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Concentrated porfolio

Stocks and Shares ISA , Choosing funds for ISA's, risk factors for funds etc
Investment strategy discussions not dealt with elsewhere.
Itsallaguess
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Re: Concentrated porfolio

#359931

Postby Itsallaguess » November 25th, 2020, 12:49 pm

simoan wrote:
One of the problems with investment boards is that you can end up comparing yourself with complete strangers who you don't, and never will, know. I mean, they may not even be telling the truth for heaven's sake!! Don't compare your approach to anyone else - only you know your own financial circumstances and you don't know theirs.

For instance, when someone posts that they only have 15 holdings in their portfolio it tells you nothing. You don't know their age for one thing, and then the portfolio may only be a very small part of their total net worth, in which case the additional risk may make sense. Of course, if they have their entire net worth in 15 shares, then IMHO they don't understand risk, no matter what their age.


Absolutely - and another huge variable that's not always obvious is just where individuals are on their 'investment journey' - are they just starting out and still have many years of paid employment ahead of them, allowing them to take the appropriate commensurate risks, or are they retired, and in draw-down, and potentially looking at things with a completely different hat on to those of a working age....

A site like this can sometimes be great without those specific details being declared all the time, because many of us will have longer-term experience of peoples positions from different conversations over the years, but it's very important not to make assumptions in any of these important and very personal areas, and especially so if we think we might be looking to 'align ourselves' with a particular situation that might actually be completely at odds with our own personal circumstances..

It's a very important point that doesn't get mentioned enough, in my view, so thanks for raising it.

Cheers,

Itsallaguess

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Re: Concentrated porfolio

#360124

Postby Wuffle » November 26th, 2020, 6:42 am

The dismissal of the state pension as 'holiday money' is always a warning sign to me that I may not be aligned especially well with another!
'When I was a bond trader' is another personal favourite.
(with apologies to the obvious candidates for the mild comedy, whose contributions I find almost wholly fascinating).

On concentrated portfolios, about 5 years ago I briefly had a position in Syivania Platinum that would now exceed the value of my house. Pooped myself and sold it after making 20%. There are lessons here.

W.

dealtn
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Re: Concentrated porfolio

#371379

Postby dealtn » December 30th, 2020, 6:18 pm

dealtn wrote:My portfolio currently consists of 43 holdings. None are collectives, all being individual shares.

The top 3 make up 25% of the portfolio.
The top 5 make up 35%.
The top 10 make up 50%.

The portfolio has slightly underperformed a benchmark over the last year, although has outperformed generally over the last decade.

The top 3 have each been held for the entirety of that decade (although the holding sizes have varied). 1 of which has significantly outperformed, the other 2 significantly underperformed.


I bookmarked this to see if much would change, although arguably a month is too short a timeframe to notice anything meaningful.

Despite an "interesting" month for the markets it seems very little has happened.

The top 3 make up 24% of the portfolio.
The top 5 make up 34%.
The top 10 make up 50%.

The portfolio has outperformed over the last month, slightly underperformed a benchmark over the last year, although has outperformed generally over the last decade.

It seems more of the "fireworks" have happened outside of my top 10 holdings. I'm not sure if I am happier that my diversification has provided a stable portfolio, or more annoyed that my successful stock picking has happened amongst my smaller holdings. Probably the latter, but in truth a month is meaningless.

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Re: Concentrated porfolio

#371654

Postby spasmodicus » December 31st, 2020, 1:36 pm

dealtn wrote:
dealtn wrote:My portfolio currently consists of 43 holdings. None are collectives, all being individual shares.

The top 3 make up 25% of the portfolio.
The top 5 make up 35%.
The top 10 make up 50%.

The portfolio has slightly underperformed a benchmark over the last year, although has outperformed generally over the last decade.

The top 3 have each been held for the entirety of that decade (although the holding sizes have varied). 1 of which has significantly outperformed, the other 2 significantly underperformed.


I bookmarked this to see if much would change, although arguably a month is too short a timeframe to notice anything meaningful.

Despite an "interesting" month for the markets it seems very little has happened.

The top 3 make up 24% of the portfolio.
The top 5 make up 34%.
The top 10 make up 50%.

The portfolio has outperformed over the last month, slightly underperformed a benchmark over the last year, although has outperformed generally over the last decade.

It seems more of the "fireworks" have happened outside of my top 10 holdings. I'm not sure if I am happier that my diversification has provided a stable portfolio, or more annoyed that my successful stock picking has happened amongst my smaller holdings. Probably the latter, but in truth a month is meaningless.


