November Stock Market Purchase – What Are The Odds


I have decided to do this post way earlier than usual. As most of you know, I normally do my monthly stock purchase programme on the 10th as this is when most of the big platform providers conduct there regular investing/dealing service. As per the norm, I was researching stocks to invest in on the days leading up to the 10th. With the UK markets being in the doldrums there were many attractively priced stocks to choose from.

 

But on the 9th, news came out that Pfizer had success in trials of for a vaccine. Whilst this is great news from an individual, societal and global standpoint, it is bad news – at least in the short terms- for a young investor.




Before news hit the markets, there were tasty bargains to be had in UK markets. I was eyeing a number of purchases to be made on the 10th. Associated British Foods, BP, Royal Dutch Shell, RelX, Hargreaves Lansdowne, Schroders, just to name a few. But with the news being released around midday on Monday the 9th, the stock market rallied, and these stocks in particular went parabolic rising double digits. I was left ruing the opportunity toping up great stocks at attractive prices. What are the odds the announcement came the day before my purchases. Could it have not happened the following day. Sigh.

 

Why am I ranting? Because valuation is a big component in returns. I have written before that young people still in the asset accumulation phase of their life cycles should pray for falling stock prices. But don’t take my word for it. This is what the most successful investor of all time, Warren Buffett, had to say on the topic in his 1997 letter to Berkshire Hathaway shareholders

 

 

A short quiz: If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices? These questions, of course, answer themselves.

But now for the final exam: If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the “hamburgers” they will soon be buying. This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.

 

There you have it. People accumulating shares in companies should wish for lower valued markets. That way they can buy more of a company’s stock for a set amount of money.
Markets rising on the 9th didn’t keep me away from the markets. The UK stock market is still attractively priced as compared to other global markets of asset prices. I just would have loved to buy stocks for even cheaper.

 

During my monthly stock purchase programme for November, I bought the following shares:


 

  • BAT: 6 shares at £26.15 each
  • GSK: 13 shares at £14.42 each

  • SDRC: 10 shares at £19.72 each.

These purchases have added £29 in dividend income to my portfolio.

 

Looking at my portfolio as a whole, it is expected to generate £3,979 in pure passive income  over the next year. That’s £331 a month, £76 a week or £11 a day that rolls in to my account regardless of what I do. Not a bad position to be in.



My gut feeling is the UK markets will continue to languish over the coming month giving me opportune moments to invest in high quality companies and keep ramping that dividend figure upwards. But that is only my gut feeling and could well be wrong.

 

That is why I have this monthly stock purchase programme in place. It takes away the human element of emotions and gut feelings. It ensures I invest a certain amount every month so even if the markets were to march higher, I wouldn’t kick myself for not investing when prices were low. It helps me stick to my plan.

 

That’s it for now. Can’t believe its almost the end of the year. But with the shocks, surprises and suspense 2020 has brought so far, let’s see what’s in store over the next couple of weeks. Till then happy investing and stay safe.