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Portfolio without funds

A helpful place to also put any annual reports etc, of your own portfolios
InvestUK98
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Portfolio without funds

#309437

Postby InvestUK98 » May 17th, 2020, 5:20 pm

Is having 13 indiividual stocks in my portfolio being too diverse.

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Re: Portfolio without funds

#309442

Postby dealtn » May 17th, 2020, 5:41 pm

InvestUK98 wrote:Is having 13 indiividual stocks in my portfolio being too diverse.


No

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Re: Portfolio without funds

#309447

Postby TUK020 » May 17th, 2020, 5:55 pm

InvestUK98 wrote:Is having 13 indiividual stocks in my portfolio being too diverse.


Diversity across unrelated sectors reduces 'sector' risk. i.e. you are not too concentrated if something unforeseen and bad happens to all companies in a sector (see oil price this year - affects all companies in this sector)
After about 15 sectors, you start to get into diminishing returns from diversifying across sectors.
Many of the investors here on this site also double up in a sector to reduce specific company risk (think Macondo oil spill impact on BP).

Many investors here rule out some sectors as being unethical (some avoid tobacco), and some as being inherently unattractive from a consistent profitability perspective (e.g. contract services, contract construction, airlines).

Some investors on this site also gain further diversification beyond the pool of FTSE individual companies by using Investment Trusts (ITs) either geographically (e.g. Henderson Far East Ltd), or in asset terms (HICL - infrastructure assets).

I have a total of about 40 investments, approx 30 individual companies and about 10 'other' including ITs and Exchange Traded Funds (ETFs) which track indexes (L&G Global 100 companies, and also Physical Gold PHAU).

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Re: Portfolio without funds

#309448

Postby monabri » May 17th, 2020, 5:55 pm

InvestUK98 wrote:Is having 13 indiividual stocks in my portfolio being too diverse.


No.

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Re: Portfolio without funds

#309484

Postby tjh290633 » May 17th, 2020, 9:23 pm

As others have indicated, ideally you could do with a few more. However, what is also important that you are not duplicating sectors, like having BP. and RDSB, or AZN and GSK, so if your 13 are all in different sectors, then you are well on the way. If in time you can add a few more that would be good. Once you are at 15 or more, then you can afford to duplicate sectors.

Why not post your portfolio in percentage composition terms, listing the individual shares, then we can comment more meaningfully.

TJH

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Re: Portfolio without funds

#310114

Postby JohnW » May 20th, 2020, 1:01 am

Or you could phrase the question as: is 13 alone sufficiently diverse?

There’s a risk that any one company you invest in will come into major difficulties not shared by other companies or sectors, which substantially reduces the value of your investment.
For people who own shares in every company, that one company going bad will barely affect them; people in that situation (owning every, most, or very many companies) will be happy to push up the price of the companies they own because the risk to them is small if any single one goes bad.
Now picture the person owning only one company; when it goes bad that investor is massively affected and for this reason would not be as comfortable as the diverse investor putting so much money at such risk. Put another way, the diverse investor can be comfortable paying more for any company than the single share investor because the diverse investor is at less risk if any one share fails. And as they are comfortable to pay more, they push the price up.

Since we all can be diverse investors, and many are, share prices are pushed up beyond the value that a ‘one share investor’ would be comfortable with. Basically, as a single share investor you’re taking on more risk, or paying more than the ‘average’ single share investor would be comfortable to pay (so overpaying). It’s a bad deal. But, you can diversify this risk away by owning shares in more and more companies, thus buying them at a value which better reflects the risk you need to take.

However, the market decides what is a fair price for a company’s shares in view of the risks, by the multi-brained wisdom of thousands of investors. If you think you’re know something about the price and risk of a company’s shares that almost all other investors don’t know then what’s above doesn’t apply to you.

So, back to the re-phrased question, and maybe ‘no’ is still the answer.

Itsallaguess
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Re: Portfolio without funds

#310127

Postby Itsallaguess » May 20th, 2020, 6:21 am

InvestUK98 wrote:
Is having 13 individual stocks in my portfolio being too diverse?


I've always found that there's two levels of 'diversity' when it comes to my own investments, and understanding the difference has been a great long-term benefit to me personally as my portfolio has grown over the years.

