Your 2-Step Plan To Help Grow Your Wealth

Two ways to tackle a battered portfolio.

Maynard Paton

Maynard has worked at the Fool since 1999. He ran the Qualiport online portfolio on the Fool from November 1999 to September 2005 and was lead adviser for the Champion Shares & Champion Shares PRO stock-picking services from September 2005 to June 2011, at which point he moved to become Deputy Editor of the UK Fool. Prior to joining the Fool, Maynard worked for a year as a Poll Tax clerk and then for six years at the local authority's IT department in the murky world of ICL mainframes and COBOL programming. He relocated to Kent to join a financial services firm's IT department and there discovered the joys of stock market investing. As well as keeping an eye on share prices and his local housing market, Maynard's interests include karting, martial arts and entertaining his young family.

Published 26 August, 2014 2:49 pm BST

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Heavy traffic, costly attractions, long queues and dodgy weather – I can think of no better time to stay at home and catch up on my shares!

Yes, it’s all a bit sad. But don’t worry too much — my family have already enjoyed their fair share of outings this year.

And for next year, if my son does want to zoom around the Nürburgring (it’s a race track in Germany) and my wife does want to book that fancy cruise…

…then yours truly will have to ensure his portfolio is in tip-top condition to pay for it.

I generally take a good hard look at my shares three times a year:

Around the Easter weekend or the May Day holiday
At the August Bank holiday, and;
During the Christmas break.

It’s every four months or so, which is frequent enough to keep tabs on developments, but infrequent enough to prevent any knee-jerk trading.

In the meantime, of course, I always skim the results from my companies…

But double-checking valuations, making plans to re-balance positions and the really exciting bit — calculating my overall returns! – I generally do around now.

My big winner is up 86% and my worst loser is down 40%

I’ve had a sneaky look at my figures before this weekend and I think I’m up 15% during the first eight months of the year.

Not a bad performance, especially when the FTSE 100 has inched just 1% higher and the AIM index – where many of my holdings reside – has slumped 10%.

For what it’s worth, my three best performers during 2014 to date are Tristel, up 86%, French Connection, up 56%, and City of London Investment, up 33%.

My worst losers are Getech, down 40%, Tasty, down 22% and M Winkworth, down 10%.

Luckily, the winners have offset the losers this time, but I guess it could have easily been a different story.

Indeed, my portfolio has stagnated since the spring and has had a rough time in the summer.

You may even recall me crowing about an 88% gain on French Connection earlier in the year. True to form, such boasting usually signals a top for my shares and that particular gain has shrunk ever since.

Elsewhere, the bulk of my portfolio has stagnated in the summer sun – and my wealth has not been helped by a barren few months without dividends.

Anyway, this weekend I will make some decisions about my portfolio weightings. You see, my biggest position represents about 15% of my portfolio, while my smallest is about 1%. And my cash holding is zero.

So, is 15% too large? Should I just forget about that 1% holding? Should I bank some profits from my winners and reinvest in some of my losers? Or should I just sell a bit of everything to have some cash on hand?

I have a lot of thinking to do.

I’m not complaining, though. It could be a lot worse. I could be staring at rivers of red ink right now…

…and having to explain why those dreams of the Nürburging and fancy cruises may have to be swapped for no-expense-spent stays at Windowsill Bay next year.

Have you suffered your very own private ‘correction’?

I’ve written this before, but I’ll write it again:

Successful investing is as much about avoiding losers as it is picking winners.

True, I could have latched on to shooting stars GW Pharmaceuticals, Crawshaw and Roxi Petroleum…

…and sat back and made gains of +132%, +192% and +238% this year.

But far more likely, I could have stumbled into some of the usual private-investor traps…

Not least:

Punting on big names with big problems, such as Serco and William Morrison (down 37% and 33% respectively this year);
Speculating on hot IPOs, such as AO World and Boohoo.com (both down 46% from their first-day closing prices), and;
Gambling on bulletin-board favourites, such as Quindell Portfolio and Globo (down 43% and 20% respectively this year)

Anybody who holds a few of those names can forget about any warning of a market downturn…

…because their wealth may have already suffered its very own private ‘correction’.

And if that includes you, you may wish to consider these bits of advice…

2 steps to help grow YOUR wealth this weekend

1) Revisit all your troubled shares and decide which have the potential for recovery and which are likely remain disappointers.

You see, it’s quite possible some of your losers have become genuine bargains as the market frets over temporary difficulties? Then again, some of their stories may have changed permanently for the worse? Work out which is which, then act accordingly.

2) In future, remember Warren Buffett’s famous first rule: “DON’T LOSE MONEY”.

Sure, everyone (even Buffett) picks a loser from time to time. But if you first and foremost STOP adding all higher-risk punts, gambles and speculations to your portfolio, you could end up with more reliable, positive returns.

All told, I am convinced if you study your portfolio this weekend and resolve to take the two steps above, you too could look forward to totting up decent gains on future bank holidays!