Wednesday, 30 September 2015

Seeing red

So the stock markets are busy at the moment, maybe the traders need to top up their children's school fee accounts? Those lifestyles don't maintain themselves you know!

Up and down, up and down - according to Reformed Broker in the US they are seeing a significant increase in the number of days when the market is up or down over 1% - I haven't totted up how the FTSE is doing, but if feels like it can't be far behind.

So what now after the c.15%  fall I was looking for - well, seeing red is never great when you log into your trading account, but there it is, about half of my investments are under water. Some by a few pounds, others by reasonably significant percentages. This makes me feel uncomfortable, obviously, I don't like it at all, but it's worth sticking with because it's caused by and will be helped by reinvesting the dividends.

I generally stick to ticking the box that reinvests the dividends, which means all through the time when the FTSE was going from 6,200 - 7,050 roughly two years from 2013 to early 2015, before tumbling down to where it is now, I was buying shares. These are the ones that are now underwater by a few pounds as more expensive versions of the same shares were bought, taking the average price per share up. The larger losses arise from purchases where I felt I needed to act, bought too quickly and without enough thought - hopefully they will come back and I'll be able to get out of those holes and learn some lessons!

Pre-correction I was earning a yield of just over 5% in good blue-chip, main-stay companies which I bought and add to during dips. I feel this compensates me for my lack of knowledge and skill and increases my chances of avoiding capital losses whilst receiving an above market income return - nice and simple! That yield will now be boosted by the falls through new purchases and top ups along the way.

A slow recovery / this current bouncing about gives me time to think and hopefully act more rationally - my musings on buying shares in the oil industry show just how long I can take to think about things! I'm happy with that as my personal share dealing account is not my main investment pot, across them all I'll be buying more shares and units all the time at, hopefully, discounted prices supercharging future returns - from that point of view, it's all good, but that doesn't make seeing the losses any easier to bear.

I do also genuinely see these as paper losses, crystallised only if I hit the sell button. Since the money invested is surplus to everything else I spend on, I don't need to sell, which generally puts me in a decent position mentally.

So I'm okay seeing red at the moment. Deals are hopefully on offer, rather than "correct" valuations. I've bought Vodafone and the Vanguard worldwide high yield ETF during the slumps, so we'll see what else is out there in the next few weeks...

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