I find that for me, there's what we might describe as 'technical diversity', where some 'external agent' could probably 'show' or ''prove' that technical diversity might be largely 'achieved' by a certain number of holdings.

Many investment studies have shown that once we get beyond 10 or 15 diverse holdings, the bulk of 'diversification-risk' has largely been removed, and with additional holdings beyond that number giving little additional benefit to 'diversification risk-reduction' -

Image

Image source - https://tinyurl.com/ybejn2rx

But on top of that, for me there's then what I might describe as 'personal comfort diversity', where a relatively low '10 or 15' holdings simply never 'felt right' for me as an individual investor, and I found that I was much more 'personally comfortable' holding around 30 or 40 investments, and even more 'personally comfortable' again once some of those holdings were actually 'collective investments' themselves, in the form of Investment Trusts or Funds.

If someone could look at that situation and perhaps wish to tell me that I'm probably 'diversifying for the sake of it' at that level, and could perhaps even 'prove' at a 'technical level' that I actually 'stopped benefiting' from additional diversity some time ago, then I wouldn't be surprised at all by that, and would quite happily accept that fact in all honesty - and I would still be quite content to continue holding an investment portfolio with around 30 or 40 investments in it... In fact, I've just checked and there are currently around the 40 number in my portfolio at the moment..

So for me, it's more about at least understanding the technical side of the situation, and perhaps accepting that going beyond 15 diverse individual holdings is probably adding very little 'technical benefit', but then it's also very important for me, to find my own 'personal comfort' level as well with these types of things, and working in a way that might tick the first box, but also make sure to tick the more personal boxes too, where there's relatively little technical detriment in doing so...

Cheers,

Itsallaguess

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Re: Portfolio without funds

#310142

Postby Bubblesofearth » May 20th, 2020, 8:21 am

Itsallaguess wrote:
I've always found that there's two levels of 'diversity' when it comes to my own investments, and understanding the difference has been a great long-term benefit to me personally as my portfolio has grown over the years.

I find that for me, there's what we might describe as 'technical diversity', where some 'external agent' could probably 'show' or ''prove' that technical diversity might be largely 'achieved' by a certain number of holdings.

Many investment studies have shown that once we get beyond 10 or 15 diverse holdings, the bulk of 'diversification-risk' has largely been removed, and with additional holdings beyond that number giving little additional benefit to 'diversification risk-reduction' -

Image

Image source - https://tinyurl.com/ybejn2rx

But on top of that, for me there's then what I might describe as 'personal comfort diversity', where a relatively low '10 or 15' holdings simply never 'felt right' for me as an individual investor, and I found that I was much more 'personally comfortable' holding around 30 or 40 investments, and even more 'personally comfortable' again once some of those holdings were actually 'collective investments' themselves, in the form of Investment Trusts or Funds.

If someone could look at that situation and perhaps wish to tell me that I'm probably 'diversifying for the sake of it' at that level, and could perhaps even 'prove' at a 'technical level' that I actually 'stopped benefiting' from additional diversity some time ago, then I wouldn't be surprised at all by that, and would quite happily accept that fact in all honesty - and I would still be quite content to continue holding an investment portfolio with around 30 or 40 investments in it... In fact, I've just checked and there are currently around the 40 number in my portfolio at the moment..

So for me, it's more about at least understanding the technical side of the situation, and perhaps accepting that going beyond 15 diverse individual holdings is probably adding very little 'technical benefit', but then it's also very important for me, to find my own 'personal comfort' level as well with these types of things, and working in a way that might tick the first box, but also make sure to tick the more personal boxes too, where there's relatively little technical detriment in doing so...

Cheers,

Itsallaguess


I'm with you on a high level of diversification. Most studies of the relationship between diversification and risk look at volatility as the measure of risk. Indeed, volatility is the widely accepted best and most easily quantified measure of risk. However, I have also seen studies, and had personal experience, that show the bulk of stock market, and individual portfolio, gains come from a relatively small number of high performing companies. If, instead of looking solely to reduce portfolio volatility, you want to optimise your chances of capturing some of these high performers then a greater level of diversification is needed than to simply reduce portfolio volatility.

