Australian (ASX) Stock Market Forum

My Investment Journey

Jump to new
HI KTP, hope all is well.

Just a quick question and you may have covered this so forgive my laziness (of not wanting to go through the entire thread to get the answer)... Have you considered concentrating on fewer stocks rather than being spread so thinly across a larger number of stocks?

The reason I ask is, yes diversification is good and risk on each trade will be low in a total portfolio sense, but for me, diversification like this limits profit potential also.

Considering an averaging up strategy or "pyramiding" as some call it has enhanced my returns in trading/investing once I knew how to use it correctly.

E.g. I'll purchase a stock, lets call it XYZ... I purchase XYZ with at $1.00 and the entry risk (where I would place my stop) is at $0.80.... Therefore, the entry risk on this trade is 20%. Using this, I combine it with my total portfolio value, again for illustration purposes, it is $10,000 total. If one of my trading rules or money management rules is not to trade any position risking more than 2% of my total portfolio, I could position size this to purchase $1k worth of stock.

Let's say the price advances steadily and is now at $1.30 (giving us a profit of 30% on an open position). At this point, my stop loss has been adjusted and is trailing the price. Now my stop level may be $0.95 or even at break-even $1.00. With the right action on the stock, I may choose to purchase more of this same stock whilst still keeping my risk levels in check... Then rinse and repeat until the time comes to sell out (in which I sell all my holdings at once).

Any thoughts on whether this would be of benefit to you?

As I said, I have found it very useful.

An example is my trades in SEN recently:

CODE Purchase Date Purchase Price Disposal Price Profit/Loss %

SEN 29/07/2015 0 .2 0.18 -10.00%
SEN 20/07/2015 0.16 0.18 12.50%
SEN 4/05/2015 0.115 0.18 56.52%
SEN 16/02/2015 0.091 0.18 97.80%

Net result was a 34% average profit on the four trades and I made double the money I would have if I had just stopped at the first purchase.

Not criticising by any means but just adding my two cents and getting your brain thinking about this possibility.

It's a hell of a lot easier managing less positions too!
 
Nortorious said:
HI KTP, hope all is well.

Just a quick question and you may have covered this so forgive my laziness (of not wanting to go through the entire thread to get the answer)... Have you considered concentrating on fewer stocks rather than being spread so thinly across a larger number of stocks?

The reason I ask is, yes diversification is good and risk on each trade will be low in a total portfolio sense, but for me, diversification like this limits profit potential also.

Considering an averaging up strategy or "pyramiding" as some call it has enhanced my returns in trading/investing once I knew how to use it correctly.

E.g. I'll purchase a stock, lets call it XYZ... I purchase XYZ with at $1.00 and the entry risk (where I would place my stop) is at $0.80.... Therefore, the entry risk on this trade is 20%. Using this, I combine it with my total portfolio value, again for illustration purposes, it is $10,000 total. If one of my trading rules or money management rules is not to trade any position risking more than 2% of my total portfolio, I could position size this to purchase $1k worth of stock.

Let's say the price advances steadily and is now at $1.30 (giving us a profit of 30% on an open position). At this point, my stop loss has been adjusted and is trailing the price. Now my stop level may be $0.95 or even at break-even $1.00. With the right action on the stock, I may choose to purchase more of this same stock whilst still keeping my risk levels in check... Then rinse and repeat until the time comes to sell out (in which I sell all my holdings at once).

Any thoughts on whether this would be of benefit to you?

As I said, I have found it very useful.

An example is my trades in SEN recently:

CODE Purchase Date Purchase Price Disposal Price Profit/Loss %

SEN 29/07/2015 0 .2 0.18 -10.00%
SEN 20/07/2015 0.16 0.18 12.50%
SEN 4/05/2015 0.115 0.18 56.52%
SEN 16/02/2015 0.091 0.18 97.80%

Net result was a 34% average profit on the four trades and I made double the money I would have if I had just stopped at the first purchase.

Not criticising by any means but just adding my two cents and getting your brain thinking about this possibility.

It's a hell of a lot easier managing less positions too!
Click to expand...

Hi Nortorious,

Position size is certainly a consideration in my strategy, and depends on the results I expect to achieve from it.

Keeping in mind that most of my trades are expected to be 3+ years, no stop losses and hit rate of <70%, I would be uncomfortable with a smaller position size then the 15-25 I am running now.