HI dealtn,
you're being very coy about the actual benchmark that you used. Whatever it is, I agree that it's better to compare our portfolio's performances against an established benchmark, whose defintion is clear,rather than with the alleged performance of some dodgy bulletin poster who may be being economical with the truth (especially if he/she worked professionally as a trader**). For many years I used the FTSE 100 as a benchmark and since about 2016 was congratulating myself on how well I was doing relative to it. However, I then belatedly noticed that the FTSE100's performance was rubbish, compared with the likes of the NASDAQ etc. Time for a rethink.

Happy investing in 2021,
S

**Disclosure. One of my sons works for a hedge fund. So, as a dad, whilst I am by definition useless at nearly everything, this especially applies to investing.

dealtn
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Re: Concentrated porfolio

#371671

Postby dealtn » December 31st, 2020, 2:30 pm

spasmodicus wrote:
dealtn wrote:
dealtn wrote:My portfolio currently consists of 43 holdings. None are collectives, all being individual shares.

The top 3 make up 25% of the portfolio.
The top 5 make up 35%.
The top 10 make up 50%.

The portfolio has slightly underperformed a benchmark over the last year, although has outperformed generally over the last decade.

The top 3 have each been held for the entirety of that decade (although the holding sizes have varied). 1 of which has significantly outperformed, the other 2 significantly underperformed.


I bookmarked this to see if much would change, although arguably a month is too short a timeframe to notice anything meaningful.

Despite an "interesting" month for the markets it seems very little has happened.

The top 3 make up 24% of the portfolio.
The top 5 make up 34%.
The top 10 make up 50%.

The portfolio has outperformed over the last month, slightly underperformed a benchmark over the last year, although has outperformed generally over the last decade.

It seems more of the "fireworks" have happened outside of my top 10 holdings. I'm not sure if I am happier that my diversification has provided a stable portfolio, or more annoyed that my successful stock picking has happened amongst my smaller holdings. Probably the latter, but in truth a month is meaningless.


HI dealtn,
you're being very coy about the actual benchmark that you used. Whatever it is, I agree that it's better to compare our portfolio's performances against an established benchmark, whose defintion is clear,rather than with the alleged performance of some dodgy bulletin poster who may be being economical with the truth (especially if he/she worked professionally as a trader**). For many years I used the FTSE 100 as a benchmark and since about 2016 was congratulating myself on how well I was doing relative to it. However, I then belatedly noticed that the FTSE100's performance was rubbish, compared with the likes of the NASDAQ etc. Time for a rethink.

Happy investing in 2021,
S

**Disclosure. One of my sons works for a hedge fund. So, as a dad, whilst I am by definition useless at nearly everything, this especially applies to investing.


I'm not being coy.

In my record keeping I don't formally benchmark anything, but informally I compare each stock purchase with FTSE100. I also note any dividends received as total return is the only meaningful measure. My portfolio broadly equates to a broader UK one, so I also look at the FTSE250 from a Total Return perspective.

At portfolio levels I also regularly track "decline from peak", and compare the percentage decline with the FTSE100 and 250 also.

So its not a perfect comparison, but its "benchmark" not "forensic", the level I am happy with. This is all a little odd as for someone with OCD I should be doing it more correctly, but frankly my investing journey started over 30 years ago, and I didn't start it properly and don't wish to invest the energy to backdate it, nor change what I am used to.

Despite the inaccuracy I can tell over most periods how I have done vis-à-vis the benchmark, if I am a few per cent either side I would say "broadly matched", not needing the accuracy to know which side of the line I actually was.

So in this "update" I know over the month the FTSE is up by 5%ish but my portfolio has grown >10%. Without any forensic calculation I can tell I have outperformed. Similarly over a year I know I am a few per cent behind the FTSE100, which in turn has lagged FTSE250. Over a decade it is also clear.

Whether I am in the category of "the alleged performance of some dodgy bulletin poster who may be being economical with the truth (especially if he/she worked professionally as a trader)", I will leave others to decide. To be clear though my days as a professional trader were in a market I don't invest in.

I doubt I will give regular updates or commentaries, just thought it was an interesting thing to observe. I only run portfolios for myself and immediate family, with a total return focus, and no real interest in matching, or otherwise, any alternatives, be they trackers, other passives, or absolutes. I invest for me/us, reap those rewards and feast or starve as a consequence.

You might find my opinions across the site, and I generally confirm if I hold/buy something, but certainly don't advise anyone to join me in my choices, my strategy, or particularly criticise choices of others.

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Re: Concentrated porfolio

#371890

Postby Bubblesofearth » January 1st, 2021, 7:58 am

dealtn wrote:In my record keeping I don't formally benchmark anything, but informally I compare each stock purchase with FTSE100. I also note any dividends received as total return is the only meaningful measure. My portfolio broadly equates to a broader UK one, so I also look at the FTSE250 from a Total Return perspective.



