When I started out investing I had no strategy, and limited knowledge of the market. But having grown up during the mining boom two industries naturally stood out. The resource sector had been booming but had hit some slight turbulence, and the financial sector were trading down due to macro-economic factors that I believed would pass. So that leads me to the mistake I made, in two of my first ever trades.
I bought Woodside Petroleum (ASX:WPL) and ANZ Bank (ASX:ANZ).
The stable blue chip stocks that experts would have you believe are crucial to a ‘balanced’ portfolio. Although I now know this not to be the case, so much so I have shared what I have learnt about balancing your portfolio here in the past.
Unfortunately, we could not get stock quote ASX: WPL this time. price has seen sharp declines in line with the Iron Ore index, and this is representative of all commodity prices recently as global demand slows. WPL had benefited from years of exponential growth, and an abundant supply of resources which was sold the China fuelling the economic growth (which reach in excess of 30%p.a). Prior to the GFC it had gone above $60 a share, but the past 12 months has seen it decline from over $40 a share to trading around $29 a share today.
Now I have been sitting on it for a while, figuring I would just sell it once it goes up. But the decline continued and the losses compounded.
Unfortunately, we could not get stock quote ASX:ANZ this time. arguably has more upside, along with the other banks this stock has reported record profit (just not enough for the analysts) and is part of an oligopoly on a country which is growing. It survived the GFC and has expanded into Asia. But the trend has been remarkably similar to ASX:WPL. Shaken recently by the need to capital raise to satisfy new APRA regulations the stock has dropped from $37 in April, to $26 today.
The primary argument as to why ANZ (and other banks) will struggle to see any significant gains in the market over the short/medium term is that there is more idle cash not making money. This cash, which APRA has regulated banks must hold against the debt. Ultimately a ROI problem. This argument has been debated at length in the market over recent weeks but regardless of what side you believe, it seems unlikely the market will be optimistic.
So I have already broken a cardinal sin of trading, selling for a loss. Further still I have offloaded two stocks which pay high dividends.
Well the reason I’ve done this is relatively simple. I can make this money back quicker trading in other stocks. We have mentioned ASX:BAL here a lot, ASX:NEU and ASX:FAR. All stocks that could explode in the next couple of months. There is no certainty with them, but we can be certain that ASX:WPL and ASX:ANZ won’t.
I would even be more inclined to put this money into a ETF rather than keep them in these stocks, as the exposure in these stocks is neither safe nor lucrative.