BoE

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Re: Portfolio without funds

#310189

Postby JohnW » May 20th, 2020, 9:58 am

It’s difficult to quantify the decreasing benefit from more diversification, when studying that graph; and they haven’t given a source for it.

However, there’s other research, including a study from Toronto which simulated different sized random portfolios and compared their annual returns with the broad market return. https://www.researchgate.net/publicatio ... d_Skewness

They concluded: ‘For investors holding only 15 issues, the bias is about 40 basis points per year, but for portfolios of 75 issues, the bias under each of the three portfolio approaches is, on average, under 10 basis point.’
The ‘bias’ is their measure of the under-performance of a less diversified portfolio on average and broad market returns on average. Their portfolio approaches were: randomly chosen shares of equal weighting; randomly chosen shares with capitalisation weighting; and equal weighting of each share held but a higher chance the portfolio held the bigger companies.

Some folk have taken away from this that with small portfolios there is a greater dispersion of return results: you can get onto some real winners, but similarly finish up with some dogs. But the distribution is not symmetrical; there’s more chance of finishing up with below market returns, and a smaller chance of outperforming.
You can read a similar study here:
http://www.efficientfrontier.com/ef/900/15st.htm

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Re: Portfolio without funds

#310376

Postby Mememe » May 20th, 2020, 6:48 pm

Bubblesofearth wrote:
Itsallaguess wrote:
I've always found that there's two levels of 'diversity' when it comes to my own investments, and understanding the difference has been a great long-term benefit to me personally as my portfolio has grown over the years.

I find that for me, there's what we might describe as 'technical diversity', where some 'external agent' could probably 'show' or ''prove' that technical diversity might be largely 'achieved' by a certain number of holdings.

Many investment studies have shown that once we get beyond 10 or 15 diverse holdings, the bulk of 'diversification-risk' has largely been removed, and with additional holdings beyond that number giving little additional benefit to 'diversification risk-reduction' -

Image

Image source - https://tinyurl.com/ybejn2rx

But on top of that, for me there's then what I might describe as 'personal comfort diversity', where a relatively low '10 or 15' holdings simply never 'felt right' for me as an individual investor, and I found that I was much more 'personally comfortable' holding around 30 or 40 investments, and even more 'personally comfortable' again once some of those holdings were actually 'collective investments' themselves, in the form of Investment Trusts or Funds.

If someone could look at that situation and perhaps wish to tell me that I'm probably 'diversifying for the sake of it' at that level, and could perhaps even 'prove' at a 'technical level' that I actually 'stopped benefiting' from additional diversity some time ago, then I wouldn't be surprised at all by that, and would quite happily accept that fact in all honesty - and I would still be quite content to continue holding an investment portfolio with around 30 or 40 investments in it... In fact, I've just checked and there are currently around the 40 number in my portfolio at the moment..

So for me, it's more about at least understanding the technical side of the situation, and perhaps accepting that going beyond 15 diverse individual holdings is probably adding very little 'technical benefit', but then it's also very important for me, to find my own 'personal comfort' level as well with these types of things, and working in a way that might tick the first box, but also make sure to tick the more personal boxes too, where there's relatively little technical detriment in doing so...

Cheers,

Itsallaguess


I'm with you on a high level of diversification. Most studies of the relationship between diversification and risk look at volatility as the measure of risk. Indeed, volatility is the widely accepted best and most easily quantified measure of risk. However, I have also seen studies, and had personal experience, that show the bulk of stock market, and individual portfolio, gains come from a relatively small number of high performing companies. If, instead of looking solely to reduce portfolio volatility, you want to optimise your chances of capturing some of these high performers then a greater level of diversification is needed than to simply reduce portfolio volatility.

BoE


Hit the nail on the head for me. This is why I also go passive for the majority of my money

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Re: Portfolio without funds

#311229

Postby Hariseldon58 » May 22nd, 2020, 10:14 pm

13 Stocks but how big is the portfolio ?

£100,000 per holding would be a brave move , £1,000 per holding sounds sensible.

13 stocks from across the world or from just the U.K. ?

A U.K. bias got me to my first significant investment milestone but an international exposure doubled it....

