Learning lessons the hard way

I don’t think there are many better ways to learn about how not to do in the market than losing money! Well let me tell you this has been happening in abundance this year so far. A SIPP value down some 12.5% this calendar year has led to a lot of head scratching, self-doubting and loss of confidence in my own abilities. I think the decent year previously gave me a bit of a false sense of security about the way these things play out usually.
 
Here is the thing though, I know I can find decent companies who’s share prices invariably do increase over time to give very good returns. So what am I doing wrong?
 
I think there are a few areas I need to concentrate on in greater depth. Firstly I have to look at the size of my initial stake in a business. I think with the fact that my portfolio is fairly small, I currently take positions which are the equivalent of approx. 15% of the overall value. This makes things looks amazing when everything is going swimmingly, however as recent times have shown, it can cause many issues when things aren’t quite so rosy. So that is definitely an area I can improve on instantly with any new buys I potentially make. I think this has to be linked to my own feeling of wanting the value of pf to rise quickly. I’ve always told myself “once I get up to x value I can then look at position sizing more seriously”.
 
Secondly, I need to enter trades with a much better plan of action should prices rise or drop. I feel this is where my lack of knowledge (read non-existent almost) on technical analysis has not helped. I’ve started reading “Technical Analysis for Dummies” to hopefully help give me a slightly better understanding of why prices move around the way they do and give me a better idea with planning an exit strategy either in profit or indeed for a loss. I have no problem placing stops to take any emotional attachments out of selling losers, however there have been a number of occasions where I’ve been stopped out of a share for a loss, only for the price to then go to a level where it would have theoretically made me a decent profit.
 
Thirdly, and I think this is potentially the most important lesson of all, is to stop checking on my holdings every half hour, hour, whatever. I do find it very, very difficult to relax during the day especially when things are looking a bit shitty, which is a lot recently! Don’t get me wrong, I don’t find myself rushing to click the sell button when I see things tanking but I think for my own sanity and stress levels I need to concentrate on not just checking values quite so often as you can drive yourself mad sometimes!
 
In my previous post I set myself a target of finally finishing the book I was currently reading (“The Little That Still Beats The Market”), I’m pleased to report I managed this and as mentioned above I’ve start to read up on a bit of technical analysis which makes for very exciting bedtime reading!! I am actually quite enjoying reading more again though and looking forward to getting through some of the books I’ve had for some time now.
 
Markets
 
This week saw me get stopped out of XL Media (XLM) in both my ISA and my SIPP. Of course the price then shot back up leaving me frustrated and bemused in equal measures! However I’m going to make a clean break from this share as it’s done this to me a few times now and at the moment I could do without the volatility while I go over a few things mentioned earlier.
 
Also, rather typically, after last time reporting that Robert Walters (RWA) was turning upwards and looked to be breaking out, it came back down quicker than it went up! However, this still looks a bit more stable and am happy to leave this well alone. The price and spread moves around seemingly ridiculous amounts here so my holding value can appear to increase and decrease quite a lot while the actual mid-price stays pretty much constant.
 
Numis (NMS) has improved a touch leaving me just a couple of percent down from my buy price. Chart is in a nice upward trend for 2 years now so happy to leave as is.
 
I’ve not really taken a great deal of time out to research anything new over the past couple of weeks while I look at my strategy etc. but I’m hoping to get my head in a better place to get back on track with things. As ever I’ll try to keep you guys in the loop as much as I can! Fingers crossed for some improved performance soon but obviously these things can take time!
 
Until next time,
Ian