Tuesday, 22 April 2014

It Was The Best of Times...(Portfolio Sale)

Another one for the chop...

...it was the worst of times. (Dickens - A Tale of Two Cities).

Sometimes we end up doing the right thing for the wrong reason - and sometimes we do the wrong thing for the right reason.

When it works you need to acknowledge that you have been lucky; when it doesn't - just put it down to experience and try to learn from it.

Up to this morning I held two chunks of RSA Group (LSE:RSA) in two different brokerage accounts - both bought around the same time in February 2012:

  • The best of times: my recent self-awarded 'best buy' was accomplished thanks to RSA's rights issue. The shares I bought have risen nearly 70% in value - that's over just two weeks!
  • The worst of times: I only took up part of my entitlement, as I lost track of the closing date and ran out of time on my other holding.

With my new, harder-headed approach to selling I probably shouldn't be holding RSA at all - the yield is anaemic, following their aggressive dividend cutting and I'm showing a loss. My new stricter approach, to recall, is to consider selling when the capital loss is greater than 10 years' worth of current income. I was mainly holding onto it because of 'anchoring' - being fixated with the price that I paid for it.

But the rights issue has given me an the easy way out. By selling the holding that I added to I can exit at my average purchase price. As I said: doing the right thing for the wrong reason.

My other holding of RSA has a 'sell' indicator of 'just' -6.5, so I have not yet triggered my new 'sell' rule. So probably doing the wrong thing for the 'right' reason.

In any case, should I treat the two holdings differently like this? My defence is that I'm only human - with the handicap of a 'monkey' brain seething with biases.

"...it was the age of wisdom, it was the age of foolishness"

[Sale price: £0.946]

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.


  1. Interesting problem, that one. You buy two tranches of shares at different times (probably when your monkey-brain biases are seething in opposite directions) and then you look at the portfolio some time later. One line to take is that you take a view of a share and what it will do in the future based on lots of lovely accounts and that you make one decision on all the shares. Probably an oversimplified view, but for those with to little monkey brain power, the best they could do. You can always say that the market doesn't know and that nobody except you is in the least interested in how you bought the darn things in the first place. The other line to take is that you bought each tranche under different circumstances and that it is perfectly reasonable to deal with each one separately (like you seem to be preparing to do yourself, Sisyphus!)

    The more I think about this the more confused I get. The only clear piece of financial guidance I have received this week is from Lloyds Bank who are skilfully making their Vantage accounts extraordinarily unattractive places to keep even the skinflint amounts of money they let you lend them before. Yes, they have opened a new "Club" account - not advertised much, but the demands to pay two DDs every month are too much for the simple life we lead... If that's financial advice, it seems to be "take your loot somewhere else"...

    End of angry old man blog!!

    1. Hi Angry

      On the Lloyds Vantage accounts - I agree (just got the letter today, cutting rates and imposing new conditions). I've been singing their praises for years but now I guess the financial cost has become too great for them. If I find a better current account I'll let readers know!

    2. Look at Santander 1-2-3. Small monthly fee but 3% interest to 20K and discounts on some DDs.

      Angry, as ever.

    3. I changed this week from Vanyage to club all pretty easy. While in the branch it was explained Lloyds are doing this is because people have abused Vantage accounts and have 4 or 5 in their name with the maximum allowed in them costing Lloyds a fortune. The move to club it to stop this - you can only have the one and also the reason for needing the two direct debits set up.