I have 13 ETFs and that’s definitely diversified :D
(Plus 5 distinctively managed active investment trusts etc)

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Re: Portfolio without funds

#312038

Postby onthemove » May 25th, 2020, 12:58 pm

Itsallaguess wrote:But on top of that, for me there's then what I might describe as 'personal comfort diversity', where a relatively low '10 or 15' holdings simply never 'felt right' for me as an individual investor, and I found that I was much more 'personally comfortable' holding around 30 or 40 investments, and even more 'personally comfortable' again once some of those holdings were actually 'collective investments' themselves, in the form of Investment Trusts or Funds.

If someone could look at that situation and perhaps wish to tell me that I'm probably 'diversifying for the sake of it' at that level, and could perhaps even 'prove' at a 'technical level' that I actually 'stopped benefiting' from additional diversity some time ago, then I wouldn't be surprised at all by that, and would quite happily accept that fact in all honesty - and I would still be quite content to continue holding an investment portfolio with around 30 or 40 investments in it... In fact, I've just checked and there are currently around the 40 number in my portfolio at the moment..



I completely agree. I've seen - and accept - all the theory that says anything more than 15 stocks means you're just matching the market risk, etc.

But like you, I feel 30 to 40 (or more) with a good proportion of those also 'aggregate' investments, just sits far better.

And I think it can be rationalised - perfectly reasonably - like this...

It's one thing to know theoretically, on average, what the average levels of risk are.

But as individuals we are just a single instance. We're not the collection that makes up the averages. We are just an individual within that.

Average are just that - averages. Some will do better, some will do worse, depending which 15 you pick, but on average across all investors, they'll just be matching the market.

Except that doesn't help you as an individual investor, who might have given up / be intending to give up, any new income to live off their investments in retirement!

And that's the crux of the issue.

If your 'portfolio' in question is just a small part of your overall wealth, and not critical to your financial future, then 15 stocks, market risk is fine.

But for those of us whose portfolios are pretty much not just our entire life savings, but also the majority of our net worth as well (no home ownership either!), and more than half way through our earning careers, the idea that just 2 stocks doing a Carrillion, Debenhams, Laura Ashley, Enron, Thomas Cook, or so on, could knock well over 10% of our entire life's savings, is just completely and utterly not an acceptable risk.

And for me, particularly since the Brexit vote, even single country risk is no longer acceptable for me. As a result, not all, but most of my 'aggregate' investments have recently been non-UK ETFs.

Were I starting over again, back as the 20-something year old when I began, I'd be happy to do exactly the same again - when young, with much of my career ahead, and the portfolio size the same as only a few months take home salary, I'd happily take the risk again of buying only 3 or 4 shares to begin with. In fact, I'd probably still recommend that to my 20-something year old self.

Now, 20 something yrs, on, with the most profitable part of my career probably behind me, now looking forward to financial independence / semi-retirement within hopefully the next 5 years or so, and certainly no way at all I'd be able to start back from a very big knockback and hope to get back to this point before retiring, there's absolutely no way that I could take the risk of putting my net worth into only 15 individual company holdings.

Sure, 15 will track the market - typically, on average - but I cannot now afford to be the unlucky one.

In summary...

It comes down to...

-o- How much of your overall net worth is your portfolio - what would be the consequences on your life / living standards, of it, say, halving (due to company failure)?

-o- How much future (excess) earnings do you realistically think you'll still have remaining before you retire, to recoup the losses in the event of very bad luck with company failures? How enthusiastic are you about the prospect of needing to call upon that? I definitely wouldn't want to have to repeat the LBYM sacrifices, and live through the job risk / uncertainty, again, to re-build up what I currently have.

If you were very unlucky, 7 companies failing within a couple of years could knock 50% of your portfolio. It might not be likely, but it's not impossible.

I suspect most people who own a home, have some kind of buildings insurance, yet I imagine that these days, very few buildings get gutted by fire, or other similar catastrophic events.

For me, now my portfolio is substantial enough, I look on a more diversified portfolio as insurance to mitigate against the unlikely, but not impossible, risk of catastrophic loss.

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Re: Portfolio without funds

#312047

Postby onthemove » May 25th, 2020, 1:22 pm

Bubblesofearth wrote:However, I have also seen studies, and had personal experience, that show the bulk of stock market, and individual portfolio, gains come from a relatively small number of high performing companies. If, instead of looking solely to reduce portfolio volatility, you want to optimise your chances of capturing some of these high performers then a greater level of diversification is needed than to simply reduce portfolio volatility.


