Hariseldon58 wrote:Apart from Berkshire Hathaway, which is far more than a single business, I don’t really see the point in holding individual shares compared to the Fund/ tracker / Investment Trust , the saving in running cost is scant compensation for the lack of diversity and admin involved. For some it becomes a hobby and a few clearly have done well out of it but most of us are going to better off in a collective.
I did some research in 2016 on my 35 share HYP from 2006-2008 , which I sold out of in 2008, in 2016 I did the total return comparison on a no tinker basis with the FTSE100, City of London and my actual portfolio ( more global and in the latter years mostly passive )
The conclusion was that I was a dreadful stick picker , slightly underperforming the FTSE100, significant underperformance of City of London and a huge underperformance of my actual portfolio. I doubt if I was alone in being a lousy stick picker...
It’s notable that many mix the HYP and IT’s , Funds and ETF’s but I am curious, what is the reason to hold 10 or 15 individual companies at all ? Within otherwise well diversified portfolios,
I absolutely wholeheartedly agree. I think HYP is a viable but a flawed way to invest, and I could have better investment returns since starting had I been 100% in collectives. The major source of any underperformance was my selection of CLLN, ALY and PSON which with hindsight look crazy. Why did I get those wrong? Well I was blindly adding sectors despite their secular decline like a good HYP-er and I was chasing yield over a solid balance sheet. What I was adding was riskier players that were declining, badly. The lesson for me was for individual shares, several years worth of data need to be plotted and falling interest cover needs to be identified, together with a close look at intangibles and adjustments.
In defence of individual shareholding: my first several picks were spectacularly successful, with RIO up 125%, RDSB up 80%, and HSBC up 70%. It seems obvious with the benefit of hindsight that the commodities bust was overdone and the miners were offering value at that point in the cycle. Likewise the beaten-up banking sector looked like a risk worth taking in early 2016. An no doubt similar opportunities will be thrown up in future, and I want to be able to take advantage of them.