When we launched the GillenMarkets online investment newsletter in November 2009, which remains Ireland’s only investment newsletter today, we started a Regular Investor’s Share Portfolio. The aim was to guide subscribers to our best ideas covered in the newsletter and to action it with real money.
To kick it off, we decided to contribute €1,000 each month to the portfolio and report on its progress through the weekly newsletter. From that initial €1,000 in 2009, the portfolio hit a value of €100k in 2014, €200k in 2019 and now €300k on the 26th May 2023.
The rate of return achieved has been 9.3% compound per annum after all costs (0.9% per annum). Now here’s the thing: the average interest rate on bank deposits was 0.34% over that same 13.5-year period. The chart below highlights the progress of the portfolio’s value along the way and compares that with the same monies left on bank deposits.
The monies contributed to the portfolio from late-2009 to May 2023 amounted to €163,000. On 26th May, the portfolio was valued at €300,528 while the equivalent saved in bank deposits was worth €166,338.
Compounding is the Key!
It’s no wonder Warren Buffett titled his biography Snowball. Build a small snowball at the top of a hill and let it roll down and watch it grow in size on nothing more than its own weight.
While the portfolio has grown at 9.3% compound per annum, it was a real slog for the first five years. By the end of 2014 (5 years), the amount contributed was €62,000 and the value of the portfolio was €88,239. So, in those first five years, it was really about what we had contributed to the portfolio (€62,000) rather than the returns (€28,239).
However, as we stand today, and without contributing another euro, a 9.3% annual return from here is €27,954. From here we will continue to contribute the usual €1,000 monthly, or €12,000 annually. But these contributions are now a side-show. Compounding has taken over and the likely returns ahead will make a much greater contribution from here.
In other words, the hard yards have been put in, and the main benefits lie ahead.
Don’t Fear Errors
We all make errors in investing. Here’s a list of errors the Regular Investor’s Portfolio has made over the years:
- We were too cautious in the early years, fearing the aftermath of the Global Financial Crisis and missed some easy recovery returns in 2010.
- Great growth stocks like Kingspan and Google (Alphabet) were covered in the newsletter but not invested in by the Regular Investor’s Portfolio. Errors of omission, if you like.
- An investment in a global equity exchange-traded fund delivered an 11% compound per annum return over the same timeline, so we have done nothing special to get to €300k.
On the other hand, markets outside the US equity market (which accounts for 60% of the World equity index) have fared much worse and delivered a substantially lower return of 6.5% compound per annum over the same timeline.
Current Stocks in the Portfolio
The current stocks in the portfolio include Berkshire Hathaway, Markel, Irish Continental Group (ferry operator), Associated British Foods (owner of Pennys/Primark), Ferguson (US building materials), Hargreaves Lansdown (UK’s largest investment platform), Ryanair, Grafton, DCC, Meta Platforms (previously Facebook), Reckitt (household goods), Mincon (Shannon-based mining engineer), Hipgnosis Songs Trust (songs royalty business) and Tetragon (an alternative asset manager).
The portfolio is well diversified, contains little or no financial risks and all holdings offers decent value, which should ensure both the portfolio’s staying power and reasonable returns from here.
The Regular Investor’s Funds Portfolio
In 2016, we started a Regular Investor portfolio dedicated to investing in a range of funds – the Regular Investor’s Funds Portfolio. By their nature, funds are more diversified and therefore carry much less risk of permanent losses. Subscribers to our website/newsletter have the option to follow this strategy instead, or to follow both.
Who Wants to be a Millionaire?
Should we be able to continue achieving a 9% annual return from here, the portfolio will hit the magic €1 million mark in late 2033.
Many think the stock markets are for the privileged few. We could not disagree more. Anyone earnings the average income in Ireland can use the stock markets to save and invest. And you don’t have to start with €1,000 a month; start with what you can afford to save.
Achieving Financial Freedom?
Committing to a savings programme is a discipline. One our 1-Day Seminars, we argue that you should consider saving 10% before all else. That includes before any mortgage commitments. Do that and learn how to maximise your returns via the stock markets and you will surely achieve financial freedom in your lifetime. Nobody is going to do it for you, so you need to make up your mind regarding your priorities.
Why Stock Market Returns are Generally Superior to Bank Deposit Returns
Companies earn a higher return on the capital employed in their businesses than you can earn from bank deposits. If this was not true, then no one would take the risk to set up and manage a business. Everyone would keep their savings in cash and with no demand for capital, interest rates would stay at zero and economic growth would not materialise.
The basic assumption we make here is that we are dealing with countries that are democratic and where the government is pro-business.
With higher returns on offer from businesses, and businesses listed on the stock markets, all investors can benefit from these higher returns assuming they don’t overpay for the businesses (shares).
The regular investor, who is sufficiently diversified, has a natural advantage in this area. Yes, at times you may overpay, particularly when markets overall are overvalued. But at times you will also underpay, particularly when markets are weak and offering better value. The regular investor simply must – as Rudyard Kipling said – ‘In triumph and disaster, treat those two imposters both the same’.
There are many ways to achieve the discipline required:
- Commit to a standing order which automatically gets invested for you each month.
- Learn about investing in stock markets, so that you take the fear factor out of it.
- Follow a reliable newsletter service, which does the legwork and can act as a calming influence in more difficult periods in the markets.
The 2009-2023 Period Had Plenty of Crises
The Regular Investor’s Portfolio had to contend with the European Sovereign debt crisis in 2012, Covid-19 in 2020 and, more recently, the rapid rise in interest rates reflecting the outbreak in inflation. Good companies get through troubling economic times even if the value of your investment portfolio swings around.
Risk is not a declining stock market. That’s important to remember because the stock market always swings around the place. Risk is a poor business, a business with too much debt or a business that you buy at too high a price. The fact that there is a daily stock price that swings around the place is not the risk you need to fear. In fact, to the knowledgeable investor, volatility in markets is an opportunity.
So, we hope this article inspires you to get started with a savings and investment programme with personal savings and/or saving via a pension structure (very tax efficient).
The GillenMarkets newsletter offering is there to assist those who want to save and invest but would prefer to have an experienced, calm partner to guide them along the way. For a annual subscription price of €299 (€25 a month), we can be that partner.
Click the icon below to subscribe or call (01 2871400) or email the office (info@gillenmarkets.com) for assistance in subscribing.
