Buy low, sell high

Hi all, sorry I have not updated the blog for a while. It was a tough time in the correction. The FTSE 100 at one point was -18% since the start of the year, close to a becoming a technical bear market. Since the low in May we have bounced back strongly.

I have continued to buy on dips and increased my appetite for risk the lower we went. I added more BP to the Portfolio at £3.40 averaging down my other buys. I misjudged how bad the oil leak was and to be honest not happy with how BP communicated the situation. But now, I am where I am and still believe they are undervalued and will hold them for the long term and wait for the dividend to be restored.

However all my other buys into the dip are looking good. Aviva are up 27%, AstraZeneca up 14%, BT up 22%. I am also still doing very well on other high income shares in 2010, Severn Trent(+24% YTD) and United Utilities(+18% ytd).

My UK bank holdings are also doing very well and driving gains in the portfolio. Lloyds is up 50%, RBS up 76%, Barclays up 15%

Some of the shares struggling and holding back the Porfolio, are Glaxosmithkline (-14% YTD) and surprisingly Tesco (-7%). I think both of these are undervalued significantly and will bounce back. My 2 absolute returns & bond funds are holding back the portfolio’s gains as well. My Chinese and Japan funds are also not doing well so far this year but are good long term prospects.

However as I have always said, make sure you have a diversified Portfolio. Although the total gain in my Portfolio is lower than if I just invested in high risk stocks like the banks and miners, I am aiming for consistent profitability over the long term. As Warren Buffet says, rule no.1 Never lose money, rule no.2 – Never forget rule no.1

The stocks, bonds and shares Portfolio is up 5.5% YTD vs a 1% gain in the S&P 500 and 0.5% on the FTSE 100. I am happy with this given that BP is taking 1.0% points off my portfolio currently. On top of this I estimate my income will be around 3% at the moment, which would equate to 8.5% in total return for the full year. I am hoping that by the year end I can increase the 5.5% capital gain up to about 7% to give me a 10% gain overall in 2010.

Of course a lot of this depends on how the stock market does for the rest of the year. Forecasts vary from 4000 to 6000 on the ftse100. My estimate at the start of the year was 5800. I still believe equities are a better asset class to have your money than in cash or govnt bonds and will buy on dips into further drops in the stock market.