Ross Parker » investing

My investing mistakes, a continuing series

Ross — Mon, 09 Nov 2009 21:02:33 +0000

I sold out of Tesco in October at 407, having bought them at 321 exactly a year previously and enjoyed two dividends in addition to the 26% rise in share value. It was my first investment. Of course, commissions took their toll from my profit: although I try to keep these as low as possible, I’m playing with hundreds rather than thousands, so it’s hard not to lose a few points to the brokers. However, perhaps that’s a good thing as it discourages frequent trading, a sure fire way of making brokers rich at your expense. The asymmetric brokerage costs that I now have arranged (£1.50 flat to buy, £10 flat to sell) are a good incentive to stay in the game too. Despite this, not staying in the game is my first investment mistake. Tesco passed 420 today, making 321 seem even more of a steal.

Lessons about investing

Ross — Thu, 08 Oct 2009 18:47:40 +0000

Very slowly, I am learning about investment and investing. I do believe that investing requires learning: I am firmly in the ‘value’ school. From the various books I have read and people to whom I have spoken, this is the wisdom I have distilled to date, with sources and my subsequent embellishments.

Never invest what you can’t afford to lose. From Caleb Loom, my grandfather. You need an income, and you need shelter. Don’t do anything that jeopardises this. Your investment baseline should not be zero, nor should you consider all your assets as part of your portfolio.
Invest on the basis of fundamental value. From Benjamin Graham. Every system is phoney, every day-trader a gambler. Patience is not only a virtue, but a competitive advantage.
Diversification reduces your potential for large losses, but also your potential for large gains. From Warren Buffett (who put it more succinctly, “When your advisor tells you to diversify, he’s telling you he doesn’t know what he’s talking about”). Note that (as John Kay would argue) diversification is the best way to ensure modest growth – but by prioritising the need for diversifying your portfolio, you are adding another reason to buy a stock: for the sake of diversity. This is one reason too many. The only reason you should have is because it’s a good stock.
Hammer down your investment costs. From John Kay. Fees and charges eat your return. Buy and sell smartly – take advantage of deals, buy in bulk. Try for a maximum 1% annual overhead.

I hope to learn much, much more, but this isn’t a bad start.

Investment advice

Ross — Tue, 01 Jan 2008 06:45:04 +0000

Three rules from John Kay, in the January edition of Prospect:

Pay less [primarily commissions, fees, etc.]
Diversify more [between asset classes and within them, remembering that indexes are not diverse]
Be contrarian

These may be my financial New Year’s resolutions.