Monthly update: continuously reducing risk

The Thrifty 30 moves sideways, the market moves all over the place

Here’s the performance table:

Here’s the performance chart:

Here’s a familiar refrain:

A neighbour commented this morning that the stock market must be interesting at the moment.

I gave my usual reply, which is, I keep my head down.

Once a month I surface to update these charts and tables, viewing them with mild curiosity and resolving to take no action because of them.

Changes in performance in one month are a poor source of feedback, if, as I believe, in the short-term the market is, effectively, random and unpredictable. That’s why I don’t try to explain why a certain company’s price has risen, and another’s has fallen. Everybody is anxious about the state of almost every economy, which, as an explanation for the hyperactive and generally depressed state of the market, is both concise and about as accurate as I can hope to be.

I could expend a lot of time and energy attaching plausible-sounding reasons to share price movements, and plausible-sounding rationales for future movements. Almost always these will be wrong, because the financial world is too complex to predict, at least with modest resources. That doesn’t mean I’m sanguine about the market. The alternative to trying to understand it is to accept it’s risky and play safe.

So in keeping my head down, I’m not holding it in my hands and praying things will turn out all right, or blithely assuming it will. I’m continuously reducing the risk in the Thrifty 30 portfolio by ejecting companies that, because of their high prices or changes in their businesses, are too speculative, and adding new companies with strong finances and good prospects at low prices. If I don’t find any, I keep the cash.

This month I ejected Solid State, the portfolio’s best performer, which is why the portfolio table looks a little shabby. Its 146% return is an anonymous portion of the cash balance.

I’m confident In the long-term thrifty companies will make investors more money than investment in the broad index.

If the Thrifty 30 fails it will be because I picked the wrong companies at the wrong valuations, and not because I should have spent longer watching and wondering about their vibrating share prices.

Better get my head down.