LM portfolio as at 26/05/2023:
| Code | Sector | Date Bought | Cost | Value | Gain/Loss |
|---|---|---|---|---|---|
| LM055 LM055-2 |
General Financial | 11/01/2023 02/05/2023 |
£2560 | £3070 | 19.89% |
| LM056 | Media | 11/01/2023 | £1270 | £1370 | 7.62% |
| LM057 | Gas, Water & Multiutilities | 12/01/2023 | £1270 | £1510 | 19.24% |
| LM058 | Support Services | 17/01/2023 | £1270 | £1340 | 5.58% |
| LM059 | Industrial Transportation | 30/01/2023 | £1260 | £1080 | (14.75%) |
| LM061 | Aerospace & Defense | 20/02/2023 | £1270 | £1340 | 5.32% |
| LM062 | Food Producers | 06/03/2023 | £1290 | £1160 | (10.15%) |
| LM063 | ETF | 24/04/2023 | £1270 | £1230 | (3.04%) |
| LM064 | Personal Goods | 24/04/2023 | £1290 | £1210 | (5.97%) |
| LM065 | Travel & Leisure | 24/04/2023 | £1280 | £1350 | 5.69% |
| LM066 | Beverages | 24/04/2023 | £1280 | £1290 | 0.34% |
| LM067 | Nonlife Insurance | 02/05/2023 | £1270 | £1240 | (2.23%) |
| LM068 | Industrial Engineering | 02/05/2023 | £1270 | £1180 | (7.22%) |
| LM069 | Food & Drug Retailers | 02/05/2023 | £1280 | £1170 | (8.14%) |
The general slump in the market this last week claimed LM060 as a victim. The position was closed off on the 25th for a loss of just over 20%.
It hadn't quite touched its 200 day SMA but on logging in to my trading account I saw the share (JD.) was down 20%.
I sold it immediately.
Losing money is never fun but it is something you have to accept. Some shares will decrease in value from the moment you buy them until the time you press Sell. I'm not sure I ever saw anything but red from my JD Sports share purchase.
It isn't the end of the world. Providing that a loss limit is established - and kept to - the winners should eventually dwarf the losers. Of course that means you need to stay the course with the winners.
As of Friday's close, the FTSE 250 is down to around 18,800 which means a loss of a couple of percent in the last month.
With all these falls in share prices over the past few days it can difficult to know what to do.
Should you sell your shares? Buy more? Panic? Hoard food and weapons?
The markets have dropped before and will drop again. No-one will ever be able to accurately predict when this is going to happen. And when it does happen and we are in the middle of it all, as we may well be at this moment, no-one will be able to predict when the drop will end.
Yes, some will probably guess correctly this time but if you search enough you'll be able to find someone, somewhere predicting a crash everyday.
Even a stopped clock is right twice a day.
All this uncertainty reminds me of Jonathan Maitland in his very entertaining book about his share-trading exploits in the year 2000.
(Book review here: How to Make Your Million From the Internet (And What To Do If You Don't) by Jonathan Maitland
Maitland buys and sells shares all year long and shares his ups and downs. His book is in a diary format so you know exactly what he was thinking on particular days - and with the power of Google you can go back and look at what happened in the market on those days.
At one point he'll write - giddy with excitement - about making several hundred pounds in a few hours but then a couple of weeks later he is so anxious about the markets and his portfolio that it takes him a while to realise he has chewed his finger down so far it is bleeding.
It's the parts where he justifies his share purchases that make me shake my head in disbelief (oh yes, it's SO EASY for me to know how silly his decisions were with hindsight).
There are several shares which he buys SOLELY because they have fallen 50% "from the peak". The peak in this case being just a couple of weeks before.
Pure madness.
He's buying a share that has HALVED in value in just a few trading days. His rationale for buying appears to be that the share is a lot cheaper that it was, therefore it's a good buy. I guess he expected these shares to go back up to their previous high levels.
The point was, how did he know that they had finished falling? They've already halved so the trend was down, it wouldn't be beyond the realms of possibility that they halve again.
During the market downturn he sold the only share he had which was in profit. He kept all the losing positions open and took a profit of a few hundred pounds on the one share that was actually performing.
So the only share that he picked correctly, the only winner, he sold so that he could keep hold of all the others which were losing him money.
Of course it's easy to sit here and pick out his mistakes 23 years later.
You have to remember he was brand new to trading, had never read anything about investing and was also brand new to the internet. He'd remortgaged his house and jumped right in with the £50,000 capital he'd received.
It was probably unfortunate for him that he got lucky with Viglen and Autonomy and made money with these first couple of trades. It left him overconfident and buoyed by some beginner's luck.
His progress would've been more surprising (and probably not as interesting to read) if he'd been sensible in cutting the losers and letting the winners run but instead he snapped at small profits and watched his poorer choices drop in value.
And I've not even mentioned his spread-betting antics...
Back here in the present, let's pretend we see further selling off over the next couple of weeks and there are shares which have dropped 50% since the beginning of May.
At that point would it be a good idea to buy them because they are half their previous valuation?
Thought not.
This 'correction' should shake out the weak traders and the skittish investors and then at some point the markets will start moving up again. That could be tomorrow or it could be in 3 years time. In the meantime it's a fine balance between preserving capital and not making rash decisions.
I'll be happy to invest again when I see positive signs that the market is recovering - new 52 week highs, moves above 200 day SMAs and so on.
Yes, by waiting I'll miss out of some of the move but as Liam Gallagher says "first bird to fly gets all the arrows". Someone else needs to buy to get the market moving again and I'm betting there are some impatient people out there with cash who WANT TO DO SOMETHING.
Waiting for them to invest and then jumping in later may turn out to be a wiser decision than just buying something because it looks cheap.