Risk and diversification

Deciding how concentrated my portfolio should be is a question I’ve mulled over many times. I wrote about it in a previous post more than a year ago, where I decided that I would benefit from being more concentrated. Unfortunately, I think my reasoning then, while on the right lines, was a little half-baked. As a result, I still feel torn by the conflicting desires to either diversify into more of the attractive-looking opportunities on my watchlist, or to only concentrate on my very best ones. To build a more coherent approach I can confidently stick to, I think I need to go back to first principles.  Continue reading

A question of perspective

The ability to look at a complex problem from multiple perspectives is a skill useful in many different contexts, none more so than investing. Different perspectives often yield different insights, so if you can effectively combine multiple perspectives, in principle you should be able to materially improve your decision-making. Despite this, as I mentioned in my recent post on contrarianism, there is often a tendency for people to prefer to focus on what they see to be ‘the one true way’, rather than acknowledge the legitimacy of other perspectives.

In this post I talk about a perspective that is highly relevant to investing but often relatively neglected – the ‘external’ perspective of a business. Continue reading

NSP bought

My portfolio continues to wade slowly through the rather treacly summer markets. Some of my larger holdings, notably Burford, seem to be going from strength to strength, while others, like Bioventix, are showing some (hopefully temporary) weakness. Still, slow progress is better than no progress and right now I’m feeling optimistic that the second half of the year should be a good one. Continue reading

Ignorance is bliss

Humans hate uncertainty. Uncertainty is stressful. Often it is even more stressful than a certain negative outcome. The reason we find uncertainty so stressful is so it prompts us to take action. When our ancestors weren’t sure if a predator was lurking nearby, the ones that got a bit stressed out by the idea and took steps to find out probably did better than those that blissfully carried on their business regardless. But like many other evolutionary instincts, the desire to reduce uncertainty can lead us astray when it comes to investing. Continue reading

Letting go of mistakes

It’s slow but steady progress at the moment for my portfolio. All seems well right now but I expect some more volatility is just around the corner, judging by how this year has been going so far.

This is just a short post to update on my trades from last week. A few mistakes unfortunately, but hopefully I’ve resolved them well. Continue reading

Gripes corner

This week’s post is a bit of a rant I’m afraid! I’ve highlighted a handful of fairly common ideas in investing that have managed to get under my skin. They are common but don’t make much sense and I feel compelled to debunk them. Some you could put down to differences in perspective I suppose, but some are just downright wrong. Continue reading

Two steps forward, one step back

After a decent July, this week was a pretty torrid one for my portfolio, which fell 3.4%. This was not really the result of any bad news for my holdings, but appears more due to wider sector rotation away from highly valued growth stocks to cheaper value stocks. Following a timely reader comment on a recent post, I’ve been wondering whether this could be the start of a more prolonged shift. Continue reading