Is beating the index possible as a stock trading rookie possible or realistic?
As you'll know if you've read my other posts, I'd never bought a share before July 2017, and I'm trying to develop a pot big enough over the course of 15 years to provide a retirement income from dividends.
The London FTSE-100 total returns with all dividends reinvested have averaged 8.7% per year since 1983, which means that mirroring the index would be enough to double your money just over every 8 years. In order for me to reach my retirement target of a portfolio worth £1,000,000+ within 15 years I need a slightly higher return than this to reach my goal.
My wife and I just cashed in on a property renovation project and will be putting these gains into stocks over the next 2-3 years via the UK ISA system which allows £20,000 per year per person to be invested and capital gains and dividends to be taken tax free.
Despite this advantageous investing vehicle, I've got to be beating the index - very slightly - to reach my goal.
How realistic is that for a beginner like me? Surely only top pros are beating the index consistently?
Well... who would have guessed it... my Stockopedia inspired portfolio has continued to post decent numbers despite media coverage over the last 3 months (Feb-Apr 2018) announcing "The Return of Volitility" (see here and here).
Here are the figures - This is the state of my portfolio as of today (18th April 2018):
A 23.6% capital growth and 24.7% total return in just under 9 months sounds (and is) fantastic, but it looks even better when you compare it with the FTSE-100 to see if it's been beating the index...
In a similar period since 23rd July 2017, the London FTSE 100 went up and down like a yo-yo, starting at 7,377 and ended yesterday down 60 points at 7,317.
Here's the chart for that period...
It was time to fasten your seatbelts for a bumpy ride!
And my portfolio? Well, while trying not to get carried away and not to get horribly smug, I'm completely thrilled with the results!
During this period I've smashed the index!
If I can have one-fifth of that sort of result over the next 15 years my retirement might be earlier and more stylish than I expected!
However, I can see that getting over-excited and becoming unrealistic could easily be a problem here, so I wrote to my investing mentor, Mike Roberts, to ask a couple of questions and his answers were fascinating, so I thought I'd share them with you below: