There are a few different aspects to this discussion, many of which are far removed from the initial article about my Tesla short.
I will deal with just two of those aspects now: my preference for direct investment instead of a pooled fund (taking as read that I'm not going near bonds - that's a completely different topic), and the concentrated nature of my portfolio. Sceptics include
@Gordon Gekko,
@Sarenco,
@Fella, even The Boss!!
At its simplest, I do what I do because I enjoy having shares in individual companies rather than units in a pooled fund. I had an interest in stocks and shares since childhood, but it was completely theoretical until I set up my own company pension scheme in the mid-1990's having set up my own business a few years earlier. Setting up a company pension scheme was an ideal opportunity to indulge myself.
I have a concentrated portfolio because I don't want to spend much time analysing financial statements. I also like to feel that I know the businesses in which I'm invested. That would not be possible with a large number of companies without having to make too much of a time commitment. As regular diary readers know, I have just a few core stocks in my portfolio and they have remained remarkably consistent over the years.
I recognise that, in theory, I am running too much risk by having too many eggs in a small number of baskets but I believe that, over a long period, that risk reduces. I'm already at this for 23 years; I hope to have another 5 years at least before circumstances (physical or mental) force me to give it up. I think that's enough time for mistakes and coups to balance out.
As noted earlier, I find it easier to accept setbacks when I'm familiar with a business. It helps me psychologically by allowing me to keep a higher proportion of my investments in the market. It also helps me gain a better understanding of turning points in the market.
Finally, there are fees. I reckon that, even if I do worse than the market, the margin of under-performance will not be more than the cost of managing the investments. Even 0.5% a year mounts up over many years.
But make no mistake: if someone were to ask me what I would advise, I would tell them to put their money in a low-cost passive world equity fund, where they would get lots of diversification, etc.
As you can gather from the above, performance is not the absolute be all and end all, but I have done well.
The figures I quoted earlier for the ARF were money-weighted, not time-weighted. It would be difficult to compare them with published figures for unitised funds without going to a lot of effort.
From the start of 2014, I have kept detailed records of the performance of my total portfolio, which includes the ARF/AMRF, some non-exempt investments, a deposit account, and spread bet accounts (including my shorts). Those records are sufficiently detailed to allow me to calculate time-weighted as well as money-weighted returns, so I can compare the overall return with those available from published unit funds.
I looked at the website rubiconic.ie. The best performing active managed fund over the five years to end October delivered a return of 8.5% a year. The average return for seven funds from various companies was 7.4% a year. My overall portfolio performance averaged 8.7% a year over that same 5-year period. That is net of all charges, including the ARF/AMRF charges by the ARF administrator, all stamp duty, commission, withholding taxes, etc. It's also net of the bid-offer spreads when I'm buying or selling shares, and even bank charges on ARF withdrawals.
I think the results vindicate my approach. Of course, I may not do as well in future as I have done over the last five years. As I've said already, though, that's not the primary aim.
