For more than 25 years, I have either managed money, advised portfolio managers, or written research papers about investing. Why didn’t you retire then, I hear someone shouting from behind. It’s a good question to ask all the financial “experts”. My answer, for what it’s worth, is: four kids, divorce and I’m always the first to the bar.
I have learned throughout my career that counseling has two problems. First, it is often wrong. Trump as president? It will never happen. Buying Emerging Markets Stocks – Oops. And secondly, the donor rarely suffers when he is wrong.
This new weekly column will attempt to reduce the number of bad calls. Better yet, why not agree that sometimes we’re so late with a good idea, or so far ahead of the curve that we won’t be alive to celebrate our winnings? I wouldn’t ever say the word “wrong” if you didn’t.
As for the lack of appearance in the game, there will be no recommendations that I do not participate in – whether to buy, sell or discount summer items. We’re in this together. And by leaving the one-name stocks to the Reddit band — sticking only to the big sectors, indices and asset classes — we can’t be accused of market manipulation.
To make sure my funds are where my pen is, you’ll be able to view my portfolio’s performance each week. Except for a small investment in a friend’s data business (Essentia Analytics) I have no other savings. Just like playing poker without money for kids, investing without the joy and fear that comes with putting your own assets on the line is pure fantasy.
This is why so many template portfolios are shooting the spotlight. They are not real. What it is, as I tried in 1999, is that it’s five percentage points less than News Corp’s weight as it soared and soared during the dot-com bubble. I was sure that he would appear, but my doubts grew. What was I missing? Colleagues stopped looking you in the eye. You do not sleep. rarely eat. In the end, my relatives’ returns were so bad that I had to buy. Then I landed.
It wasn’t even my money. The customers were the losers. Which is why I consider writing a personal finance column a responsibility. Some readers will be minted, others will endure unimaginable financial stress. There is no way I would consider making recommendations if I didn’t follow them myself.
Let’s start with a goal. I want to double the size of my pension within a decade, in real terms. This is an inflation-adjusted return of just over 7 percent per annum. Long-term equity yields are a bit lower than this, so it may not sound ambitious. But we are emerging from a multi-decade bull market, valuations are still rich and the world is facing many crises. I think that’s a reasonable ambition – not too greedy, realistic and with room for upside.
Now to open the book. My only investments lie in two defined contribution pension schemes of about the same size, totaling £438,000. The biggest bet is exposure with 27 per cent to UK equities, then cash at a lower price, followed by an ex-UK global equity fund. Then it drops to 11 percent of Pacific stocks excluding Japan, and the same weight in Japanese stocks. This is it. There is no fixed income. No alternatives. not gone.
Over the coming months, we will analyze these situations and any news that affects them. What made me buy? Does the investment case still make sense? What’s the best out there? But in a week Autumn statementHow about we start with this huge exposure to UK equities?
I got out of risky assets before the pandemic (coincidence) and when the stock markets crashed in Q1 2020, I wanted to rebuild my capital exposure. But what do you buy first? I didn’t necessarily care where it was, just that the market had to be cheap enough to make up for the uncertainty still so intense around Covid.
The forward price/earnings ratio for the US S&P 500 fell from 20 to 14 times. But UK indices, whose prices fell by a quarter, rose nine times. One day I will write about PE ratios and why they are ridiculous. But the absurdity of single numbers is often a buy signal.
So it is proven. My FTSE All Share ETF is up by a third since then. What now? Unusually, the index is cheaper on an earnings basis today than it was when I bought it, despite the uptick. One reason is that oil companies’ share prices have more than doubled since 2020, while their earnings have skyrocketed. Likewise, banking and pharmaceutical stocks have pulled off some impressive earnings recovery.
The low multiple also reflects concerns that profitability will collapse next year – by as much as a third based on consensus estimates. This sounds harsh. Besides, earnings fell by much more in 2020 and shares rebounded. Also remember that the UK has a bunch of amazing companies that no one else has heard of. These tend to be asset-less businesses in pharma and technology with valuable patents and impressive R&D pipelines. The average cash flow return on invested capital for UK indices is world class.
Since the majority of the revenue on UK stocks is derived from abroad, a weaker pound is good for translated earnings. If the fall statement fails to convince the markets, stocks should be a good hedge. In fact, there is a 60 percent inverse relationship between the quarterly returns of the FTSE All-Share Index since 1969 and the pound sterling against the dollar. Be warned, though, that in the past five years, the association has reversed.
I will maintain my weight in British stocks. Experience tells me the best time to own up to anything is when I’m feeling extremely uncomfortable. I definitely have that feeling now. not you?
The author is an investment columnist and former banker. E-mail: email@example.com; Twitter: MustafaHosny Oh God, Amen