2007 Portfolio Review

This brief review details y portfolio performance for 2007, a mixed year overall. My overall strgtegy is split into 2 halves:

HYP

Performance this year comes in at -9% which is disappionting though not surprising. All of the loss came from RBS with my other holdings BP. and GSK clawing some back. Over the course of the year I decided that I wanted to scale back my equity exposure and so sold the BP holding for a profit. I also added GSK which sould be reasonably defensive even in the hard times which I think we may be facing.

I intend to continue investing using time cost averaging, picking a new share every couple of months. Ihave also decided to invest in mores shares in this HYP after watching what happened to RBS and otheer finance shares I think that diversification is very important.

After reading what “works on wall street”, I’m convinced that this strategy is good. However the book raised the point the that the high yield strategy works for Large stocks but its advantage is less so in other stocks, thus it is probably best for me to stick to FTSE 100 where possible. Another interesting point was that he suggested adding the dividend yield to the percentage of buyback a company makes to get an overall yield which outpreformed selection by dividend only. These points probably merit more consideration and I may post more on this subsequently.

I also intend to invest in stocks that have a low PE as well as hight yield which I hope sould maximise my return, particularly as I may be moving to another country where the dividend taxation is more strict than the UK so I’m hoping a low PE may mean more captial appreciation.

It is worth pointing out that my portfolio is is the early stages of creation so I am  not paying two much emphasis on this years disappointing return, after all it only contains 2 shares!

Value

The performance of the value portfolio was 10% which I am reasonaly happy with . Most of this came from SIA which is up around 50%, however I lost a significant amount on RBS. This year I learned a couple of very important lessons while trading in the value portfolio:

A) If decide to sell, do so immediatly and don’t hang on in for that bit extra. As a result I watched my RBS holding drop day after day after I had decided to sell

B) Don’t average down. Before I invest, decide on my maximum amount and don’t exceed it. Apparently the biggest mistake amateur investors make is averaging down.

C) Pretty much all the shares I invested indropped after me buying. Maybe invest 50-75% first then do the remainder later. Catching a falling knife is dangerous as they keep on going down, dont rush into buying as often the share will stabalise before moving up.

Overall

My overall performance this year was a dissapointing 4%, for comparison the FTSE All Share wasup 1% so at least I did’t underperform the index (In still not sure whether to use ftse 350 or all share for comparison).

In the year to come I hope to remain defensive, currently I am 80% cash though may invest some more as much of this cash is earning little interest in the brokerage account. My only vlaue holding is SIA and I’m hoping for an increase on drilling news.