I track my investment returns, and my normal go-to chart for reviewing my performances is my bar chart chart of absolute gains / absolute losses (total return capital + dividends), ordered by (absolute) size, biggest to smallest, with losses pointing left, gains pointing to the right.

I do it by £ gain / loss, not by %, because % would be being dishonest with myself.
£ is what I actually made / lost - and is largely a result of the confidence (or otherwise) I felt in that company at the time I chose how much to invest in it.

I think what the chart shows me, is that my gut feeling for which shares are high risk / low risk, is rubbish! I'm just as likely to win big, as lose big, on the ones I had the confidence to invest more in.

And that's the key thing... sure I agree... the biggest gains come from a relatively small number of high performing companies.

But it's also true that the biggest losses come from a relatively small number of big catastrophes.

If you think diversification is chasing the winners, it's also chasing the losers!

In fact, I'd go as far to say the probability of the (£) size of gain or loss for any company, largely seems to come out at an approximately normal distribution, centred a little to the right of zero (because stock market investment typically does provide positive overall returns in the long run).

And like any distribution, the more samples from which its constructed, the smoother the result.

If you just picked 15 numbers at random from a gaussian process, then plotted their distribution, I would imagine quite often the result of the 15 on their own probably wouldn't look particularly gaussian. Sometimes you'll have quite a bias one way, other times a bias the other way.

But the more samples you pick, the clearer the curve will become, and the better 'refined' the average.

But picking more and more samples, won't keep shifting the centre of the distribution further and further towards the positive.

On average, picking more samples just improves the 'accuracy' with which you'll find the average.

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Re: Portfolio without funds

#312090

Postby 1nvest » May 25th, 2020, 4:24 pm

Bubblesofearth wrote:However, I have also seen studies, and had personal experience, that show the bulk of stock market, and individual portfolio, gains come from a relatively small number of high performing companies. If, instead of looking solely to reduce portfolio volatility, you want to optimise your chances of capturing some of these high performers then a greater level of diversification is needed than to simply reduce portfolio volatility.

But its fractal! If you hold 100 stocks then one might rise 100% but if equally weighted adds just 1% of portfolio to the portfolio value. With ten stocks, one might rise 10% (and often more), and in being 10% weighted adds 1% to portfolio value. A example of how few can compare to many are the Dow 30 and S&P500. Both have broadly aligned (moderately) over the mid/longer term.

In times gone, when it was relatively expensive to buy/trade stocks, many investors opted to hold less than 10 stocks, even for very large/massive portfolios (such as the Rothschild's family funds). There are other instances of relatively few (30) comparing to the many over very long periods. LEXCX for instance that bought 30 stocks back in the 1930's and have held those since (more recently down to around 20, with the largest being a Railroad stock).

Jack (John) Boggle suggested a ultimate buy and hold portfolio of buying the 50 largest S&P500 stocks - buy and hold https://www.forbes.com/forbes/1999/0614 ... dae8896874
At our request, Professor Jeremy Siegel of the Wharton School calculated a hypothetical return (before transaction costs) if someone bought the 50 largest S&P 500 stocks on Dec. 31, 1950 and held on. Average annual return: 12.6%, a fraction of a point better than the market (which Siegel defines as all listed stocks). He then created separate buy and hold portfolios for every year since until 1996. Result: the buy-and-hold approach beat the market three-quarters of the time and it never underperformed by more than 0.6% a year.

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Re: Portfolio without funds

#312093

Postby Hariseldon58 » May 25th, 2020, 4:44 pm

In respect of buy and hold, the indexes change a lot over time, the original FTSE of 1984 is very different from today, would cause some complications!

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Re: Portfolio without funds

#312107

Postby Bubblesofearth » May 25th, 2020, 6:07 pm

onthemove wrote:
And that's the key thing... sure I agree... the biggest gains come from a relatively small number of high performing companies.

But it's also true that the biggest losses come from a relatively small number of big catastrophes.

If you think diversification is chasing the winners, it's also chasing the losers!



The most you can lose on any given share is 100% of your investment.

