Allowing for Timing Issues
From those Examples I put in Part 3 of this Blog Series regarding different % Sizes of a Drop (if you look on the Educational Blogs page you should be able to easily find Part 3 if you have not seen it yet), it appears a bit of a ‘No-Brainer’ that if our Portfolio is above a certain Size, then we should seriously consider a ‘Move into Cash’ when we anticipate a Drop in the Markets coming. In other words, as an example, if your Portfolio is worth £50k and you expect a Drop of 10%, the Costs of moving half your Portfolio into Cash (assuming a 2% Spread) would be 6.8% so it probably would not be worth the bother (go back to Part 1 of this Blog Series to get more information about this). But of course nothing is this simple.
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Moving into Cash - the Unknowable and Uncontrollable bits
In Part 2 of this Blog Series I wrote about what kinds of things are ’Controllable and Knowable’ when it comes to Moving into Cash but the ‘Uncontrollable’ and ‘Unknowable’ aspects of Moving into Cash are many and by definition impossible to be certain about in advance. The kinds of things that are Uncontrollable and Unknowable include factors like the following:
If you have not read Part 1 of this Series, then scroll down the ‘Educational Blogs’ page and it should appear a couple of Blogs before this one. I recommend you read that first.
Moving into Cash So now that I have ‘set the scene’ with these Concepts of Controllable stuff and Uncontrollable stuff and, likewise, things we can be Certain about and things where we have no Certainty; I want to relate them to the specific Subject of ‘Moving into Cash’ but of course these concepts have wide validity across many aspects of Investing as I pointed out in Part 1. To be clear on this, I am discussing the subject of whether or not we should sell All or Part of our Portfolios before we foresee a Major Drop in the Markets coming - a bit like we have had this Year with the upcoming Brexit escape from the EU. I am not really sure how to go about writing this and as much as I know I should plan out a structure, I am not really in the mood for that so I will just crack on with it and of course vigorous use of the ‘Cut ‘N’ Paste’ function should help me sort the resulting mess into something that is almost readable. (Editor’s Note from much later - not doing an Initial Plan was a very big mistake !!)
I realised that just one Checklist for the ‘WD40’ would not actually suit my needs - because I Invest in a range of Investment ‘Styles’ to ensure more Diversification. On this basis, I have decided to produce the following Checklists:
This is the Final Checklist and you can find the other ones at these Links:
This is the third of the Buy Checklists I am creating and once I have Published the final one I will put Links in it to all the others. This one is for Stocks that have fallen foul of the Markets usually after a Profit Warning or several and although Buying such stuff can be Risky it is often a very good strategy for making sizeable Returns and I regularly find that for Quality Stocks that have real decent Businesses underpinning them, they nearly always recover after an often lengthy period in ‘Rehab’. This can apply to Stocks I already hold that have gone a bit messy or for Stocks that are new to my Portfolio.
So far I have published Checklists for these kinds of Stocks and you should be able to locate them fairly easily on the ’Educational Blogs’ Page as they are from recent Weeks and the final one will be for a ‘Quality at a fair Price’ Buffett Stock:
My mate Michael (@vilage_idoit on the Tweets) has done me a huge favour and offered up this great piece of writing to help me out at a time when I am struggling to produce Blogs for the Website because of my ever dragging on Health aggravation. It is very relevant to the current unpleasant Markets we are all suffering and well worth reading.
Big THANKS mate, WD
I recently published a Blog with a Buy Checklist for Stocks for my Income Portfolio and now I’m turning my attention to my ‘Normal’ Portfolio.
I realised that just one Checklist for the ‘WD40’ would not actually suit my needs because I Invest in a range of Investment ‘Styles’ to ensure more Diversification. On this basis, I have decided to produce the following Checklists:
As I start to produce these I will probably realise that I need more but I really hope this doesn’t happen as it will just confuse things and make it all too complicated.
Lots of People on Twitter etc. are extremely helpful with Tweeting out Stocks they have been buying and selling - which can be great for drawing attention to New Ideas of Stocks to Invest in and also lets People reading the Tweets get an idea of the sort of Approach a particular Tweeter follows. I always say that I can get a very good insight on whether or not a particular person makes Money simply by looking at the Stocks they Tweet about. This really is one of the many benefits I find from being extremely fortunate to be able to interact with so many helpful and collaborative Investors / Traders and it has enabled me to meet a whole new bunch of top quality Mates - and this has without doubt boosted my own never-ending Learning Process.
I am sure I mentioned that I wanted to create ‘Buy Checklists’ that I could use to help me make a final Decision whether to Buy a Stock or not and having thought about it I have come to the conclusion it is not an easy thing to do !!
I have sort of already done the opposite of this - a ‘Negative’ if you like in a photographic sense - in the form of the ‘WheelieBin’ and if you look at the Website page with the WheelieBin on it you will find a good Checklist of what constitutes a Stock that is best avoided.
This is something I often seem to discuss with People and to Tweet about but I am not sure if I have ever written much about it in my Blogs. Anyway, the point I am making here is that when calculating the Performance of your Portfolio or of the Stocks within it, it is always a good idea to think in terms of Percentages - not in terms of the Pound Notes.
There are many reasons for this but the main one is that once your Portfolio gets to a particular Size (and this will vary depending on each and everyone of us and our attitudes/personalities especially with regard to Risk and of course how ‘Rich‘ we are in total), if you start to think in Pound Note terms then you can easily frighten yourself and this will lead to Fear, Panic, and other Cognitive Errors that the amount your Portfolio moves about is instilling in you. |
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