Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
On the twenty-eighth of last month I massacred my portfolio. It’s now a smouldering pile of cash. For an investment column born of transparency, I apologise that I couldn’t reveal this earlier. The rules are clear. I must leave a 30-day gap between trading and writing.
Luckily for those who mirror my holdings, markets haven’t crashed since. They are only down a bit. Over recent weeks I found myself in the odd position of willing stocks upwards so as not to be flayed alive by readers.
Indeed, October 28 was the record high for the S&P 500. Pity I didn’t own any, it would have been nice to have picked the absolute top. Who says market timing is impossible? Oh yes, me. After all, the Nasdaq didn’t peak until the next day.
I wasn’t bang on with my own funds, either. I was 24 hours early selling Asia, too — which is still 3 per cent lower. Worse, I bailed out of my FTSE 250 units four days late. Their high was £41.42 per share, while I received £41.38. Losing my touch.
Meanwhile, the summits for Japanese and UK equities were a fortnight after I pressed the sell button. But again my sale prices more or less matched them. If this really is the big one — as some believe — I’ll have fluked it like a lottery winner.
Early days, of course — global equities have rallied this week. Still, if I hadn’t sold, my pot would now be eight grand to the worse and not earning 5 per cent a year in a Fidelity cash fund. Take that, Rachel Reeves.
But why did I do it? More to the point, doesn’t selling make me the biggest hypocrite to grace the pages of this newspaper? Not to mention duplicitous, unprofessional and frankly mad? The answer is yes to each, surely.
Let’s start with the first charge. Only in August did I write that one of my learnings from bubbles past is that they go on for much longer than you expect. And two months later the headline above my column was “Greed is my fourth-quarter investment strategy”. I was all-in — or so it seemed.
What is more, completely ditching your stocks only to keep the proceeds in cash is at odds with every finance textbook — not to mention my core investment beliefs. A thousand times I have shown a long-run chart of share prices to clients and students. The line goes from the bottom left to top right.
And how about my spreadsheets that calculate that the majority of equity returns come from the big rebound days soon after a sell-off? Since timing re-entry points is almost impossible, missing out on these bounces is a retirement killer.
My hypocrisy goes on. Harping on about the reasonably attractive valuations of UK, Asian and Japanese companies. How silly it is to have cash when higher inflation lurks. Or the scores of times I’ve written about a possible renaissance in productivity, which would be positive for both equities and bonds.
I’m disrespectful too. Didn’t I honour my father less than a year ago with a summary of his investment wisdom? Top of the list was enjoying life and not even looking at his portfolio, let alone trading it. I’ve fiddled more in a week than he did in three decades of retirement.
What made me do it, then? I suppose the only honest answer is to blame my character flaws and defects of principle and personality. These are urges so strong they overcome logic, experience and learning. Nothing else makes sense.
For example, me always wanting to be a smart arse. Or the setting of impossible challenges just for the fun of it. Attempting to pick the exact top — to the day — of a 4,727-day bull market is like pulling a nun or learning to wingfoil in choppy water.
Then there’s my obstinate contrarianism. In the South Downs national park where I live there are hundreds of beautiful tracks to run along, the best of which are marked, with maybe a useful car park to boot. Do I take those? No. I have to find my own, which are invariably muddy with stinging nettles and no view.
Hence, it was a big deal when I finally bought some US equities in early 2023, despite me thinking they were overvalued. I couldn’t handle the universal optimism, nor the rapid rise in prices, however. Thus I sold again three months later.
If I’m honest, this is the reason I’ve torched the lot this time. I lay in bed on Monday the 27th with everyone everywhere telling me it was wrong to sell. Global bourses were booming. World peace was imminent. Artificial intelligence would lead us to nirvana and riches.
Perfection, in other words. And it is in those moments of ubiquitous consensus that something inside me snaps — as it did at the apogee of sustainable investing when I gave “that speech” (Google it). I know not why.
Sure, the value of my retirement pot had jumped by almost a third since April. It is also certainly true that I didn’t want to think about markets for a second while in Australia over Christmas. Why not just close out the year and return to the fray in January — as hedge funds do when they are miles ahead?
But I’d be lying if I said these were responsible. I just did it and that is that. Well, not entirely on a whim — I’ve said we’re in a bubble for yonks. Now almost everyone thinks we are. It’s just how long it lasts that we’re now debating.
Hang on a minute! Almost everyone thinks? That’s the most positive thing I’ve written on equities all year. Hmmm. How does all-in on the Nasdaq sound come January?
The author is a former portfolio manager. Email: stuart.kirk@ft.com