Note that, as usual, you can expect our next update in about 12 weeks or
so, in November 2016.
Meanwhile, you can also have a look at our
actual portfolio and previous portfolio updates here:
Since May, markets have continued to soar up. This is a great thing for our DIY Portfolio value but kind of makes it very difficult to find interesting stocks to buy.
We were hoping Brexit (the
possibility of Great Britain
Then the agonising
question comes back to haunt us yet again:
Should we be worried
about these skyrocketing markets?
Once more, I’ll remind you that I am not an investment or tax professional of any kind. The intent of this blog is not to give specific investing advice. Before investing yourself, we suggest you to do all necessary research and consult a licensed financial professional if need be.
Brexit Scare Quickly Went Away
A couple weeks before
the Brexit vote, world markets, anticipating a stay vote, mounted quite a
rally. Things were running smoothly and we were almost ready to talk about
Brexit as a past remote possibility. Heck, less than 24 hours before the vote,
even bookmakers heavily favoured the stay side and you know and no sane person
would dare bet against these guys…
But then, the unthinkable happened, real votes were compiled and the leave option passed. What!? And, as the popular song tells us, is it going to be the end of the world has we know it?
We don’t think so;
still we were looking for some short term tremors. As expected, markets
stumbled the following days after that surprising result. Finally! We could
smell opportunities lurking...
Not so fast Johnny!
Then again, in a flash, markets unexpectedly rose back to their pre-Brexit
levels. Wow! Bye bye opportunities…So two weeks later, we were back to about
the same point. I know; no one can really predict what the markets will do,
especially short term.
And when you take time
to analyze and think about it, as a country, Great Britain
The British economy is
strong in itself. Their currency, the pound, is quite robust and still widely
used. Over their rich history, on numerous occasions, British people have effectively
dealt with change and adversity. British citizens cultivate healthy democratic
values: they discuss and argue a lot yet we pull together and respect their
collective decisions in the end. The legendary phlegmatic nature of British
people should also help smooth the transition. After some discussions and
adjustments, prosperous economic exchange and trading should remain active with
Europe (and with the rest of the world as
well).
As a matter of fact, immigration
turmoil probably induced Brexit more than real economic troubles.
After a while, both
British citizens and their European counterparts should be able to manage and
negotiate the transition and their economic separation.
On the other hand, we still
probably should be a little worried about Brexit enticing weaker countries to
try an exit of their own and that they might not be as successful. The
potential cascading effect could really throw a wrench in Europe ’s
and the world economy. Yet, we may have to wait several years for that
situation to occur and we should cross that bridge when we come to it.
Just don’t despair,
interesting stock buying opportunities will eventually present themselves, they
always do!
We could also divert
our attention on the whole Trump/Clinton spectacle that, soon enough, could
provide us all the desired commotion. Let’s hope they don’t completely derail
the economy because depression like consequences are just no fun for anybody.
Even though depressions
can provide terrific investing possibilities and will inevitably happen at some
point, it may not be a wise thing to play with fire and provoke them too often.
On our part, we could easily be content with occasional heathy corrections.
Why We Have Kept More Cash
As opposed to all
acquisitions reported in our May Update, we have not bought any stocks since.
We usually acquire new
stocks as money comes along because we believe that time in the market is always
more important than timing the market. Yet we won’t buy stocks at any price, we
have to remain somewhat patient and wait for more attractive prices and
valuations.
A quick look at our
portfolio variations confirms that attractive occasions are rare. Likewise, a
noticeably lower Dip Factor average
just over 1 tells us the same story. As a reference, the equivalent average was
around 2.5 both in our November 2015 and February 2016 updates.
A low Dip Factor average
suggests that many stocks are near their high value and that they might dip
soon.
This leads us to our next point: we have
to confess and admit to presently be a little worried about the markets and
their unprecedented high levels. And that may be the other reason we are so frigid
about committing new money. Let’s just say we have a bad short term vibe.
Still, we fundamentally won’t change
our investing approach that much, except for being a little more careful with
our acquisitions. Hence, we won’t panic and sell any actual positions.
Happy About a Full Year of Updates
Even though we were initially
very hesitant before publishing portfolio updates, we are now very happy with
the whole process after a full year circle.
Our overall portfolio numbers and progress continues to be quite pleasing.
And looks like better performances recently observed has reversed both total return and capital return tendencies that have gone from slightly down to slightly up.
Writing and reflecting
on many aspects of our financial situation through our DIY Portfolio has definitively been an enjoyable process as well.
The best way to know is
you truly grasp a subject is to try to teach and explain it to others. We are
far from perfect and won’t pretend to be masters at it but the entire portfolio
update process sure has helped us to reflect, grow and improve on it. That may
be the most important point of all this as we really feel like better DIY
investors today because of it.
It may also be one of
the secrets of the 12-Minute Approach: to regularly invest time to
gradually get better at something.
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