I've been doing much the same for many years but now question whether this is the best comparison. I'm more and more coming to the conclusion that the best benchmark for any long-term equity investment strategy is the Global index. All equity portfolios, whether individual bespoke or whole country, are a subset of the Global index and, as such, carry more risk. Assuming one accepts formal definitions of risk.

Going forward I shall embrace the Global index as my benchmark even if that is painful during periods such as 2020!

BoE

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Re: Concentrated porfolio

#371895

Postby dealtn » January 1st, 2021, 8:43 am

Bubblesofearth wrote:
dealtn wrote:In my record keeping I don't formally benchmark anything, but informally I compare each stock purchase with FTSE100. I also note any dividends received as total return is the only meaningful measure. My portfolio broadly equates to a broader UK one, so I also look at the FTSE250 from a Total Return perspective.



I've been doing much the same for many years but now question whether this is the best comparison. I'm more and more coming to the conclusion that the best benchmark for any long-term equity investment strategy is the Global index. All equity portfolios, whether individual bespoke or whole country, are a subset of the Global index and, as such, carry more risk. Assuming one accepts formal definitions of risk.

Going forward I shall embrace the Global index as my benchmark even if that is painful during periods such as 2020!

BoE


I'm not too hung up on it if I am honest.

Over 99% of my life to date has been spent in the UK, and I can't see that changing for its remainder. My assets and liabilities are >90% UK (if you consider listing as the criteria with respect to equities).

It's just a benchmark, or challenge if you will, to see whether I outperform a conveniently available "target".

The real benchmark, if such exists, is the "feast or famine" lifestyle I lead as a result of my endeavours.

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Re: Concentrated porfolio

#371900

Postby johnhemming » January 1st, 2021, 9:10 am

dealtn wrote:The real benchmark, if such exists, is the "feast or famine" lifestyle I lead as a result of my endeavours.

I tend to approach things in the same way as dealtn. It is worth looking at indices and one should review decision-making as to whether one is making systemic errors. However, in the end I can only spend money that I have and I need to manage in that way. I have always had a lifestyle that was not particularly lavish so I tend to have a reasonable amount of flexibility.

At the moment one of my personal concentrations is on improving my health. Hence even if we were not in a tier 4 restriction environment I would not necessarily do that much differently. The main thing is I would play some gigs. Last year I was probably going to have 10 gigs and all were cancelled for reasons linked to the virus.

From a concentration point of view my biggest holding (DGOC) is now 25% of my main stockbroking accounts (I have accounts at three brokers) and that is forecast to bring in about 50% of the income. The forecast yield is 10.7%. I expect the cash yield to be quite constant in fact gradually increasing, but if the price takes the stock up by about 20% (which I think is possible, it could be more) then I might sell some. I think some investors are put off by the high yield. ("It seems too good to be true").

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Re: Concentrated porfolio

#372032

Postby Bubblesofearth » January 1st, 2021, 1:46 pm

dealtn wrote:
It's just a benchmark, or challenge if you will, to see whether I outperform a conveniently available "target".



Fair enough. Bit different for me as, because of long-term underperformance, I've actually started transferring money out of UK stocks and into the (Vanguard flavour) of the Global index. In essence I see my past investing as an experiment to see if I could beat the Global Index. My recent actions are a consequence of the failure of that UK-based strategy. Certainly any new money I may get (e.g. through inheritance) is now far more likely to go into that Global index.

BoE

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Re: Concentrated porfolio

#372037

Postby johnhemming » January 1st, 2021, 1:57 pm

Bubblesofearth wrote:Bit different for me as,

There are lots of right and reasonable strategies. I would not say what you are doing is in any way "wrong". It sounds entirely reasonable to me. However, I do things differently.

I personally stick to the UK in the main in terms of listing because I know how things work and can readily easily get the right information because I know where to look.

I hold a couple of stocks on other exchanges, but there is a lot more effort in that and always a certain amount of a learning curve.

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Re: Concentrated porfolio

#372048

Postby ADrunkenMarcus » January 1st, 2021, 2:28 pm

Even a concentrated portfolio can perform very similar to 'the market'. Taking my SIPP as an example (accumulation units): since 5 April 2020 it is up about 53.7% which compares to a 51.7% rise in the FTSE All World TR ($).

Best wishes

Mark.

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Re: Concentrated porfolio

#373142

Postby hiriskpaul » January 4th, 2021, 7:52 pm

In the past I have run very concentrated portfolios. eg, for a few years after the financial crisis I was pretty much all-in on subordinated bank debt and preference shares. At the same time I had a heavily geared bet on investment grade corporate bonds. It was at times stressful, particularly when a couple of the Irish investments went bad. It worked out well, but I don't think I would do something like that again. For one thing I now live virtually completely off my investments and the thought of having to go back to a proper job should I suffer massive losses fills me with dread. If you run a very concentrated portfolio there is always the risk of heavy losses, but that is the price required for potentially substantial gains.

