LONDON -- It's not easy being a novice investor.
Almost every time I've looked at the My Scorecard tool within Motley Fool Share Advisor, there it is, taunting me: "Your longest-held stock is CAN -- it's been in your portfolio for 2.7 years."
True, the share has lagged the FTSE 100 (INDEX: ^FTSE) , but I'm still up 20% since I took the plunge and bought Centrica almost three years ago. I've also enjoyed the dividends to boot. So what's my problem with this helpful snippet of info?
Well, it's actually the "2.7 years" that's bugging me -- because that purchase of Centrica marks the start of my first (serious) attempt at building a proper share portfolio using money held within my SIPP and ISA.
Right now, My Scorecard reminds me that I find myself holding 15 companies -- and something that's starting to resemble a grown-up portfolio! But perhaps more worrying, it also reminds me of a very real dilemma that I need to face -- where am I going to allocate the new cash coming into my portfolio each month?
It all seemed so simple to start with...
To date, new money has been invested straight into new stock ideas, and with a couple of exceptions, I've invested roughly the same amount each time. My strategy is what you'd call "Motley" -- including growth plays and some dividend stocks -- although I'm definitely skewing toward the dividend payers.
But I know my current approach can't continue indefinitely -- I just can't see myself having the time to keep track of more than 20 shares!
One solution, then? Adding to my existing positions.
Sounds simple, right? After all, I bought all my shares with a view to hold for the long term, so surely there must be some top-up opportunities in there. But how do I decide what to target, and how do I avoid becoming too overweight in any given company?
As a novice investor, this feels like starting all over again!
I decided it was high time to knuckle down and take my first-ever look at my portfolio's asset allocation.
Breaking it all down
% of Portfolio
Apple (NAS: AAPL)
Tesco* (OTC: TSCDY)
Zipcar* (NAS: ZIP)
Vodafone (NSYE: VOD)
Average gain: 17%
Figures as at April 29, 2012. *Initial investments in Tesco and Zipcar were twice that of the other shares.
Holy Excel pivot tables, Batman! What I thought was an evenly balanced portfolio is looking decidedly weighted toward consumer essentials, tech stocks, and pharmaceuticals. Actually, it turns out that:
21.4% is allocated to consumer names Reckitt Benckiser, Unilever, and Tesco.
I have 19% exposure to the technology sector (thanks for sterling performances from Apple and Imagination Technologies over the past few months).
12.6% is allocated to pharmaceuticals through my GlaxoSmithKline and AstraZeneca holdings.
9.7% is assigned to financial services -- that'll be Admiral and Hargreaves Lansdown.
This in turn leaves:
7.5% in vehicle hire (ZipCar).
6.9% in outsourcing (MITIE).
6.2% in telecoms (Vodafone).
6.2% in energy (Centrica).
6% in property (Land Securities).
4.3% in PR and marketing (Chime Communications).
So what's a Fool to do?
To my mind, I'm clearly overweight in ZipCar, and with its P/E of about 129, this is an American growth stock I intend to hold for the long term. However, I don't need any further exposure.
Also, given the recent press attention Chime Communications has received and the forecast slowdown in its earning, that share is firmly on hold for me right now.
So that's two quickly eliminated.
It's looking like I've become underweight in energy, telecoms, and property, and that taking some further positions in these sectors would help rebalance my portfolio, lowering my exposure to consumer essentials and technology.
Given that the U.K. has officially returned to recession and the eurozone crisis will rumble on for a good while yet, I'm drawn to the defensive and high-yielding qualities that both energy and telecoms have to offer -- a sentiment shared by dividend ace Neil Woodford. (To see what Neil's portfolio looks like, I recommend you read this special report: "8 Shares Held By Britain's Super Investor." It's free!)
Land Securities and MITIE also seem like less certain positions to top up on now, given the uncertain economic outlook, but let's keep them in mind for the time being.
How do the final four compare, then, looking at their forecast data for the next year?
11.8 (March 13)
11.5 (Dec. 12)
10.3 (March 13)
19.6 (March 13)
On a net-asset-value basis, Land Securities currently trades at a discount of 14% at 746 pence. But even so, commercial property looks susceptible to any further downturn, and there are juicier yields to be had. I'll pass.
The forecast yields on Centrica and Vodafone certainly look attractive, combined with reasonable growth predictions. For now, I think I'll take them over MITIE.
So how do the final two stack up against direct competitors? Energy group SSE seems to have the edge on Centrica when we compare the forecast data, but it interestingly seems to be out of favor with the market. That may represent an opportunity -- and you can read Fool analyst James Early's take on SSE in this "Top Sectors For 2012" report (also free).
BT is cheaper relative to Vodafone, but its forecast yield is much lower. With BT, I feel you are getting the equivalent growth prospects but also taking on the risk of a pensions black hole.
11.2 (March 13)
8.7 (March 13)
My conclusion, then? I think I'll be taking a further position in Vodafone and either opening a position in SSE or adding to my Centrica holding -- but not before fully reviewing my investment thesis on each!
However, what do you think, Fools? What would you do with this portfolio (I'm 33)? Over to you, in the comment box below!
At last -- a special free report that introduces novices to shares! "What Every New Investor Needs To Know" and The Motley Fool are helping Britain invest. Better.
Further investment opportunities:
At the time thisarticle was published Andrew owns every share mentioned in this article, save for BT and SSE. The Motley Fool owns shares in Hargreaves Lansdown, Imagination Technologies and Tesco, and has recommended shares in Hargreaves Lansdown and Unilever. The Motley Fool owns shares of Zipcar. The Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Tesco, Vodafone Group, Apple, and Zipcar. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.