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Diary of a Private Investor

Investment Strategy

“Your portfolio is a garden. Pay close attention to it. Pull out the weeds and water the flowers” – Peter Lynch

Compound Growth & Income (CGI) Portfolio

Portfolio Objective
To generate a long-term CAGR in excess of 10% and to consistently beat my selected benchmarks.

Portfolio Mindset
I treat my portfolio as a fund, its purpose being to provide an inflation proofed retirement income for my wife and I until the end of our days, as well as providing a decent inheritance for our children. Individual holdings within the portfolio either add to the fund over time or they are a drag on it. The ongoing challenge is to ensure that I have the right mix of portfolio components to balance risk and reward, relevant to the prevailing market conditions. Below, I have outlined my portfolio rules/guidelines which are subject to ongoing refinement as lessons are learned.

My primary mechanism for risk mitigation is to run a well diversified portfolio. I update portfolio holdings/weightings regularly (approximately quarterly) here.

The Four Pillars of Compounding
I don’t claim to have any special investment skill beyond that of a keen hobbyist. Therefore, I rely on the four pillars of compounding to generate consistent returns.

Pillar 1 – Own quality companies that are able to compound returns by reinvesting profits into the business for organic and/or acquisitive growth.

Pillar 2 – Own companies that pay a dividend, providing cash returns that can be reinvested across the portfolio to grow future returns.

Pillar 3 – Top slice winners, either when valuation has got ahead of itself or position size has become too large. Profits can be reinvested across the portfolio.

Pillar 4 – Favour companies that are growing dividends year-on-year to provide a further dimension to compounding returns.

Core Strategies
My circle of competence, such that it is, revolves around investing in UK small/mid cap companies where I try to buy Quality at a Reasonable Price (QARP). I have developed a QARP checklist to help me screen for suitable candidates and to monitor the progress of existing holdings.

Beyond this actively managed portfolio of small and mid cap companies, I invest in other asset classes via funds (Investment Trusts and ETFs).

My self-imposed weighting limits are 10% maximum and 2% minimum. This means that every holding can make a meaningful contribution while no single holding can decimate the portfolio if it goes wrong.

When to Sell
The main reason for selling is if the investment thesis no longer remains intact. Another reason to sell would be to free up space and funds for a new, higher conviction holding and on occasion, to shift the balance of the portfolio from risk-on (more speculative holdings) to risk-off (more conservative holdings) or vice-versa. 

Reality Check
I am a non-qualified amateur playing a professional game which employs some of the smartest, most educated people in our society. This site is about me learning out loud in pursuit of my own investment goals and financial independence. First and foremost, I write for my own benefit and my own learning BUT if my ramblings and transparency can help you with your own investment journey, that’s great and I’m delighted to have you along for the ride. Feel free to connect with me on Twitter (@BrilliantLeader).

Markets go up and markets go down, some shares rise and others fall, often for no discernible reason. Where there is risk, there is opportunity and I am simply trying to weigh the odds in my favour, over the long haul, based on my own financial situation, skill set and tolerance for risk. No financial advice is ever intended in my writings.

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