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Re: Concentrated porfolio

#373356

Postby tikunetih » January 5th, 2021, 10:34 am

Adamski wrote:Does anyone here run a concentrated portfolio, and how has it gone this year to date?

...

Has a high conviction strategy served you effectively? And would you recommend it?


My experience:

(1) For the past ~decade: highly diversified, with a portfolio aimed at being pretty robust in the face of different economic & market outcomes. Hands-off, able to be left unmonitored for extended periods of time, sleep like a baby. Primary function: the old "protect & grow" mantra, with the growth engine being compounding over the years vs. moonshotty stuff. Easy!

(2) For nearly two decades prior to that: often highly concentrated portfolios, occasionally down to a single stock. This entailed watching both markets and my holdings like a hawk, to the extent of gaining knowledge akin to a virtual insider in one or two cases (NB nothing dodgy, You Honour). Very hands-on, continuous monitoring, (very) high risk with potential for high reward. Hard.


The concentrated portfolios worked out well for me - most of what I have was probably made in this way, concentrated in the periods when markets were most generous albeit most dangerous - I'm thinking here of the latter stages of the late-90s technology & mid/late-00s commodities markets, when rational secular growth trends morphed into "bubbles", proving hugely lucrative for some.

But I had a lot of luck, and you cannot count on luck as a strategy. Like most people for whom something has worked out well, my ego would have me believe "I made my own luck", but I'm rational enough to realise that I definitely didn't make all of the luck and perhaps I made hardly any of it, and was mostly just plain "lucky". There's no real way to analyse these things and tease out the luck from any possible application of skill and judgement. Repeatability can begin to suggest some presence of skill; but also the absence of repeatability doesn't necessarily preclude some skill, since some circumstances (opportunities) might only occur very occasionally or even once in a lifetime and perhaps there is skill in identifying these opportunities that others miss? Philosophy aside, I do consider anyone who's enjoyed outsized success at anything to have also enjoyed a great pile of luck too, regardless of how hard they worked etc etc, and more luck than they're ever likely to realise or acknowledge because we all take so many fortuitous things for granted. Anyway, getting a bit sidetracked.... :?


To the OP question posed re high conviction, "would I recommend it": I don't think many people should be running highly concentrated portfolios, at least in the manner that I did: for the vast majority, I think that investing should simply - and wisely - be a background activity like paying the mortgage, designed to secure people's long term financial futures. This is the rational thing to do, not a cop out. They've better, more rewarding, more interesting things to do with their lives than to focus much on investing. And they'll likely get (much) better results by avoiding anything that might be classed as "too clever by half", which may carry excessive risk in an attempt to deliver out-sized returns. You don't read so many BB posts from those people who ruined their finances by making concentrated bets on markets and losing, for whom sensible "Get Rich Slowly" methods, offering high probabilities of success, weren't enough.

But, for those who feel that investing might be their vocation or passion, and crucially (a) have the (financial) capacity to accommodate additional risk, and (b) are not generally predisposed to gambling*, I would suggest considering high conviction strategies and highly concentrated portfolios for some of your money, at least for some of the time. If your smart, you'll find a way of doing this so that if it doesn't work out you don't jeopardise your future, ie. you structure this endeavour akin to an option, which will have a cost (a drag on returns) if it doesn't work out as you hope, but not a ruinous one, but with a fair wind might deliver a large payout / outsize returns.


*Be honest with yourself!

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Re: Concentrated porfolio

#373703

Postby DiviLuvva » January 6th, 2021, 8:56 am

My friend runs a concentrated portfolio.
He and his wife are both in receipt of final salary and state pensions so the port is "fun", but it is "big" for a private investor.
His main holdings in roughly decreasing size are:

Fevertree
Boohoo
Bioventix
Halma
Spirax Sarco
Tristel

plus a few others.
However, I think the above constitute significantly more than 80%. FEVR and BOO are about 25% each.
The portfolio climbs in value every year and was on an all-time high a day or two ago.

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Re: Concentrated porfolio

#374941

Postby hiriskpaul » January 8th, 2021, 7:25 pm

I have a friend who only ever invested in Microsoft shares, the company he worked for. A lot of his shares came through share options that he took up, but he also bought more. This was a seriously insane way to invest, but there is no denying it worked out well.

He is still > 90% in Microsoft shares. He is trying to diversify now, selling enough each year to use up his CGT allowance, but the value of his holding still goes up faster than he can dispose of them. I often tell him he's nuts and he keeps proving me wrong.


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