Yes, but I still have sleepless nights about YOUR strategy, even though I’ve seen it pay off for you.
There are other posters on ii, or there were, who had similar strategies with all their eggs in one FTSE 100 company basket in the belief things couldn’t go wrong. Some of them are no longer with us as investors. Any company can fail with no warning. In fact the larger and apparently safer the company the more their accounts can hide and the more the auditors miss, it seems reasonable to say.
There’s a tendency for companies to keep on saying things are going ok and the dividend is safe etc etc right up to the point when they announce a massive loss and kitchen sink it with the suspension of the dividend, the cancellation of the buyback and a massively diluting rights issue.
You’re left with the choice of throwing more money after bad (if you have any cash left and any hope at all that the company may turn it around) and the only satisfaction you have is the resignation of the CEO (with a £25m golden parachute).
It has happened to me more than once, and in companies credit rated AAA (that supposedly means as safe as cash, by the way). Fortunately I’ve rarely ever had more than 5%-6% in any one company so although the losses are painful, I live to fight another day.
I’m not saying that is going to happen to LLOY, and they should be especially safe with the yearly stress tests they are now obliged to conform with, but why take the chance?
I know. I may as well talk to the wall.
Why not give over the whole of your portfolio to a professional manager? Its about big enough I would think and you’d be ‘all in’ with him or her. Just tell them you’re looking for a 5%+ divi payout per yer and you’re in for the long term. Then get yourself a hobby.
Hi @Eadwig, Yes but these “professional managers” want to charge you 1.5-2% of of your portfolio value per annum to manage it typically. Thats quite a scary figure - but perhaps not as scary as @regardless’s strategy !.
Re your other point @SteveShares & HSBA comes to mind. HSBA results day on the 18/2 might be a big day for him, one way of the other. He seems totally unconcerned with capital losses though, as long as he can keep taking his SCRIPs and increasing his share count (and income therefore) he appears 100% confident that the share price will recover - indeed he has seen worse times with HSBA so maybe he is right. I’m afraid that I am firmly wedded to “capital preservation” these days myself though, even if it does cost me a bit sometimes. He & I clearly think very differently.
I completely agree with you and others that diversification is a good strategy. All companies will die someday and all of them will suffer downturns from time to time. Maybe LLOY is at the bottom of its cycle and is reasonably safe from a further downturn but it can’t be guaranteed. I hold a decent slug of LLOY and don’t lose sleep over it. I get a good flow of divis.
Although Regardless’s strategy is conventionally risky, I suspect that anyone who had held only Shell since the end of WW2 would have done well if they had remained invested and reinvested their divis back into the company since during this period they have never cut their divi. A rarity, I think. Not too many companies with such a record.
Frog in a tree
p.s. I note that RDSB has a yield of 7.61% at the moment. Even with the end of oil on the distant horizon, given that Shell has never cut its dvidend it looks like any newly invested money will go on earning 7.61% for the foreseeable future. Is there any better investment offer at the moment?
I seem to remember that @regardless also has RDSB shares and mentioned he also held some other stocks/funds and that the pot he’s investing with was just for a few years until his real pension kicked in… maybe I’ve mixed him up with another poster but I’m sure he’ll advise at some point.
You can hold a lot worse shares than LLOY and RDSB as long as you didn’t buy @ the top.
I know a couple of people who invest purely in the AIM market and on just a few stocks each… despite having repeated failures where the price tends to zero they seem to only be interested in potential for massive increases in SP… lucky for them they are high earners so they can afford to continually flush large parts of their savings down the toilet.
Hi @J_Westlock, Yes he posted the other day about having bought £10,000 worth of Shell. From memory he also said he has some AIM mining stock ?, can’t remember the name ATM. He might have some BARC too ?. But I think they are all small holdings compared with his 500,000+ (?) shares in LLOY.
Yes AIM stocks really are the wild west aren’t they ?. Scarily volatile. @Eadwig has several AIM holdings though and he seems to do OK. Like anything else it’s how you pick your stocks that counts in the end I guess. One positive is that they don’t appear to be too market correlated and are more driven by what’s going on in the company concerned (or perception thereof) than what the broader markets are doing.
There are some I could name on these boards that are invested in ONE AIM stock and have been for years and are 99% underwater unless they have been adding on the way down. Still waiting for it all to turn around and attending the AGM’s and gettign a few warm words from the CEO (don’t mention the £20m private loan he hasn’t paid back to the company yet).
But as Pref said, there is Steve who is only in HSBA, Regardless who is 90% in LLOY, i remember a guy who used to be 100% in TSCO. If he’d held on he might be just about ok now, but in his despair I’m pretty sure he sold out somewhere close to the bottom when they hit their big problems.
