The Wealth Inflexion Point

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Our attitude to money is shaped by many factors, the most significant being perhaps our upbringing - the role models provided by our parents. We certainly try to teach our kids 'the value of money'.
But there also seems to be point in our lives when our relationship with money - our 'money paradigm', if you like - changes significantly.  We see money in a new way - a bit like looking through a telescope the 'wrong' way, and then the 'proper' way.

I like to think of this point as a Wealth Inflexion Point - a point beyond which the old 'paradigm' of your relationship with money changes. From that point wealth creation can truly begin. And probably not before.

Portfolio Sale: Standard Chartered 8.103% Step-up Perpetual Preferred Security (LSE:ESC6)

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What's this? An income investor selling something that yields over 7%. Has he lost the plot?

Well, maybe - but there is a thread of logic to this. And maybe a note of caution about the potential complexity of fixed-income investment.

Portfolio Buy: Braemar Shipping Service (LSE:BMS)

Changing course?
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2013 is turning out to be an exceptionally busy time for the DIY Income Investor portfolio - which is quite out of character for this investing style. But there is spare cash sitting in the various investment accounts, which should be working hard.

This new purchase may represent a move in a new direction in the portfolio strategy - towards Small Caps (i.e. companies with relatively small share capitalisations) traded on the London Stock Exchange. This part of the market has some interesting high-yield dividend companies that I will be looking at over the coming months.

Kairos and a Penny Found

Opportunity knocks! But sometimes only quietly.

Beliefs shape us and as an active investor you must believe that your investment choices are better than just buying a market index ETF or (horror!) a fund managed by a man in a suit who claims to foretell the future.

My own (unprovable) belief is that there are opportunities every day for an investor willing to put some original thought into the effort. The key, I believe, is just to be looking. Maybe that's why I regularly find money on the street.

Portfolio Sale: Persimmon (LSE:PSN)

Persimmon - the horse
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Like the racehorse it is named after, house-builder Persimmon saw the finish line and raced for it.

I put my money on it - and I have now been to the bookie's window to receive my winnings.

Although this is a dividend share, I was looking this time for a quick profit (to cover some previous losses) - unlike my other purchases, which I normally buy and hold.

So, what is different?

Portfolio Buy: African Barrick Gold (LSE:ABG)

Gold is in the news currently, following a sharp drop in the gold price that surprised the market.

As a DIY Income Investor, holding gold does not appeal as I expect my investments to 'pay for their keep' by returning an income. Gold just sits there, looking shiny but incurring holding costs - but there's no doubt that it has been a stand-out speculation investment over the past few years.

So, I have been on the look-out for a gold mining share that pays a good dividend; the problem is - most don't. Until now...

Portfolio Buy: Homeserve (LSE:HSV)

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Having just dealt with a leaking shower, I know first-hand the stress and disruption that these domestic emergencies produce. If I didn't know a friendly plumber, I would be having to find one in the Yellow Pages - and how much would that cost?

One attractive option for many people - although not me, it has to be said - is to take out a home maintenance policy.

And perhaps one of the companies that offers this kind of service might be a useful additional to the DIY Income Investor portfolio.

Don't Buy the S&P500!

Or the FTSE 100. Or any other capital-weighted market index fund. Really, don't.

I'm not totally against completely passive investing and 'buying the market' but recent academic research on US stocks has shown that a capital-weighted index fund would probably be the worst index-based investment approach you could choose.

5% Return, Inflation-Proofed and a New Dilemma

Yes, you read that right: a current 5% annual return, guaranteed (almost) to be raised in line with inflation.

Nothing else that I am aware of can equal this real (after inflation) return promise: index-linked gilts currently have negative yields and NS&I is not currently offering any index-linked products. So who is offering this?

Portfolio Buy: BP (LSE:BP.)

Cash sitting in a brokerage account does not earn its keep - so there is a continual pressure to re-invest it. Having said that, it is nice to have some cash for any 'special situations' that might pop up.

As readers will know, I am trying to diversify geographically from the UK. Buying into oil - be it BP or Shell is a way invest in dollars without actually buying overpriced dollars, in the sense that the oil is priced in the greenback (as are the dividends). But there is more...

Luck or Judgement? Man or Monkey?

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In 1988 the Wall Street Journal began a contest inspired by Princeton Professor Burton Malkiel’s book A Random Walk Down Wall Street. In the book Malkiel suggested that "a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts."

The end of the calendar and financial years are times to take stock, as the financial markets are structured around these dates and a lot of analysis takes place about what worked (or didn't).

But when your investment strategy does well - or badly - there is always a question to ask: was it just luck or is it a result of judgement (good or bad)? And how good is your judgement anyway?