It will be the year that no one will ever forget, and the volatile nature of the COVID-19 pandemic took its toll on the UK stock market. Investors began to see the start of what was to come in late February, which culminated in the FTSE 100 suffering the second worst crash in a single day on 12th March 2020. After ‘bottoming out’ a couple of weeks later, the FTSE 100 had lost around a third of its value. It was clear that a significant change of fortune was required to breakeven for the year. The race was on to recover the losses to the Start Investing Stock Portfolio (SISP)
Hi investors, So, this Monday (9th March 2020, or ‘Black Monday’) investors across the world witnessed one of those sobering feelings as global stock markets turned uniformly red . Billions of dollar s were wiped off the face of the Earth by a swirling vortex of terror - one part unchecked spread of coronavirus , one part oil price war . Before 9am UK time on Monday, over £120bn was lost from the FTSE 100 alone , which closed down 7.2% . A drop like that in a single day hasn’t been recorded since the financial crash in 2008 . Interesting times lie ahead… However, do not lose hope ! People react irrationally during market downturns, and it is at times like these that investors need their decisions to be directed by their heads more than by their hearts . For example, we know that the companies which we invest in are good companies . Some are even g reat companies that have been around for decades, through several market crashes (and oil price wars )! And because of this, we will continue to invest regularly into the UK stock market as we strive towards financial freedom. Anecdotally, the stock market takes a downturn every 10 years . The last ‘crash' was in 2008, and we could be on the verge of the next blip. But as Warren Buffet would say: “Be fearful when others are greedy. Be greedy when others are fearful .” With this in mind, we spied an interesting exerpt from an Investors Chronicle (IC) supplement this week, which recommended ’10 Shares for Your ISA’ . Obviously, we couldn’t resist putting each company through our Inherent Value Index (IVI) evaluation to see whether any of these companies were good value investments . As outlined in our free ebook “The Start Investing Guide to Stock Screening” (which you can get for free by subscribing here ), we have certain metrics that we live by when it comes to picking stocks :
When we first started screening for stocks back in January 2018, the first few months produced surprising results: housing companies , seemingly making money hand over fist, were trading at a huge discount . At Start Investing we follow the numbers, and the numbers told us to cash in on these strong companies that had been beaten down by Brexit uncertainty. We continued to buy until early 2019, by that time housing stocks made up a large portion of our portfolio and even though we hadn't seen much of a return by then we trusted the strong financials these companies were reporting. Below is the result of our February 2019 screen, as you can see, 7 of the top 11 are housing companies : Bellway, Redrow, Bovis Homes, Countryside Properties, CRH, Taylor Wimpey and Persommon.
Hi investors, And just like that, it's been two years since the birth of the Start Investing Stock Portfolio (SISP). After buying into our first company on 19th December 2017, we've been regularly adding to the SISP on a monthly basis, and tracking the growth performance and incoming dividends. In this biennial review, we thought we'd share with you exactly how it has performed throughout 2018 and 2019. TL;DR Summary Over the last 2 years, our Monthly Stock Picks have outperformed the FTSE 100 by 13.2% and the FTSE 250 by 5.6% Dividend payments increased the growth of our portfolio by an additional 5.7% (not too long to read now, ey?!) As you will see, it really has been a journey of two halves... 2018 - Into the Deep End Total Number of Companies in Portfolio by 31st December 2018: 14 Best Performing Portfolio Stock of 2018: Rio Tinto PLC (RIO) +4.8% 2018 was a tough year for investors in the UK stock market, and the SISP was no exception. The poor performance over the 12-month period was ascribed to a combination of global volatility for equities and the uncertainty surrounding Brexit. Following a very positive start in January 2018, the SISP went on to perform similarly to the FTSE 100 Index over 12 months, both of which beat the FTSE 250 Index.
Something pretty exciting is happening to the Start Investing Stock Portfolio . September will be our 20th month of investing £300 per month into our stock picks, meaning we will have invested about £6,000 into the portfolio. Our average dividend yield (remember, this is the % of how much money we put into a stock that is paid back to us in the form of dividends) is about 5%. This means that next year we will get a whole month’s stock pick paid for by dividends! 5% of £6,000 is £300! WE LOVE DIVIDENDS. This is also a very good way to see compounding interest at work. Here's a question for you: How long will it take for all 12 months’ picks to be paid for by dividends? The first one took 20 months right? So is it 12 x 20? 240 months or 20 years ? Nope. If we think we need £3,600 in the form of dividends to pay for 12 months of picks, we need a total portfolio worth £72,000 (5% of £72,000 = £3,600). Here is a breakdown of how the next 20 years will go if we keep adding £3,600 and reinvesting our dividends.