Why I’m Building A Single Stock Portfolio
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- Опубліковано 13 чер 2024
- We’re used to finding an off-the-shelf fund or ETF for almost any type of investment. But what if you want to invest in a way that isn’t available in fund form? For example, in the UK, one of my pet peeves is that we don’t have a passive small cap value fund.
In this video, I’m going to show you how I’m going to construct my own portfolio out of single stocks to achieve a small cap value fund. This is part of my “Fun” portfolio, and it’s an experiment to see whether this will work in practice and whether I can actually beat the market. I will also consider some of the pitfalls in building your own single-stock portfolio and some ways to help you overcome them.
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Timestamps
00:00 Introduction
00:55 Why build your own single stock portfolio?
02:00 Drawbacks
03:27 Stock filter
12:15 Style performance
14:22 Small cap value caveats
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DISCLAIMER
All information is given for educational purposes and is not financial advice. Ramin does not provide recommendations and is not responsible for investment actions taken by viewers. Figures that are quoted refer to the past and past performance is not a reliable indicator of future results.
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Not a chance of me putting any money into stockopedia
The biggest problem with buying single stocks is you might actually make some money, you then start thinking that you are the next warren buffet and invest even more money only to quickly find out that your not warren buffet when it all goes pear shaped.
So, that’s a long commercial 😂😂
Should have placed an energy drink commercial within the commercial!
Many on UA-cam who teach a certain level of subbs (influence) are bombarded by offers to feature related services/products for sponsorship or endorsement through a video. It’s prob a lot of money and pressure. Part of a capitalist profit based world and system. It’s why you make money on investing.
I thought it was still pretty interesting and informative regarding this tool.
Man gotta make a living - but, sadly, feels somewhat of a sell out 😢
what's the problem? Ramin provides us with fantastic content all the time. I think it's more than fair that he is rewarded in some way for his excellent work.
I started off buying single stocks. Then i bought index, and ETF; that is when i started to make money. In this, costs will kill you.
@helixvonsmelix
I dabbled in single UK stocks in the 1980's and 1990's and did OK, but didn't have much money to invest or appetite for too much risk. I did OK much better than putting money into savings accounts which were actually paying decent interest rates then, even without any real knowledge of proper stock picking. But I think things have changed a lot since then, it's now much harder to make money on single stocks. I did have some single stocks but i got rid of them as I learned more about passive investing, and they hadn't performed very well . I agree with you the passive funds, etfs have provided much better returns and I think less risk
Hi Ramin, thanks for a great video. It would be very beneficial to see a video where you try and actually recreate this portfolio using a platform available in the UK. It's great to create these portfolios in theory, but I always wonder what the costs will come to once you practically try and create them vs. holding an ETF. Many tthanks!
At the very least you would lose 0.5% of your input capital to stamp duty.
An interesting viewpoint. My father in law has in the past suggeted some small cap investment trusts for my children's ISAs; their performance has in almost every case sucked if I am being kind. The exception being Odyssean. If you take into acccount a soggy £ as well , a Nasdaq or SP500 ETF would have probably been better. I was also a UK small cap analyst for the l;ast 5 yearts of my stock broking career and the level of information and disclosure given by UK small caps is pretty woeful compared to say US companies. Its just an opinion but I am not sure the UK with its problems is going to be a very fertile landscape.
Blimey Ramin, that's a trend change 🙂 I'd add another drawback. When do you sell? From personal experience, my timing on exit was laughably poor and I came to the conclusion that I was better off out of the decision loop... 🤣
I really can't understand why anyone would go down this route: you wake up one morning and hear that the share price of one of your companies has plummetted for any number of reasons, completely negating any benefit all the efforts you have put in for the past 5 years. But small caps are the kind of "factor" investing that you can dabble with for a bit of excitement, but there are a couple of GBP-denominated ETFs which track the US small-cap and US mid-cap indices, in which I've put some "venture" (adventure) money, for a flutter. UK no attraction whatsoever, for all the usual elephant-in-a-room reasons.
Landmark video for me, it has changed the way I think about trading and ETFs. Thanks, Ramin.
Glad it was helpful! @simoneloizzo4178
Great video, thanks Ramin 👍
Glad you enjoyed it @shimsteriom4191
The 0.5% stamp duty puts me off buying UK shares.
Hi @george6977,
Investing in small-cap stocks, especially those listed on the Alternative Investment Market (AIM) in the UK, often comes with several tax-related advantages. To begin with, these investments are exempt from stamp duty tax and inheritance tax on gains.
Furthermore, holding AIM-listed shares within an ISA allows you to enjoy the benefit of tax-free dividends and capital gains!
Bang on time! Been into recovering shares since 2021. Started looking at small caps as I ballsed up before and joined a Gifford bailey fund by mistake previously and backed out since knowing the US is over valued. Many thanks on passing on small cap considerations again.
