OK, so this week is an easy one, a catch-up blog post to put together the story so far in the context of an overall slow growth strategy for an investor who doesn’t have much capital to work with but who doesn’t see that as a stumbling block in order to harness the power of the stock market.
So what is the story so far? Allow me to reflect on the gains made in this series (from CRX, PTR, HZM, EME, GDP) and add to that mix, without going into major detail since they were more quick (but not so dirty!) short term investments, gains made from Summit Corporation (SUMM), Verona Pharma (VRP), and Toledo Mining (TMC).
Capital used (£)
% Price difference
Table 1 – A summary of gains from short term investments where the majority of gains remain as a ‘freeholding’ of shares. The % price difference is the % difference in price of the freehold shares from the investment for the closing bid price on 2 November 2012, compared to the final sell price of the short term investment. The colour represents which % price differences have increased (green) or decreased (red), with colour intensity increasing with marked differences.
As you can see from the amount of capital used for each investment, all except for GDP were below £500, yet the % returns (assuming I sold the complete holding at the final sell price) didn’t drop below 7% - which is suitable for the time length held and capital amount used. However, since this strategy is designed for the investor who wants to grow a portfolio over the long term then the % price difference column in Table 1 is really worth taking in. The price of shares goes up and down. From the examples above, the only freeholds which have gained in price since the last sell are HZM, SUMM, and TMC, while the rest have dropped in price, with major price falls occurring in CRX, PTR, and VRP. Now imagine I hadn’t recouped the capital from these heavy price fallers, look how the value of the capital would’ve massively reduced as well. CRX dropped due to a negative news announcement, PTR primarily fell due to a share placing, while VRP fell on profit-taking after the price rose sharply on positive news. Most investors know this happens, but to sit down and work through these examples, even with these small amounts of capital, I’m beginning to become very aware of how many things I don’t have control over, suggesting that I need to be fully prepared with the things I do have control over, such as how much I want to invest and when I trade.
Coupled with the above, I believe it’s also useful to emphasize the timing aspect of these short term investments – they weren’t all made at the same time and by sharehopping, even on the short term with small amounts of capital, it is very possible to catch different companies in non-synchronized uptrends, as demonstrated in Figure
Figure 1 – The coloured lines represent the time length of investments for 8 companies between the initial buy and the final sell.
I hope this has provided some inspiration to anyone who wants to create a low risk investment strategy in high risk shares, particular those companies listed on the Alternative Investment Market. I’ll be back on my technical analysis soapbox next week as we head towards Christmas!
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