The opinions expressed in this article are those of its author and not necessarily those of ShareSoc.
Over the Christmas period we were treated to a bumper edition of the Investors’ Chronicle. And I have to say that this magazine has improved of late under the editorship of Rosie Carr. Whether she has a bigger budget or is just picking better writers I do not know but she certainly deserved the job after working for the magazine for many years.
I’ll pick out a couple of interesting articles from the latest edition:
“What does it cost to be an effective private investor” by Stephen Clapham. He comments that “private investors are, in my experience, not nearly willing enough to invest in tools and education to improve the performance of their portfolios”. I would agree with that. They tend to rely on broker/platform recommendations, newspaper articles, or tips from bulletin boards instead of doing their own research using the tools that are available.
Stephen mentions services such as SharePad, Stockopedia, VectorVest and Sentieo. I am not familiar with the last two but I use both SharePad/Sharescope and Stockopedia as they provide slightly different functionality. Plus I use spreadsheets to record all transactions and dividends and to monitor cash. This enables me to manage several different portfolios held with multiple platforms/brokers comprising 80 different stock holdings with some ease. I have been doing this since my portfolios were much smaller and less complex so I would recommend such an approach even to those who are starting to invest in equities.
As the article mentions, half the members of ShareSoc have a portfolio of over £1m and may be representative of private investors so they may be making profits of well over £50,000 per year from their investments, particularly of late. A few hundred pounds per year to help them manage their portfolios and do research should not be rejected if it helps them to improve their portfolio returns by just a fraction of one percent, which it should surely do.
Altogether the article is a good summary of what a private investor should be using in terms of services to help them.
The other interesting article is entitled “The Generation Game” by Philip Ryland. It highlights the declining performance of UK stock markets since the 2008-09 financial crisis. He shows graphically how the FTSE-100 has fallen way behind the S&P 500 and the MSCI World Index. It makes for pretty depressing reading if you have been mainly investing in UK large cap stocks in the FTSE-100.
It reinforces the message that if you want a decent return from your equity investments you need to include overseas markets in your holdings and small and mid-cap companies in the UK. That is what has worked in the last few years and I expect it to continue to be the case.
Why? Because the growth is present in those companies while the FTSE-100 is dominated by dinosaurs with no growth. Technology stocks are where growth is now present when there are few in the FTSE-100. In fact the market cap of Apple now exceeds the whole of the FTSE-100.
The UK has become particularly unattractive for technology stock listings due to excessive regulation and over-arching corporate governance rules that divert management time. Meanwhile the UK economic environment still relies a great deal on cheap labour provided often by immigrants while our education system fails to encourage technical skills.
The Government has taken some steps to tackle these issues but not nearly enough while politicians have spent time on divisive arguments about how to deal with the Covid epidemic and about trivia such as Christmas parties and redecoration of the Prime Minister’s apartment.
There are of course bright spots in this economic gloom and generalising about the state of the country is always going to lead to mistaken conclusions. We are probably no worse than most countries if you examine their politics and the UK economy does seem to be relatively healthy.
But the key message is that if you want to make real money investing in equities you need to be selective and not just follow the crowd, i.e. don’t just rely on index trackers.
Those are my thoughts for investment in the New Year.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
Hi Roger,
In my experience, investors are definitely not keen on paying up for information as there’s so much free information out there. Although, of course, if you get what you pay for then free information may not be the way to go. Also, the cost of SharePad etc seems much more real as it will typically come out of a current account, whereas the (hopefully) resulting gains are in a SIPP or ISA and feel much less real.
As for investing internationally, my preference is to look for FTSE All-Share stocks that have international operations, rather than investing directly in non-UK stocks from the S&P 500 or elsewhere. I don’t have anything against US stocks, but they do have different accounting standards and that does make it more complicated. Of course, investing in international funds gets around that problem, as long as you trust the fund’s management and understand their investment process.
Happy New Year
John
entirely agree.
John: Perhaps my career in the software industry made me accustomed to buying software if it helps operations and I do invest indirectly in foreign stocks via investment trusts and funds.
Roger, what a wonderful blog to start the New Year. Much food for thought. I note in particular
1. As the article mentions, half the members of ShareSoc have a portfolio of over £1m and may be representative of private investors so they may be making profits of well over £50,000 per year from their investments, particularly of late. A few hundred pounds per year to help them manage their portfolios and do research should not be rejected if it helps them to improve their portfolio returns by just a fraction of one percent, which it should surely do.
My Folio F managed 27% in 2021, so I think your (5%) profits estimate may be understated. My few hundred pounds spent on Stockopedia, ShareProphets and ShareSoc subs combined with my fees to interactive investor of £xxx and £yyy to Turner Pope are well spent in relation to the performance returns achieved.
The alternative view is that passive investing is bette, cheaper and less time consuming: my Vanguard tracker fund returned 26% so it may be simpler to buy trackers and save myself time of trying to manage my own investments. However it is more fun to try and manage ones own investments.
2. Your point about overseas diversification is well made. I wish I had diversified more overseas 20/30 years ago. The US has outperformed the UK market.
3. You say “The UK has become particularly unattractive for technology stock listings due to excessive regulation and over-arching corporate governance rules that divert management time. Meanwhile the UK economic environment still relies a great deal on cheap labour provided often by immigrants while our education system fails to encourage technical skills.
The Government has taken some steps to tackle these issues but not nearly enough…”
This is an important point. The Treasury and Lord Hill are trying hard to address this. I am not sure they have understood the priorities. ShareSoc continue to engage with them and challenge them.
Best wishes,
Cliff
Hi Roger
A nicely written article on important topics – keep them coming in 2022!
Best regards, Jeremy