Great content Ramin, I wish Dimensional and Avantis funds were available to retail investors here.
I'm not sure dimensional funds actually perform better than bog standard Vanguard index tracker funds or etfs, in fact they appear to have performed worse and have higher fees
You are a weekly must-watch for me, but I'm skipping this video from the premises: as a data scientist I don't believe in data filters for investing. What you end up with are a bunch of stock with distorted value where the trap is not in the data but in the narrative around the very-recent past or next future. 😢
Truth
Ramin, are you able to create a pie of these on Trading212? If we want to copy?
Agree completely with the illiquidity issue. Some Micro and small caps have a lot of gains to make just to break even on spread. You can filter this out though by adding the rule "Size - spread < " say 400bps, or insert your number here. It may not leave you with many left out of 13, but worth considering, especially if you tuned down the other filters.
Hi @robertdewar1752,
You're absolutely right! We have a screening rule specially set up for this purpose. You can simply select the 'Bid-Ask' spread to be less than 400, if you want to filter out more illiquid stocks.
Definitely a factor always worth considering in the small-cap space.
Liquidity is also an academic peer reviewed factor in equity too
I just went through half of these 13 Companies in the list and none of them seem to be a good investment. They are all just super cyclical stocks that have negative earnings most of the years but end up in the screener because the most recent earnings were positive. Thats the problem with stock screeners.
This is a very good point. Must be a rule about performance over 10+ year but I am not sure if the momentum filter will do the opposite of this
That looks like a very sophisticated screener but 425/yr a bit rich for my blood. Used a free screener; Mkt Cap, P/B, EPS (this year +/-); some interesting names came up; I am avoiding financials (exception possibly Insurance), REITs, any sort of a fund, and utilities; Retail, Auto Svcs, Medical Technology, Materials, Oilfield Svcs, are the sectors I found names in. I then screen these names further using Value Line's individual stock reports.
I thought passive investing was a buy and hold proposition, as John Bogle said. Don't try to time the market. But you appear to be chopping and changing a lot. Just a little while back you were saying buying bonds may be a good move now as the prices have fallen and yields are up quite a bit.
Ah but if he advised everyone to set and forget then where would his weekly advertising revenue come from?! . It's ironic that he's encouraging people to try lots of strategies when at the same time acknowledging passive beats active investing.
The bonds are a fine investment, but really equities is what one wants for long term investments. In Ramin's case, he's doing all this experimentation with the small fun portion of his money, so let him play and maybe we all learn something on the way.
You are sharp to acknowledge his regular pivoting! I listen in at times for entertainment and general news, but this has nothing to do with how I allocate my money. Ramin would have you buying oil at $100 dollars a barrel.
Part of the problem is, Ramin is an advisor, less a capital allocator. What I mean is his investment ideology largely comes from the more abstract perspective of modern portfolio theory and we can clearly see that in his approach to that experiment.
The second problem is, he needs to create content. Though I argue this kind of thing is only going to get people lost in the sticks.
He is far overstepping himself here.
Is there a way how to backtest such strategy Ramin?
I like this vid. Good insight.
Thanks @gerry2345
Haha, often when I thought about buying stocks I reminded myself "Ramin doesn't invest in single stocks and he's smart so maybe he is right ". But on the other hand I thought even if it is hard to beat the market, I will try :). Thanks for sharing tips on stock picking.
Fantastic content as always pensioncraft.
Is Laura loading up on Nvidia at the moment? 😲
Obviously trading costs as a %age go up for smaller holdings. What minimum size of portfolio do you think this sort of approach is useful for ?
personally think £20k
20 bagger speculation- time and picking the one are the one- managing a filter which software- Share sight
Is investing in Berkshire Hathaway better than ETFs?
I would suggest to you and your viewers that you look at the link between stock performance, central bank balance sheets and m2 supply before investing in any stocks right now as I feel you should address this crucial point before offering such advice
An interesting video, thank you!
Glad you enjoyed it! @barnstar2077
Short term still think things could get worse but long term sure we will do well and getting dividends in the mean time softens any capital dips. Not sure though if it is better to buy good investment trusts that are currently on large discounts.
I did etf fee cost over long term.
10k initial investment, then 3000 yearly, for 45 years, it generates 7% return, and you pay 0.3% fee. You would end up paying 98k for fees. One might say, over 45 years is nothing, but thats 2177 a year. Thats a one good yearly vacation right there. Punta cana 2 week, all inclusive, including flight, for one person at 4 stars.
By the way, you would end up with 970k portfolio. If you make your own, so no fees, thats 1.067 mil (the mentioned 98k difference).
What's the best company out of the 13?
Great take, but isn't USSC a small cap value fund available in the UK?
USSC is available on the LSE but the trade currency is USD and the TER is 0.3% pa.