The most you can gain is an unlimited amount (OK, within reason).

The point being that share performance over time will not give a normal distribution. There will be a cut-off at -100% and a long tail with a few standout examples of shares that have gone up many times in value. It's capturing some of these that will be important for portfolio growth.

BoE

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Re: Portfolio without funds

#312109

Postby tjh290633 » May 25th, 2020, 6:12 pm

Maybe we should point out that there is considerable variability between the shares in a portfolio.

For the shares that I hold in my HYP, the figures for the change in price for the year to date are:

Epic   Change    Yield 
AZN 18.26% 2.44%
RB. 16.36% 2.46%
PHP 2.77% 3.75% (since 25 Mar 2020)
ADM -1.00% 5.20%
BATS -2.75% 6.74%
RIO -5.34% 8.33%
ULVR -5.41% 3.48%
UU. -6.49% 4.62%
GSK -6.51% 4.81%
NG. -6.75% 5.26%
SGRO -7.45% 2.52%
TSCO -10.93% 4.03%
VOD -11.41% 5.78%
DGE -11.45% 2.47%
BA. -12.59% 1.90%
BHP -12.76% 7.29%
SMDS -15.07% 3.42%
TATE -16.26% 4.66%
SSE -17.73% 6.64%
KGF -19.08% 1.88%
IMB -19.10% 9.01%
S32 -26.33% 3.76%
IMI -26.46% 1.71%
TW. -27.15% 2.78%
PSON -28.52% 4.33%
WMH -33.14% 0.00%
BP. -34.27% 10.50%
LGEN -37.64% 9.46%
CPG -39.18% 0.00%
BT.A -39.83% 0.00%
AV. -43.61% 4.01%
RDSB -44.59% 4.10%
BLND -45.52% 6.75%
MARS -48.11% 0.00%
LLOY -55.01% 0.00%
MKS -55.71% 0.00%

As you can see there is a lot of variation, and this is typical of any year.

TJH

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Re: Portfolio without funds

#312112

Postby Bubblesofearth » May 25th, 2020, 6:20 pm

1nvest wrote:But its fractal! If you hold 100 stocks then one might rise 100% but if equally weighted adds just 1% of portfolio to the portfolio value. With ten stocks, one might rise 10% (and often more), and in being 10% weighted adds 1% to portfolio value. A example of how few can compare to many are the Dow 30 and S&P500. Both have broadly aligned (moderately) over the mid/longer term.


These are cap weighted indices and the S&P500 includes the Dow30 so it's not surprising they don't diverge too much. A bit like the FTSE100 and FTSE350.

In times gone, when it was relatively expensive to buy/trade stocks, many investors opted to hold less than 10 stocks, even for very large/massive portfolios (such as the Rothschild's family funds). There are other instances of relatively few (30) comparing to the many over very long periods. LEXCX for instance that bought 30 stocks back in the 1930's and have held those since (more recently down to around 20, with the largest being a Railroad stock).


Once you get to 30 stocks you are on safer ground regarding capturing companies that go on to rise several-fold. Certainly much better than 10-15 which is often bandied about as adequate. The only caveat I would add is, even with 30 stocks, sectoral diversification is still very important. Covid-19 has demonstrated the importance of this with some whole sectors being devastated whilst others have held up OK.

Jack (John) Boggle suggested a ultimate buy and hold portfolio of buying the 50 largest S&P500 stocks - buy and hold https://www.forbes.com/forbes/1999/0614 ... dae8896874
At our request, Professor Jeremy Siegel of the Wharton School calculated a hypothetical return (before transaction costs) if someone bought the 50 largest S&P 500 stocks on Dec. 31, 1950 and held on. Average annual return: 12.6%, a fraction of a point better than the market (which Siegel defines as all listed stocks). He then created separate buy and hold portfolios for every year since until 1996. Result: the buy-and-hold approach beat the market three-quarters of the time and it never underperformed by more than 0.6% a year.


I'm a huge fan of buy and hold. To the studies you've mentioned I would add similar ones on the original Dow30 that have shown equal weight on purchase to add a further benefit in performance over cap-weighting.

