the adage and is where more focus should be put.
I have been meaning to crack on with this Blog for weeks but various distractions have conspired to stop me getting it done. It is a bit of a contentious subject as the Politics around it are beyond extreme but I just want to put into electrons how I see things playing out and how I will be managing around the Brexit Negotiation developments to ensure my Portfolio is protected. I have had a lot of painful discussions about this on Twitter but the upside for me is that they enable me to think through the Scenarios and to come up with a Roadmap of Options which will help me frame my approach.
In essence and at a High Level (there is no point in thinking lower than this - everything is unknown at the moment and most of the stuff anybody says or writes about this subject is useless speculation and 99% of the time it has a Political Agenda behind it on one side of the ‘debate‘ or the other) I think there are 4 possible Outcomes of the Article 50 Negotiation Process which we need to consider:
If you have not read Part 1 of this Blog Series yet then it probably would be best to start there. You should find it at this link here:
http://wheeliedealer.weebly.com/blog/maybe-were-not-in-control-after-all-part-1-of-3 Physical Stress Another one in the programme was similar to something in the Kahneman book. Some researcher somewhere analysed the outcomes of Parole Board Hearings in the US over a long time series while controlling for certain factors such as Race, Gender, Age, etc. The finding was that Prisoners who went up to the Parole Board before Lunch were far more likely to fail in their request than those applying just after Lunch. The explanation for this seems to be that when the Parole Judge is hungry and tired they tend to be less generous than after Lunch when they have been fed and watered.
**The Guest Blog below has kindly been donated by my mate Stuart who is reasonably new to Trading/Investing and he is exploring some 'experiences' he had on a Buy of Bovis BVS. Since writing this text BVS has put out a Warning and Stuart has now dumped all of his Holding and moved on.
On behalf of Readers and myself a huge 'THANK YOU' to Stu for creating this insightful scribble, cheers, WD.** This is the first in a series of blogs about lessons learnt by a newbie stock picker. I am comparatively new to 'stock picking' having opened my first self select ISA in August 2014. As I have discovered mistakes in investing can be expensive and although the errors detailed in this series may seem obvious to more experienced investors, I hope by highlighting them they may prove of use to some readers. Position sizing As Wheelie so often writes, investment performance should be measured by the return of the overall portfolio and not just individual 'stars' or 'dogs'. |
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