My online portfolio consists of four folders, organised in pairs: the UK and North American securities I own, and UK and North American securities that I monitor with a view to owning.
I do not always have the time to take a proper look at the stocks in each of these folders, but I am trying to be disciplined and at least once a week ask and answer some questions about each single entry. This does not take long, but it is an activity that I plan for and for which I schedule a meeting with myself – usually for an hour at the weekend. In most cases, the decisions I am to make are already in my mind and finalised within seconds. But I still think it’s important to commit to the time, ask questions, articulate the answers, and act accordingly.
For the stocks on my monitoring list, I ask: am I still interested in this one? When I added it to my list, I expected something. Do I still remember what it was? Has the company delivered? Am I still attracted to the prospect of owning these shares? If the answer is yes, the next question is whether now is the right time to buy. If not, what would have to happen for the time to be right? If I were to go ahead and buy, how would it sit with the stocks I already own? Do I need another miner in my portfolio? Am I still after another Africa-focused company?
If I’m no longer attracted to a company, the obvious question is whether to drop it from the watchlist altogether and look for another target.
Things are more difficult, though, once I get to the portfolio of stocks I actually own. Once a month I challenge myself to engage in the “pruning” exercise extolled by the famous Wall Street investor Gerald Loeb. His advice was to take a look at what’s in your portfolio and identify the least attractive holding. Do you really still want to stick to it? Isn’t it stopping you from owning something more attractive? Do you have a compelling reason to keep it? Wouldn’t it be better to sell it?
These are tough questions because, as behavioural economists tell us, we are hard-wired to buy and then defend that decision to ourselves. It’s always more difficult to close a position than to open one – especially if the position is not working out as you hoped. However, once a stock has made itin to my portfolio, I have a responsibility to look hard at it each month, and either commit to nurturing it or admit that things have not gone as expected and face the consequences. It is not always a pleasant experience, requiring resolve of the type similar to “eat that frog”. But it’s part of being an investor.
This past weekend, it was nice to be able to reconfirm my commitment to the stocks in my portfolio that I am happy with, such as Toronto Dominion Bank and Vancouver-traded Africa Oil Corporation, and Aim shares Monitise and Pan African Resources.
It is more difficult to decide what to do with stocks showing losses. Mining investor Polo Resources (POL), another Aim share, is a real conundrum. It did quite well for me in the past, but its share price has been descending steadily since a lavish special dividend last year. The shares trade below net assets, the company has net cash and directors have been buying. But none of this seems enough to rekindle the share price. Meanwhile, oil and gas producer Melrose Resources (MRO) is climbing to the top of my monitoring list, showing more promise at the moment. Should I get out of Polo and move on? Must decide next week!
Dina Iordanova is a private investor writing about her own personal investments. She may have a financial interest in any of the companies and trading strategies mentioned
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