Investment Analysis & Portfolio Management
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Investment Analysis and Portfolio Management
I have always been fascinated by the dynamics of the overall stock exchange as well the dynamics of individual companies and sectors. I spend time observing and analysing the movement of company shares, sectors and overall markets. My main focus has been on the LSE
London Stock Exchange,
one of the targest stock exchanges in the world). At heart, I am an applied mathematician, using stochastic modelling to make decisions and build portfolios; but the most important element in investment analysis, stock selection and portfolio management is to understand the semantics behind the numbers so that you can identify a good risk/reward ratio.
I have also been a member of an investment club called
since January 1998 and I have been its main driving force for investment and analysis for the past six years. I see Mobius as a a good catalyst (think of it as an investment lab) to test & practice my ideas and learn how to design new types of portfolios and selection methods to identify companies that show potential for future returns. The level of interaction and feedback with other private investors on a regular basis is important. Below is a photo of a Mobius club monthly meeting. For full details on the club's activity, please visit the
Share selection and portfolio strategy is at the centre of my investment analysis: I put together the steps (processes): I have devised the current Mobius toolkit proposal
This is a template used by members to put forward a new company/share for consideration by the club for investment. To see a completed version of the template, see for example the following companies
Air Partner (01/2004),
NHP (01/2004) or
Radstone (01/2005). A completed version of a more recent template issued in 2006 can be found here.
There are also different types of portfolios I put together; for example the
systematic portfolio and
semi systematic portfolio policies and
They are both based on an initial stock filtering scheme (stock screening) using a policy and set of criteria.
Share selection: There are several aspects to stock and fund selection as part of the investment analysis; in particular the ever ending debate on using fundamental analysis versus technical analysis (also called charting) - this is a religious debate in many investment firms and investment clubs. For me, a combination of both in most cases is right, with a strong biais towards fundamental analysis. In my view fundamental analysis tells you what to buy and technical analysis may tell you when to buy/sell.
Performance Analysis:The other important aspect is how to measure the performance of your stock, portfolio or fund over a period of time; in particular properly comparing it to the inflation rate, current bank base rate and/or benchmark it against other funds or indices. I have spent sometimes ploughing through the maths on these before understanding the meaning of
these various rates; for example MWR, TWR and IRR (mean weighted rate; time weighted rate and internal rate of return). I think that when making investments or reading investment funds literature, you need to understand the different performance metrics used. The Mobius Web site contains benchmarking, a wide range of rates over different periods of times with explanation and other performance metrics.
Just in case you were wondering - what is an investment club? It is made up of a group of people who combine their money into a larger pool, then invest collectively in stocks and bonds, making decisions democratically. Over the last 15 years, investment clubs have gathered momentum and a movement has developed, leading to the creation of over 10,000 investment clubs in the United Kingdom. This movement has been helped by the assistance of Proshare, an independent, not-for-profit organisation founded in 1992 by HM Treasury, the London Stock Exchange and a consortium of major companies to promote responsible share based investment. In October 2003, Proshareclubs
(Proshare Investment Clubs)
joined forces with
to underpin the UK investment Clubs community. ProshareClubs runs a prestigious award ceremony and dinner every year. In the UK, in the eyes of the law and tax office, an investment club is a business partnership. But it can only invest in its own collective funds and cannot offer advice to other investors.
In 2002, I designed the Mobius web site. and has since been managing all of its content. The Web site has won the 2005 Proshare Best Web site award and has been runner up in 2004, 2006 and 2007. I have also won the UK Private Investor "Achievement Award" with the Mobius club in 2006.
In my view, investment clubs can be a great platform for individuals to learn and invest. They can improve members in terms of investment confidence, ideas and discipline. To help the investment community, I compiled
a detailed report
on the club's activities, investment transactions, performance analysis, portfolio management and lessons learnt for the period between October 1997 and June 2004 (nearly seven years). A short version of this report also appeared as an article in
the Bloomberg Money magazine
in January 2005.
So if in doubt, then you could think of joining or setting up an investment club. Whatever you do in life, you are impacted by investment decisions, whether for your pension, life insurance or where you work. More and more, we are all faced to make important financial decisions, so it's better to be equipped to do so. The phrase I like most is the one originally set by Proshare
"promote responsible share based investment".