This editorial message is from our monthly Shareholder Yield Letter published on 2023-08-08. Signup here to receive it in your inbox on the first Tuesday of every month.

More details on the newsletter can be found here: The finest large cap investment strategy ever

You might recall that back in May this year, we initiated a fresh newsletter based on the finest large cap investment strategy we've ever tested. We've just dispatched the most recent edition, and the high-quality large cap companies that our strategy identifies continue to surprise me. 

The performance since May has been quite impressive, up +4% on average across 16 companies!

I cannot reveal the names recommended in this issue, out of fairness to our subscribers, but I can provide a general indication, so here it is.

In this edition, you can delve into strategies for managing a small portfolio, similar to my early days of investing over 35 years ago.  

But first, let's talk about the portfolio changes.

Portfolio Adjustments

Purchase Four

Four new recommendations are featured this month as the MSCI World index exceeds its 200-day simple moving average.

The first is a US-based insurance firm with a shareholder yield of 11.1%, share buybacks of 9.0%, and a 2.2% dividend payout.

The second is a UK-based tobacco corporation with a shareholder yield of 10.3%, share buybacks of 2.3%, and a 7.9% dividend yield.

The third recommendation is a UK-based DIY retailer with a shareholder yield of 11.4%, share buybacks of 6.4%, and a 5.0% dividend yield.

The fourth and final recommendation is a UK-based energy enterprise with a shareholder yield of 13.3%, share buybacks of 9.2%, and a 4.1% dividend yield.

Managing a Small Portfolio

How do you manage a small portfolio?

This is a pertinent question that has been raised by several subscribers. It's an important question because I'm certain that many of us started off with modest beginnings.

Keep Costs Low

If you have a small portfolio, a 2% allocation to each idea could result in excessive transaction fees. For instance, if the total capital you have to invest is $50,000, a 2% position, as recommended by us, would amount to $1,000.

And if your broker, like mine, has a minimum brokerage fee of $9.90, your trading costs (prior to other fees, such as exchange charges) would already be nearly 1%.

This becomes even more expensive when trading on an international exchange.

A Struggle I Faced

This was a challenge that I, too, encountered when I embarked on my investment journey more than 35 years ago. I saved diligently for around three months in order to make a single investment. Even then, my investments were modest, and brokerage costs formed a significant portion of each investment.

But I didn't allow that to hold me back.

By saving consistently for another three months, I would invest in another company until, over time, my portfolio grew to a point where brokerage expenses became negligible.

Initially, my portfolio was highly concentrated

When I began, my portfolio was highly concentrated due to my limited investment capacity. However, as I accumulated more savings and reinvested all profits, I was able to broaden my investment horizon, transforming my portfolio into a diversified entity.

Addressing a Limited Portfolio

So, what can you do if your portfolio is limited?

In order to fully embrace the concepts featured in the newsletter, you'll need approximately $40,000. Why $40,000? Because the newsletter subscription fee would then constitute only around 1% of your portfolio. This is crucial as keeping expenses minimal is imperative!

Allocate 5% to each idea

For a portfolio of this size, I recommend that you increase the allocation to each idea to 5%, which amounts to $2,000 ($40,000 x 5%).

Allocating $2,000 would lead to transaction costs of approximately 0.5% if your broker imposes the minimum $9.90 fee per transaction, akin to my broker's terms. If you conduct trades on an international market, the cost would be higher, but that's unavoidable.

Slightly Amplified Volatility

Investing 5% in each idea could result in a slightly amplified volatility in your portfolio (enhanced fluctuations), but a portfolio comprising 20 investments is already sufficiently diversified.

Furthermore, given that the newsletter employs a disciplined 20% trailing stop-loss strategy, major losses are improbable.

Seek Out an Economical Broker

An approach to lower your transaction expenses is to seek out a low-cost online broker.

However, when vetting brokers, prioritizing the security of your investments and the funds held by the broker over cost is crucial. Hence, it's essential to conduct thorough research (and scrutinize all the fine print) to ensure that your funds and assets can be promptly and easily refunded or transferred to another broker should your current broker encounter financial hardship.

Wishing you rewarding investment endeavors

PPS Delaying action is all too easy. Why not sign up right away before it slips your mind

PS Why not subscribe while the ideas are still fresh; it costs less than a lunch for two or $5 per investment concept, click here: Get the Shareholder Yield Letter now!