Monday, 21 October 2013

Two-Years' Resolution (Portfolio Sale)

thinker
Hmm...
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One of the reasons for writing this blog is to force myself to think a bit more before making investment decisions. After all, if I make bad decisions, they will be there for all the world to see.

The same thing is true about New Year Resolutions - if you don't make them public they are easy to forget. (I made some in January 2012 - but times have changed since then!)

But that's not the point. I'm selling a lot this year: that's not 'buy and hold' is it? Still, when the money's on the table, it takes a lot of willpower not to grab it - and, for better or worse, my willpower has limits.

I bought British life insurance takeover specialist Resolution two years ago (hence Two-Years'-Resolution, sorry!) and reviewed it just over a year ago - deciding to hold onto it despite some poor performance.

It's been doing nicely since then. When my 'sell' indicator started flashing (capital gain > 5 years' income) I decided to review whether or not to hold onto it any longer.

Look at the facts:

What would you do?

Resolution may well have turned the corner and continue to grow its share price. Alternatively it may have to trim the now-generous dividend. Ultimately the question I asked myself was: "would you buy this today?"

The answer was "no", so I have sold it.


[Sale price: £2.38]



I am not a financial adviser and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.

4 comments:

  1. I can certainly recommend writing a blog as a means of holding you to account!

    I share some of your portfolio - Glaxo, Carillion, Vanguard All World. This year I have the feeling I have probably been a little to quick to pull the 'sell' trigger on a few of my shares - RPC Group and DS Smith to name but two.

    Having said that, the proceeds were recycled into collective investments which have done well so maybe not to be too harsh on myself.

    I think I am a lot more patient with the (mainly) investment trusts I hold and a big part of that is mostly they tend to deliver a consistently better total return than my individual shares portfolio.

    Also there tends to be a lot more press coverage of FTSE 350 shares so any bad news hitting the financial headlines can spook small investors.

    Enjoy the blog and good luck with the next 'buy and hold' investment!

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  2. Not to second guess you on your own blog, but you did ask... :) I have to question the capital gains worth 5 years of income rule. It makes no sense to me. It will basically always have you questioning your best performers. Those are the ones you want to keep, even if the yield has dropped a little. Because the alternative is collecting a portfolio of dogs!

    (In fact, I think it would arguably make more sense in a growth portfolio, though I wouldn't like it there, either).

    Dividend cover etc -- fair enough. :)

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    Replies
    1. Fair comment - but it does seem to work for me (for a range of reasons that I describe elsewhere). But I did check: the 'dogs' currently account for around 6.5% of the portfolio by current value or 15% if I measure purchase costs (ill-chosen RBS accounts for a third of this). The dogs do often recover - e.g. LLOY is up 100% over the last 12 months and is continuing to recover.

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    2. What does "work" mean in this context, though? Have you checked to see whether the shares you sold would have gone on to do better had you simply kept them?

      A pretty tedious thing to do I know, but it can be revealing...

      Still, if it's working for you and you're happy with it, why change? :)

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