New era, new month, new game plan as volatile speculative shares leave our strategy in tatters

The Investment Club’s first post-gilt era month was almost a complete disaster. The club’s remit is to have a gradually increasing unit price, something akin to how a theoretical with-profits fund is supposed to perform. However, at one point in mid January the club’s assets had shrivelled by about £2,000.

After decades out of the stock market, having been in the relative tranquillity of the fixed income arena, we thought our inexperience in the real-world stock market was going to be reflected in the club’s month-end unit price. Fortunately, at the closing bell it had dropped a relatively modest 2p to £3.11.

If the club starts to haemorrhage value at the mid-January rate we will have to bring the shutters down. Is there a solution to prevent this outcome?

The initial game plan emerging from the gilts age was to load up with good value FTSE 100 shares and then use the club’s paper and pencil (PAP) analysis to time our purchases and sales with the rise and fall of the FTSE 100. It was decided to split the cash raised from the liquidation of the club’s fixed income positions into 12.5 per cent tranches, equating to a sterling value of between £4,000 and £5,000. This would allow us to purchase up to eight different company shares on the FTSE, thereby spreading risk.

Did we stick to plan? No. What actually happened was we decided to spice up our portfolio with two rank outsiders.

To counter the recklessness we planned to also buy three large safe companies in the FTSE, another company with a possible large dividend and 12.5 per cent left as a reserve cash pile. Unfortunately, we actually purchased two lots of First Group instead of one.