This is the editorial of our monthly Shareholder Yield Letter published on 2023-08-08. Sign up here to get it in your inbox the first Tuesday of every month.
More information about the newsletter can be found here: The best large cap investment strategy ever
You may remember in May this year we started a new newsletter based on the best large cap investment strategy we ever tested. We just sent out the latest issue and the high-quality large cap companies the strategy comes up keeps on surprising me.
Performance since May has not been bad at all, up +4% on average over 16 companies!
I can’t give you the names recommended in this issue (that would not be fair to subscribers), but I can give you a rough indication, so here it is.
In this issue you can read what to do if your portfolio is small, like mine was when I started investing more than 35 years ago.
But first the portfolio changes.
Four new recommendations this month as the MSCI World index is above its 200-day simple moving average.
The first is a US-based insurance company with a shareholder yield of 11.1%, share buybacks of 9.0%, and it pays a dividend of 2.2%.
The second is a UK-based tobacco company with a shareholder yield of 10.3%, share buybacks of 2.3%, and a dividend yield of 7.9%.
The third is a UK-based DIY retailer with a shareholder yield of 11.4%, share buybacks of 6.4%, with a dividend yield of 5.0%.
The fourth and last recommendation is a UK-based energy company with a shareholder yield of 13.3%, share buybacks of 9.2%, and a dividend yield of 4.1%.
What do I do if my portfolio is small?
What do I do if my portfolio is small?
This is a good question we received from a few subscribers. It is a good question because I am sure a lot of us started small.
You must keep fees low
If your portfolio is small, a 2% investment in each idea may result in you paying very high transaction fees. For example, if the total amount of money you must invest is €50,000, a 2% position, which we recommend, is equal to €1,000.
And if your broker, like mine, has a €9.90 minimum brokerage fee your trading costs (before any other costs, like exchange fees) is already nearly 1%.
And that is for an order inside Germany. It gets more expensive on an exchange outside of Germany.
A problem I also had
When I started investing this was a problem I also had.
I started with no capital more than 35 years ago. I saved for about three months to make one investment. And even then, my investments were small which meant brokerage made up a large percentage of each investment.
But I didn’t let that hold me back.
After saving for another three months or so I would buy another company until, over time, my portfolio grew to where brokerage costs became small.
My portfolio also started very concentrated
When I started my portfolio was very concentrated, simply because I did not have enough money to invest in a lot of companies. But, over time, as I saved more and re-invested all profits, I was able to buy more investments and my portfolio became diversified.
What to do with a small portfolio
So, what can you do if your portfolio is small?
You need about €/$ 40,000 to start following the ideas in the newsletter. Why €/$ 40,000? Because the newsletter subscription price will then only make up around 1% of your portfolio. This is important because you must keep costs low!
Invest 5% in each idea
For a portfolio of this size, I suggest that you increase the percentage invested in each idea to 5%, or €/$ 2,000 (€/$ 40,000 x 5%).
An investment of €2,000 will result in brokerage costs of around 0.5% if your broker charges the minimum fee of €9.90 per transaction that my broker does. If you buy on a foreign market, it will be higher, but that cannot be avoided.
Slightly more volatile
If you invest 5% in each idea it may result in your portfolio being slightly more volatile (larger up and down movement), but a portfolio of 20 investments is already quite diversified.
And because the newsletter uses a strict 20% trailing stop-loss strategy large losses in are unlikely.
Look for a cheap broker
Something you can do to lower your transaction costs is look for a low-cost online broker.
But remember that when looking for a broker the safety of your investments and the cash held by the broker, not price, should always be your priority. Therefore, do research (and read all the small print) to be sure that your cash and investments can be easily and quickly returned, or transferred to another broker, should your broker run into financial difficulties.
Wishing you profitable investing
PPS It is so easy to put things off, why not sign up right now before you forget
PS Why not sign up while the ideas are still fresh, it costs less than a lunch for two or €5 per investment idea, click here: Get the Shareholder Yield Letter now!