Topping up

[Jane King]

Stephen, can you explain your topping up rules again, are you looking to keep the amount invested in each share/sector roughly equal, or are you looking to keep the value per share/sector at the time of purchase roughly equal? My portfolio has become very unbalanced over time with some shares being on hold at earlier top up points, and others where the price has dropped significantly and so I’ve invested more to bring it back up to the average current value.

I’m about to do another top up from a lump sum, probably the last so I want to take the opportunity to balance up if I have been doing it wrong.

[Stephen Bland]

The original sector purchase values are of no relevance when topping up, so you have the right idea.

What matters are the current values so that the aim should be to bring any currently undervalued sectors up to the new average value, but not over it, calculated to include the new money. If the cash being added is insufficient to bring any sector up to the new average value, then just add what you can to the most undervalued sector. You also might wish to consider the available yields of those undervalued sectors because if you have to choose between them, you might as well go for the higher yielders first.

Just as the purpose of equal investment at original cost is to avoid under or over weighting any sector, the same applies when topping up or adding new holdings.

Note that only those shares shown as Buys in the latest TDL should be purchased when topping up or adding new holdings.

[Alan Rogers]

Thanks Stephen, When topping up from the “Buys” we obviously want to make the best decision though, so how do we work out which of the “Buys” is offering the best dividend forecast? It is not the only consideration; of course: but it is a necessary one. Kind Regards Pete Rogers

[Stephen Bland]

One popular and free online source of dividend forecasts is DigitalLook though it’s not the one I use.

http://www.digitallook.com/

And as an example, looking up BP there shows the following

http://www.digitallook.com/equity/BP

I point out that all external forecasts of dividends and eps etc. carry a fair degree of unreliability and not only that, they often vary between the sources used. I have no reason to believe that my source is superior to any other.

[Alan Rogers]

Thanks. Which is the one you use please?

Pete

[Alan Rogers]

I suppose the correct description for what is required is “The Current Forecast Yield”

[Stephen Bland]

I use the database service Stockopedia which gives the average of a range of broker dividend forecasts. This service requires a subscription.

[Alan Rogers]

Thanks for that. Pete Rogers

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