Investing in Shares 101: My Experience 2

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Dr Tony Stewart is a scientist and analyst by training. He has run a strategic market research business and has an extensive background in statistical analysis. At the beginning of his investment career, he read widely and undertook courses on investing run by the Securities Institute of Australia. He has invested in the Australian stock market for thirty years.

John Rothfield 1987 Feature 3

ORT_Logo Breadtag Sagas ©: Author Tony,  1 December 2021

Investing in Shares 101: My Experience Part 2 — Overview, Building a Portfolio, Banks

1 Introduction

In my experiences Part 1, I covered the golden age of floats, successes, luck, my education in shares and my one major systemic mistake. Because of the last, I argued passionately against diversifying and recommended you concentrate on a few shares only. My take homes were to stick to the value investing approach and to concentrate rather than diversify and the reasons for this. The nuts-and-bolts advice and investing methodology are covered in 1 Basics and in 2 Value Investing.

In Part 2 I begin with an overview of my thirty years of investing in shares not covered in part 1. I talk about why understanding a woman’s approach to investing is useful.  I extoll the virtues of DRPs (Dividend Reinvestment Plans) or forced investment in small lots and the general advantage of growing one’s portfolio in small parcels. I explain why I thought early on that the banking sector in Australia was a good bet and why I have been constantly disappointed. This is a useful case study that can be generalised and is worth pondering upon.

I conclude with a take home summary that encapsulates everything I have been advising in these four articles.

I hope you’ll remember this advice fondly in thirty years time, but also that you’ll review it annually and compare your investing experiences with the advice. You can always correct when you divert from sensible action!

2 Overview of My Thirty Years

I was very lucky starting out when I did. I was very lucky investing in CSL (see My Experience 1).

I had a good time buying and selling shares. I did seriously try to be contrarian (buying when the market was down, selling when it was up). I learned a great deal buying and selling many shares, hopefully not too regularly. However, I regret that I spent so much time trading in mediocre companies. From the early 2000s, I spent much time trying to get rid of shares that I shouldn’t have bought in the first place.

My share investing falls into two periods from 1993 to 2007 and from 2007 to 2021. In April 2007, I transferred all my shares from private ownership into a self-managed super fund (discussed in 1 Basics) forming a natural break for my records.

From 30 June 1993 to 2007 (14 years) the increase in the All Ordinaries Index (ASX) was an 8.76% compounded annual gain, or an absolute increase of 194% or 14% annually.

From 30 June 2007 to 2021 (15 years) the increase in the All Ordinaries Index was a 1.54% compounded annual gain, or an absolute increase of 26% or 1.72% annually.

The first period was an almost continuous time of economic growth in Australia. The second began with the GFC and continued in the doldrums until fairly recently. Where the market will go from here in the middle of a pandemic and with the emergency of climate change is most uncertain.

However, don’t despair. Even if you began your investing career in 2007 because it was the right time in your life, as long as you invested wisely your portfolio would have grown relatively well even in this period.

Sure, having transferred my shares into an SMS (self-managed super fund) the few years of little growth after the GFC seemed a bit uninspiring, but my portfolio grew almost unnoticed over time.

2 A Woman’s Touch

Early on in my investment career, I read and studied advice that women tend to be better investors than men. This is because they are more patient and accept small gains over time, rather than wanting to make large profits immediately. Sound familiar?

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