My Fantasy Share Portfolio

Written by Demetrius Vouyiouklis

Um, yay?My last article described why share dealing may make sense in today’s UK financial climate of low interest rates and high inflation. Also on how such a move might be a way forward in my personal circumstances. At the end of my previous article I was looking at two of the UK’s premium brokerage firms, TD Waterhouse (TDWh) and interactive investor (ii) and I intended to start my venture into the stock market by means of building a fantasy portfolio of shares.

My first step was to read a few articles of the type ’10 things to do/avoid when dealing in shares’ – it made fascinating reading, suggesting my temperament was up for it. I then spent some on the TDWh and ii web sites, trying to explore and understand them. I thought this was pretty important at the pre-investment stage in order to avoid future pitfalls and to be able to do what I wanted if and when I was ready to invest for real.

After gaining a rudimentary understanding of the online menus and doing some reading, particularly on the different types of charges I was likely to incur when I started dealing for real (e.g. it was free to join, but would I have to pay for other services and how much), I started looking at individual companies’ data.

I went through an alphabetical list of major UK companies and had a brief look at each ones’ profile, however I found myself biased towards companies that I had heard about and that were of a reasonably large size – I guess I was looking mainly, but not exclusively, at UK ‘blue chips’.

Of the companies I looked at, I kept the names of ones I felt were reliable judging by past performance over the last few years, that had displayed a mostly constant upward trend and were currently facing a tough time – which I assumed to be the impact of generally poor trading conditions. As I wanted to start my fantasy portfolio as soon as possible in order to learn the mechanics of trading, I did not spend that much more time on company research. I simply chose 5 companies at random from a list of about 80 that I initially thought were possible investment material. These were: AGGREKO,  DEVRO, MEGGITT, BP and ATKINS. They were in different sectors of the economy, ranging from  supplying  building supplies, to the manufacturing of sausage skins and providing engineering solutions. However,  their common characteristics were strong previous performance and a certain ‘critical mass’ – financial size and number of employees.

I decided to invest about £1000-1200 of hypothetical money in each. I therefore purchased the number of shares shown below:

  • 75    AGGREKO NEW ORD
  • 400    DEVRO
  • 250    MEGGITT
  • 250    BP
  • 180    ATKINS(WS)

My total hypothetical shares cost today (29 Aug 2011) using TDWh and buying at the higher (offer) price was £5854.50 + dealing costs of £12.50 x 5=£62.50, a grand total of £5917. If I wanted to resell my shares immediately, my stocks would be valued at the (lower) bid price of £4861.77 and I’d also have to pay £12.50 x 5=£62.50 dealing costs again. I would therefore have made a loss of £5854.50-£4861.77=£992.8 on the shares and paid a total of £125 in dealing costs, being £11117.8 out of pocket.

If I’d purchased the same number of shares at the same time from ii, my total cost would have been 5,027.18+dealing costs of 5x£10, a grand total of 5,077.18. Again, if I wanted to resell immediately, my stocks would have been valued at the (lower) bid price of 5010.20. In this case my hypothetical loss would have been 5,027.18-5010.20=£16.98 on the shares and £100 on dealing costs,  making me £116.98 out of pocket.

This was a great eye opener and a  lesson, even at the level of a fantasy share portfolio. It shows the importance of taking all costs into account when choosing a broker. With one the shares would have cost me £839.82 more to buy and would have to rise by about 17% before I was to break even, whereas with the other the stocks would have to rise by about 3% to break even.

Now that certainly got me thinking!

In my next article I’ll give a progress report of how the stocks in my fantasy share portfolio are performing, although if you have an interest and use daily pricing you can also follow their progress using the starting bid/offer prices below.

                                    TDWh                                              ii

  • AGK      1,650.00p / 1,950.00p                  1,796.00 / 1,797.50
  • DVO      237.13p  / 283.00p                           239.00 /   241.10
  • MGGT   326.30p / 400.00p                          325.6   /    326.7
  • BP.        375.00p / 400.00p                           385.4   /    385.75
  • ATK       512.50 / 700.00p                              516.5    /   518

Update 26 October 2011 – I’ve “sold” my shares and written my final report on my fantasy portfolio.

 Warning

This post is based on my personal research and calculations. I will only invest money in share trading that I can afford to lose, as I am aware that share values can go up and down, there are fees/charges when you buy and sell shares and it’s even possible to lose the capital invested.  You may wish to consult an independent financial advisor before investing in shares.