One of the strategies in my super has a historical hit rate of over 80%, I am confortable holding 10-15 stocks there.

With a more discretionary approach, I agree with you fully, I would have less then 10 stocks and I would average into them over time. For the current portfolio and forum thread, I prefer to stay closer to the systematic approach, I feel that higher concentration would be too risky here.

Thanks for the thoughts, it is very helpful to thing and write about these things.
 
KnowThePast said:
Hi Nortorious,

Position size is certainly a consideration in my strategy, and depends on the results I expect to achieve from it.

Keeping in mind that most of my trades are expected to be 3+ years, no stop losses and hit rate of <70%, I would be uncomfortable with a smaller position size then the 15-25 I am running now.

One of the strategies in my super has a historical hit rate of over 80%, I am confortable holding 10-15 stocks there.

With a more discretionary approach, I agree with you fully, I would have less then 10 stocks and I would average into them over time. For the current portfolio and forum thread, I prefer to stay closer to the systematic approach, I feel that higher concentration would be too risky here.

Thanks for the thoughts, it is very helpful to thing and write about these things.
Click to expand...

No problems. I thought there would be some rationale behind your approach and thinking but was just seeing if you had explored this consideration. Keep up the great work!
 
Sold TCN, 45000 @ 0.07856.

I bought two parcels of these, one as part of my automated strategy, and a second, larger one, on an expectation of significant profit increase.

This hasn't happened, so my investment thesis was invalidated, hence I sold off a part of it, so it is now closer to my average position size.
 
Sold SSM, 6350 @ $0.365, for a profit of $1,076.75 (81%).

It was one of the few remaining shares from my old value portfolio. Recent price raise moved it from being very cheap to just cheap.
 
KnowThePast said:
Sold SSM, 6350 @ $0.365, for a profit of $1,076.75 (81%).

It was one of the few remaining shares from my old value portfolio. Recent price raise moved it from being very cheap to just cheap.
Click to expand...

Nice result on your SSM trade KTP. A nice profit given what it looks like on the chart (a bit of noise above the current levels that may impede further progress...).
 
Bought IVO, 30557 @ $0.055.

I happen to work on a project at the moment that collaborates with a very similar company in UK market. I think this type of offering, let's call it data snooping, is going to grow massively in the future.

This is one of the many players without any competitive advantage, however, customers would be sticky and they are getting more and more of them.

Shopping Ninja, I am not convinced about, but it also has potential.

I am expecing a few more capital raisings along the way.

A very speculative play, this one.
 
I'm pleased to see that you're buy more stocks that are going up.

Your performance will improve considerably and soon those benchmarks will be eating your dust.
 
A Happy New Year to everyone!

Monthly update - portfolio up $1,584 (3.2%) for the month. While a good result, this was the first month since March that I underperformed the benchmark.

Capture.PNG
 
Monthly update - portfolio has lost $895.59 (-1.8%) in January, only just beating the index and avoiding two negative months in a row.

Capture.PNG
 
Monthly update - portfolio has lost $501 (1%) for the month.

My main small cap growth portfolio underperformed the XSOAI by almost 5%. Interestingly, the last time I had significant monthly underperformance was also in Feb, last year, -8.8% then.

Well within my tolerance parameters. My current triggers to start worrying are 3 underperforming months in a row, or relative monthly underperformance of over 10%.

Capture.PNG
 
Monthly update - portfolio has lost $364.09 (0.7%) for the month. It is now underperforming XSO for the third month in a row, which matches the worst result in a 10 year back test. Still well ahead of XAO, I will give it another month before reviewing the strategy.

Following an automated system certainly doesn't generate much discussion and I've been too busy lately with a new job to write myself.

Capture.PNG
 

Similar threads

BossMan.
Actively managed portfolio journey
5 6 7
Replies
137
Views
27K
BossMan.
BossMan.
A
Long term plan to invest in a few ETFs
Replies
13
Views
2K
Value Collector
Value Collector
M
Investing in Gold
2 3 4
Replies
77
Views
10K
houtman
H
Knobby22
Supermarkets, self checkouts and honesty
2 3
Replies
49
Views
2K
frugal.rock
frugal.rock
T
Keep $$ in an Investment Home Loan Offset Account OR Buy Shares
Replies
6
Views
1K
Tansam
T
Top