As a long term investor I don’t fret too much about short term trends, so I don’t know how well I’ve done this week, or this month, or even this year. You can fret about these things too much. So you underperformed the FTSE 100 Index? Unless there is a lesson to be drawn for future trading, the information is of no practical use to you.
However, as I was asked by a follower on Twitter how my portfolio had performed in the year to date, I made the laborious calculation of listing all my holdings, number of shares held minus any I had bought in 2018, finding 31 December closing prices, calculating the value of my holding against the portfolio value now, adjusted for cash inputted into the account in the meantime.
I wish I’d done the calculation when I was asked a couple of weeks ago. After this week’s sell off I have a total return of about minus 1%, even worse than I would have done in a bank savings account.
The one lesson I learnt from this – apart from determining never to go through the whole rigmarole again – is that I am right to stress the value of dividends. While the value of my holdings on the stock market has declined, the loss has been mostly offset by the dividends received.
Given all the uncertainties of the year so far, of which Trump’s trade wars and the Brexit wrangling are perhaps the most prominent, being close to breakeven is a fair achievement. Over the past nine years during which I have run my current portfolio I am way ahead – please don’t ask me to calculate how much – and will still be ahead even if this year continues to turn out badly.
Investors have to be prepared to grit their teeth through bear markets, knowing that they will move ahead in the longer term. Anyone who lived through the 500-point opening collapse of the FTSE 100 index on the morning after the Brexit poll should have developed an air of sangfroid.
Increases in interest rates will hang over the markets, although it will be a slow process, especially in the UK. US treasury bond yields are rising, possibly making them comparatively more attractive than shares. However, I see no reason for rising bond yields to hold back UK equities to any degree, as interest rate rises here will be few and far between.
Look for the Positive Signs
Despite the market selloff, there are plenty of positive signs. Economic growth in the UK has continued into August. Although that has to be seen in the context of a bounce back from a poor first quarter, averaging out the year so far suggests that the impact of Brexit has been nothing like as dire as forecast.
The IMF, which has a terrible record on forecasting, is saying that a messy Brexit will be bad for the world economy. That is admittedly a fair assumption, but again there is no sign of the protracted negotiations having much impact yet.
Trading updates from three recruitment companies, Robert Walters (RWA), Hays (HAS) and Pagegroup (PAGE) show fee income rising in almost all areas, even the UK. The figures from Hays caused a quite excessive drop of 10% in the shares so I nipped in smartish and topped up my holding.
I also topped up my WH Smith (SMWH) holding when perfectly acceptable figures were greeted with a similar fall.
I am now prepared to abandon my forecast in January that the FTSE 100 would reach 8,000 points some time this year. It is still possible but it will take a remarkable Santa Claus rally, or a fantastic Brexit deal, to get us there. However, I am still looking for opportunities to use up the small amount of my ISA allowance that remains to find a home.
