Page 51 - DIY Investor Magazine - Issue 23

‘A GOOD TRADER IS NIMBLE BECAUSE THEY TRADE A RELATIVELY SMALL AMOUNT OF CAPITAL – THAT IS VERY HARD TO BEAT AS AN INVESTOR’
So, what were the results of the competition and what have I learnt from the exercise?
FTSE All Share Index is up 2.25% (excluding dividends) over the competition timeframe; as the investor I achieved a gain of just under 10% and Fagin as the trader ran away with it, generating almost 50% profit. I lost by a margin of five to one.
It took me a while to settle down and stop losing money in the summer of 2017, and had I got away to a better start I might have had a result in the high teens, but I’d still have lost by a huge margin.
A good trader is nimble because they trade a relatively small amount of capital – that is very hard to beat as an investor.
My conclusions are that until the sums of money involved become far larger than any ‘normal’ private investor would have at their disposal, the odds favour the trader. Although the investor can produce market beating returns, they are tied to the performance of the underlying market because they need to be prudent
and hold a diversified portfolio; the larger and more diversified a portfolio is, the closer it tracks the market.
An exception I guess, is an investor with a really deep understanding of a very few companies who has the balls to run a tightly focussed portfolio; provided, that is, the portfolio is invested in brilliantly performing shares.
With hindsight, if I’d put all my money into AstraZenica (AZN) on day one and simply left it there, I’d have finished level pegging with Fagin without even having to check the market; but on day one would that have been prudent use of my funds? I think not.
Being a trader however isn’t simply a licence to print money, particularly if running a very large sum of
money. Trying to trade, say a twenty million pound portfolio, would not be easy because it would be almost impossible to quickly enter or exit a trade large enough to be worthwhile without moving the market; nice to have the problem though.
Also, when invested, a trader carries not only market risk but sector, and most dangerously of all, stock specific risk; market risk should not be underrated as with one tweet The Trumpster can drop the market anytime he likes, but stock specific risk can be something else - some really bad news and the price is off a cliff.
So, Fagin made some mistakes and on occasions stupidly broke his own rules, but on balance he traded brilliantly and is a worthy winner. WELL DONE HIM.
I commissioned a hand painted model of Fagin for him to put by his trading screen to remind himself that the best way for him to continue to make money is to act like the real Fagin and to pick the market’s pocket.
Finally, if you’d like to see how we trade and invest in great detail please go to https://www.thenimbletrader. co.uk or maybe follow us on Twitter @nimbletraders Regards,
Humbug
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51 DIY Investor Magazine | Oct 2019