BoE

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Re: Portfolio without funds

#312167

Postby 1nvest » May 25th, 2020, 9:50 pm

tjh290633 wrote:Maybe we should point out that there is considerable variability between the shares in a portfolio.

For the shares that I hold in my HYP, the figures for the change in price for the year to date are:

Epic   Change    Yield 
AZN 18.26% 2.44%
RB. 16.36% 2.46%
PHP 2.77% 3.75% (since 25 Mar 2020)
ADM -1.00% 5.20%
BATS -2.75% 6.74%
RIO -5.34% 8.33%
ULVR -5.41% 3.48%
UU. -6.49% 4.62%
GSK -6.51% 4.81%
NG. -6.75% 5.26%
SGRO -7.45% 2.52%
TSCO -10.93% 4.03%
VOD -11.41% 5.78%
DGE -11.45% 2.47%
BA. -12.59% 1.90%
BHP -12.76% 7.29%
SMDS -15.07% 3.42%
TATE -16.26% 4.66%
SSE -17.73% 6.64%
KGF -19.08% 1.88%
IMB -19.10% 9.01%
S32 -26.33% 3.76%
IMI -26.46% 1.71%
TW. -27.15% 2.78%
PSON -28.52% 4.33%
WMH -33.14% 0.00%
BP. -34.27% 10.50%
LGEN -37.64% 9.46%
CPG -39.18% 0.00%
BT.A -39.83% 0.00%
AV. -43.61% 4.01%
RDSB -44.59% 4.10%
BLND -45.52% 6.75%
MARS -48.11% 0.00%
LLOY -55.01% 0.00%
MKS -55.71% 0.00%

As you can see there is a lot of variation, and this is typical of any year.

TJH

Summing the price + dividend yield for total return, sorting and plotting ...
Image
That is a bit of a left tilted example and even has more shares (58%) being above the average of the total, more usually a above average number of the shares tend to fall below the average gain of the whole. But it was a bad year - so more the exception than the rule.

Digging out a older chart from my image repo reveals the more usual type of pattern ...
Image
... and as I said earlier, fractal - applies at the small and large level/scale, even up to entire countries markets/events.

It's common to overlook/forget the left (bad) tail. For instance Dow and Jones originally devised three indexes, the Dow Transport, Dow Utilities and Dow Industrial averages ... which later 'merged' into the better performing Dow Industrial as the one that evolved as the measure of 'historic average' stock performance. Similarly investors can be swayed by the historic good case outcomes such as the USA and Australia, forgetting the bad cases
Image
Note how in that chart the 1970's and 1980's saw Japan rise massively/rapidly whilst former US dominance of world market cap dropped from around 75% down towards 25% (remember Sony Walkman's, Yamaha bikes ...etc.). Then the 1990's saw those Japanese giants falter and the US surged back up again. A primary reason for Japan's lost decades (1990's onwards) was more a case of the giants still being big even after having halved or more such that they continued to dominate the index, but also saw them drag the whole index down. If a few giants dominate the index then the index largely becomes just a reflection of a small number of stocks. As Bubblesofearth said earlier, equal weighting can help (note how it was near the top/best in that world chart/data set), as can holding a mid/small cap index, as they feed both in and out of the top and bottom, so the largest holdings are much less inclined to dominate the index.

Historically index methodologies have also evolved towards the 'better' choices. Methods such as used by the FT30 largely forgotten to instead see FT100/FT250 style index methodology becoming the 'average'.

Factor in costs and taxes. let alone inflation !!! Buyer beware, the financial sector is the worlds largest sector and its happy for investors to be attracted to it.

1nvest
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Re: Portfolio without funds

#312169

Postby 1nvest » May 25th, 2020, 10:06 pm

TDWaterhouse UK stock brokerage that was bought out by iii lets you hold multiple currencies and buy stocks in multiple global markets. Would be interesting to see what a portfolio of the largest stock by market cap in each of 10/whatever individual countries markets, avoiding sector duplication ... broadly rewarded historically. Equal initially weighted 10 stocks, just bought and held.

The downside as I see it is the same reason I'm adverse to a global stock index fund - withholding taxes. 20% is around the common average, so for instance a average 3% dividend yield might see 0.6% dividend withholding tax drag. But at least in holding stocks directly there'd be no ongoing fund management fee/expense.


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