Monday, September 26, 2005

Trading update

It's time to report on the success (or otherwise) of my investments.

It is probably unwise to declare (or admit...) how much I've blown invested in my stock market experimentation. However, I can talk in percentages and proportions of the total amount staked without scaring anybody who knows me.

The figures below take into stamp duty, commission and other dealing costs but do not include any fixed annual fees

InvestmentDateInitial Price (pence)Current PriceReturn
FTSE 100 Tracker12 August 2005540.9545.25+0.8%
FTSE 100 Tracker22 August 2005540.12545.25+0.95%
MSCI Japan Fund24 August 2005613.5667.50+8.8%
Morrison (Wm)16 September 2005183.97177.25-3.7%
MSCI Japan Fund19 September 2005640.00667.50+4.3%

As we can see, most of my bets have paid off so far. However, I did not spread the risk evenly. To a first approximation, my exposure is in the proportion 1/9 FTSE, 3/9 Japan, 5/9 Morrison.

The net is that my position (before annual charges) is a +£0.02 profit. After charges, I am currently running at a -£24.98 loss.

However, my Morrison investment is a long-term bet. I already have too much exposure to the hi-tech industry (my job depends on it and I own stock in my employer). The only other business I begin to understand is retail. I believe that both Wal*Mart and Tesco are saddled with too much expectation: there is too much risk that they will provide a nasty surprise - good news is expected.

Amongst the other major retailers active in the UK, I had to decide between Sainsbury and Morrison. I gambled, perhaps unwisely, that there could not possibly be any more bad news coming from Morrison whereas signs of recovery at Sainsbury had already started to show and were probably already priced in. This belief in the intelligence of the City may prove to be unfounded (and there certainly was more Morrison news to break as my loss will testify) but time will tell if it was a good long-term punt.

The remarkable Japanese investment was prompted by observations in the Economist that businesses were reporting strong profits and that, even though the government at the time was having difficulty passing its reform package, both parties supported the concept of economic reform in principle. I gambled (successfully so far) that even if the government lost their postal privatisation bid, things would still turn out OK. The result of the recent election has shown this to be the case so far. When considering Japan as a non-UK target for diversification, I also considered Germany. I am currently very glad I steered clear of Frankfurt!

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