There are many other examples. The main thing is they all thought that their particular company couldn’t go wrong or had to come good.
Not many people have the nerve to stay with a company for 70 years like RDS who have never cut their divi, as @frog_in_a_tree points out. There are even fewer companies like RDS. There’s always a crisis at some point, strong rumours that the divi is going to be cut, bad mergers or take-overs or failure to adapt to a changing market (E.g. Kodak). Then there’s always the possibility of a financial scandal such as Enron taking the company out of business.
Also, how many companies cut their divis during the financial crisis when they weren’t directly affected but their stock price fell on a falling tide and their yield was so large they just decided they could? Quite a few, I can tell you.
I don’t need to mention Centrica and politics do I?
Diversity. Its the only free lunch in town, as they say.
Hi @Eadwig, I couldn’t think of anywhere where I could do a total return chart over 70 years to check out frogs theory. But you’d have to be Warren Buffet to be investing for that long, I can’t see me being bothered in 10 years time, that’s if I’m still around that is !.
At a steady 7.5% you’d double your money every 10 years or so (using the rule of 72) and that’s with no share price growth. As you know I am a firm believer in the miracle of compound interest, Einstein’s 8th wonder of the world !. Hence my continued focus on dividend investing and re-investment of same.
By “if your SP growth+divis are flat” do you mean if the SP reduces by the amount of the dividend each year, meaning that your capital value stays the same - putting you in a situation not dissimilar to being in cash ?. If so that’s a bit unlikely if you were getting a 7.61% yield as per frogs scenario I would have thought.
On the growth vs income investing style question I am firm adherent to the income style. Provided you have a guaranteed income then you can still live and maintain your lifestyle without depleting your portfolio assets, trying to live off growth is much harder as you have to sell assets to generate your income - which can result in the dreaded “pound cost ravishing” scenario.
And over time what is more guaranteed, the dividends that companies declare and will usually be paid (almost guaranteed for prefs) or share price growth which is totally dependant on company performance and can be extremely variable at best. No personally I’ll take income over growth all the time myself. It’s also more suited to buy and hold investing, growth you have to go out looking for the whole time it seems to me. And your success (or not) is highly dependant on making good investment choices - which is much harder.
China has apparently come up with a treatment that uses blood plasma from recovered cases to treat those worst affected which they say is being effective. So just maybe we have seen the worst of the health issues (in terms of deaths anyway) if not the continued economic impact ?. May be too soon to tell, figures can change overnight. Will global markets bounce back ?.
b) Bank results continue with HSBA on Tuesday and LLOY on Thursday. Both could be significant, either way !.
c) Next move on Vodafone Idea – can it survive the mega charges being levied by the Indian Government ?. They are being asked to pay something like $4Bn I think, Vodafone Idea shares plunged by 23% last week. Can’t be good for Vodafone Group either can it given their 50% ownership ?. (Where else is the money going to come from…).
d) Personally I’m waiting on the outcome of the Microsoft - Amazon legal fight over the DoD $10Bn JEDI contract. I bought Microsoft at ~$152 back in December 2019 and they were up to ~$185 at cob Friday. If they get this contract confirmed (already won it in theory but Amazon are appealing saying that Trump meddled due to his spat with Jeff Bezos) then I reckon $200+ could be on the cards, which would be nice. May not be sorted next week this one though…
Going on the markets high expectations recently with the banks s updates so far, I am getting my Tin Hat out
And getting the iternary / firepower out for Jack’s below 55p with Lloyd’s next week
If Final dividend is ok ( above 2p ) I be ok for the next 12 months or so to chill and relax so no need to apply to be a Domino’s delivery driver…BTW they pay £12/£13 an hour
BTW I am in Great Yarmouth for a few days… ( a well deserved break… hahahaha ) we went to the Yarmouth Stadium dogs track last night had a couple of winners… just go on the names I Like no expert… the Mrs studied the previous forms and took it seriously and never won… it’s all just pot luck… funny enough like the stock market…
Sadly NO DOG CALLED LLOYD’S OR THE BLACK BEAUTY FOR THAT MATTER
Yes indeed. I wasn’t referring to the Shell scenario though… who usually also increase their divi by about inflation and also have numerous projects in place that will be good earners for years to come.
There are numerous examples of companies that are probably on a long term downward trend although they pay nice divis.
Personally, I wouldn’t invest in those unless for the short term.
That’s why it isn’t, for me, a case of growth vs income… but finding opportunities where you get both.