@@george6977 thanks, yeah I appreciate Americans get these sorts of funds for much cheaper but I didn't think the TER was that bad for a small cap, and if dollar costed over the long term hopefully currency risk will even out.
USSC and ZPRX are available and provide US and European SCV.
The trade currency for USSC is USD, EUR for ZPRX so you'll have FX fees.
@@george6977 T212 FX fees are low and HL doesn't charge FX fees for LSE funds.
The biggest problem here would be that you’d only ever get a narrow subset of the small-value universe
Positive skew distribution of returns means that any subset will give a lower expected return than the full set (see: S&P return without top performers)
I don't know what positive skew distribution of returns means, but surely if your holdings were higher than average returns, then you'd be up on the full set? During vid, i had one AIM share which knocked the rest out of the park. For that reason i try never to hold more than 4 at a time. At the moment i only have 2 - COIN and QQQ3.
He means that if you buy a subset of the small/micro universe with these specific defined metrics, you’re likely to still underperform as the market is efficient enough in that these positive skews are priced in.
There is absolutely no advantage to picking out of a screener.
Often, particularly in turbulent times, negative ROE’s, ROA’s and the 15 other or so ratios we like are flashing red, turn into significant out-performers by an enormous margin. Context is extremely important on these too. That is, if they don’t go bust.
Ramin is great and all, but he is such an MPT guy it is freaking painful. Forget anything you thought was valuable in this video. If you want to learn how to buy companies, it is not here.
@@ThePhukst1k Agreed about the screener being kind of useless for the reasons you've outlined. It's just telling you what the market already knows.
If I am not wrong, Warren Buffett also invest in individual stocks only, no ETFs or Funds.
And he’s extremely good and doing due diligence at valuation of companies he’s buying into. He also pays highly trained and experienced people to help with prob high level technology to help. Even then he gets it wrong at times.
Yes, he spent a lot of time stock picking, even on his honeymoon.
Actually, no. He's recommended Index funds for their simplicity. And he uses them for himself. One must not confuse investing for a fund, and investing for oneself.
Stocks are for day and swing trading and shorting.
I wouldn't bother with these measurements. I'd go look at the company website and find out what they actually do. If I like the sight and sound of it, I'd have a punt.
I enjoy picking individual stocks (quality not value so that I can hold for the long-term). But for the majority of investors it would be an enormous hassle to screen, filter and pick individual small-cap value stocks. Why not leave it to an active manager if there are no ETFs. An investment trust like Aberforth Smaller Companies has a good track record as a small-cap value-oriented manager with a history of increasing its dividend to boost compounding.
So, (just checking I’ve got this right) you’re saying as someone with no trading experience I should cash in my index funds portfolio and buy single stocks? Ok, but it’s a bit of a quantum shift but I trust your advice.
Buffett would disagree with every single way they define value
Severfield has been doing well from HS2 (might have some pain if HS2 is cut short), also Cleveland Bridges going bust has helped Severfield.
Not sure the next 5 years will be a rosey as the last 5 though
Ah, an extended commercial for Stockopedia. I guess you need some ad revenue from time to time. Slightly disappointed as this deviates a bit from your usual high quality content.
He's dammed if he does dammed if he doesn't, catering for more than just fund / bond investors isn't a bad thing? No ones forcing you watching 😂?
What management or stock pick software do you use - win loss ratios
👍
Nice Ad
Diversification is great, but I believe in going all-in on a few carefully chosen stocks.
Great for a while, then you lose your shirt.
this is just a Huge hidden comercial
Halfords to the moon?
Buy tesla and hold it is that simple 👌
Nice work, lots of info on how to pick stocks, I think this is mainly your fun money, at least it lets you generate income from trading 212 links
For the average Joe who works 9-5 balancing work and a family I would avoid this unless it’s fun money on the side, Invest in an index fund and Leave the stock picking to the professionals
A man’s quest to beat the market and waste more of his life in front of a screen. A broad based index fund is the answer yet the temptation to tinker is too much
I have a suggestion. If you need a little sparkle in your life, hire an escort and go to the casino or races for the night/day
Next day add money to your broad based index fund and get on with life/ reality
Man gotta make a living - but does feel something of a sell out 😢
You're nuts, things are going much lower. A true Bear market has formed
Great Content!
It isnt, its just a huge advert for stockopedia.
@@crimsonpirate1710 absolutely, I never knew stockopedia had such capabilities. Its a service that can save you weeks or even months of research. I don’t see anything bad in it. The video was announced as sponsored by them. To me it was very useful because it has some methodology in it explained and metrics too. On the other hand the example itself was non trivial too. That’s my personal view as a non-professional in the field. So to me it was far from advert, I learned about metrics, methodology, backtesting it, value stock characteristics, uk market properties, the platform itself, the single stock portfolio as a concept and its risks. If you know all this it’s only an advert.