However, I thought it may be interesting to compare how my portfolio from Aug 2014 would have fared had I maintained the full holding of 23 individual shares. Here’s a link to my update in 2014.
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In September 2014, the FTSE 100 was 6775 - by April 2015 it had risen to an all time high point of 7,100 which was swiftly followed by a dramatic 17% decline to a 3 year low by the Autumn at just below 5,900. At the time of posting we are back on the upward trend with the FTSE 100 at 6,846. That’s an increase of just over 1% over the 2 years.
I was surprised to see just how wide the variation in the fortunes of the portfolio. As can be seen from the comparison, over just two years, the results are a very mixed bag - some shares have done very well - 4 shares up by over 50%, others have tanked with 7 shares down over 20%. However, it seems that overall, the portfolio would have provided an increase in capital value of 8.4% over the two year period.
Over the past two years the returns from some of my investment trusts suggest it has probably been a wise decision to give up on shares. For example - City of London 9.4%, Edinburgh 18.6% and Finsbury Growth & Income 29.4%. The return from my Vanguard LS 60 has been 20.9%.
As noted above, whilst the FTSE has recorded a gain of just 1% over the past 2 years, there have been periods of quite volatile swings in both directions. Furthermore, at the level of individual shares, there have been margins as wide as +86% with Sage Group and at the other end of the scale, -49% for BHP Billiton.
Unfortunately, the markets do not go up or down in a straight line but tend to zig and zag - sometimes there are positive rallies and a cause for optimism, just a quickly hope can turn to despair as the markets lurch south testing patience, resolve and strategy.
One of the main reasons for my change of strategy was to get away from the rollercoaster ride which is an inescapable part of holding shares. Some people are naturally more suited to following such a plan - maybe they view the portfolio as a single entity and disregard the ups and downs of the individual constituents.
At my stage of investing, I decided to simplify my holdings and reduce some volatility via more collective investments such as trusts and the likes of Vanguard Lifestrategy 60. Lower volatility created by a disciplined allocation to equities and bonds helps me to ‘stay in the game’ by reducing the impetus to trade and it is therefore easier to remain invested during all market conditions.
There is no getting away from the fact that the equity markets can be unpredictable and, at times, extremely volatile. We are all different in some respects and I am sure there will be many who are temperamentally suited to running a shares portfolio.
However, from my own perspective, its about matching my emotions and temperament with a corresponding strategy which meshes together. I came to the conclusion last year that the shares no longer fit this equation and I am feeling just as rewarded and more comfortable with my collectives - investment trusts and index funds.
Obviously a bit of me regrets the decision to sell some of the shares which have done well - Sage, Imperial, IG Group for example but then again it is impossible to know at the time which shares would do well and which would struggle.
I think in the final analysis, it comes down to self awareness and having a robust strategy. How you choose to invest should always come down to the type of person you are and what you can and cannot handle in the markets in terms of risk.
Do you have individual shares in your portfolio? How do you manage volatility? Feel free to leave a comment below.