My Fantasy Portfolio: Final Report

Written by Demetrius Vouyiouklis

coinlatticeThis is my final report on my fantasy share portfolio, which I started just under 2 months ago, on the 29 of August 2011. In the original report on share trading I tried to explain my attitude to risk, some of the major rules I was intending to follow and my findings regarding dealing costs. Although I compared 2 brokers, in real life I would have purchased the shares with the one that gave me the best spreads and lowest dealing costs.

So, I am “selling” my fantasy portfolio today, as I feel that I have shown some trends and learned a fair amount from this fantasy portfolio. Chances are that, was I dealing in real life, I might have done the same, then sat down to have a think about my future as a potential share trader.

My portfolio today, 26 October 2011, shows an overall profit of £271.57 (5.4%), having started with a capital outlay of £5,027.18. However, as I’d have bought the 5 different share stocks then sold them using the same broker, I’d have to deduct my costs for both buying and selling, i.e. 2x5x£10=£100. So, even with the cheapest broker I could have found, my profits would be reduced to £271.57-£100=£171.57 – about 3%.

Now, that’s a fair return in 2 months. By comparison, I’d need to have kept my money on deposit for a whole year with a bank at today’s interest rates to achieve a similar return. But then the money would have been ‘safe’ – I write this in the full knowledge that an interest rate of 3% is actually below inflation, about 5.2% at present, i.e. money in the bank loses 5.2%-3%=2.2% value per year. And that’s before tax unless I have my savings in a tax free Cash ISA.

With regard to individual share performance, two lost money (Aggreco – 5.7% and Devro – 2.12%) while the others performed rather better, with BP and Meggitt being the stars (19.25% and 16.07% growth, respectively) and with Atkins achieving a decent 5.69% to date. The overall portfolio’s value ranged between -2.2% and +5.7% (before dealing costs) during the last 2 months, but was mostly in a moderately positive territory.

Considering the variation and as I am getting out with a small hypothetical profit, this underlies both the importance of buying decent shares (I have previously mentioned my affinity for well-researched blue chips) when they’re unfairly down in value (i.e. on the cheap) and keeping the dealing costs as low as possible. Although I’d have made much bigger profits had I put all my money on the best performer, I’d also have potentially lost money on the worst, so I slept that much easier during the time I had the shares because I had bought a basket of five different types, thereby diluting both my risk and profit.

So, I now have to ask myself: was this fantasy portfolio exercise good enough to convince me to plunge a good proportion of the savings into the stock market?

Well, I reckon that:

a) My risk (about £5000) was too big for this amount of profit (about £170). By contrast, the cheapest stockbroker I could find would still have made £100 for zero risk (OK, OK, I know they pay for salaries, offices etc). But more importantly:

b) Probably not if my wife Karen has anything to say about it! She’s already feeling over exposed to stock market fluctuations with her stakeholder pension.

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.