Here's some Key Posts I've made which give some thoughts on my approach to investing in the Defence, Aerospace and Security sector and other important aspects such as Risk Management.
Why Invest in Defense, Aerospace & Innovation?
Posted in Feb 2023
Defence companies by their nature focus on the long term. In the modern age lead in times for introducing new defence equipment tend to be longer. Defence industries support employment and not just in the military domain but also in the civilian domain (for example civil aviation).
Manufacturers of fighter jets, battleships and missiles are usually one of investorsโ best defensive havens when economies get rocky. This time around, geopolitical conflict and tensions are making them key components in the offensive arsenal as well.
Defence is not perhaps as sexy as some other industries. They donโt tend to generate the same excitement as Tesla, Nio, or have the same public face as Google or Apple. But what they do offer is consistency in their long term outlook and ability to generate steady returns.ย
Defence stocks have significantly outperformed the market even during the recent market downturn because many nations have increased their defence spending.
๐๐๐๐ฉ ๐๐จ ๐ฉ๐๐ ๐๐ค๐ง๐ฉ๐๐ค๐ก๐๐ค ๐๐ฃ๐ซ๐๐จ๐ฉ๐๐ ๐๐ฃ?ย
I decided to choose ten of the top US and European Defence stocks to invest in for the initial portfolio. Their average return has outperformed other indexes including the S&P 500 ($SPX500).ย
โ Performance of Stocks in the Portfolio:
12 months: 38.5%
2 years: 58.2%
10 years: 310%
โ S&P 500 ( $SPX500) performance:ย
12 months: -9%
2 years: 9.07%
10 years: 162%
The average Profit to Earning (PE) ratio of shares in the portfolio is 1:20.ย
As the portfolio has only just been established I hope the numbers above will speak for themselves when you are thinking about copying me.
๐๐ค๐ค๐ ๐๐ค๐ง๐ฌ๐๐ง๐
In summary, I believe 2023 will be a strong year for defence stocks with positive growth prospects. I will write about individual companies in future posts.ย
Bitcoin - What I Have Learned from 10 Years of Investing in it
Posted in October 2023
๐ฒ๐๐ ๐ป๐๐๐๐๐๐๐๐:ย
โ The importance of Halvingย
โป๏ธ BTC growth is cyclicalย
โณ Be patient & prepare to holdย
Bitcoin 'Spring' is back! Bitcoin is something that many have heard of, some know a little about, with few really understanding it. Having bought and sold Bitcoin for 10 years I can say that I at least understand more than most about it. I am not going to write a long post about the origin or technical aspects of Bitcoin. There is a huge amount of information online about it. But I will share a few insights I have gained in 10 years of investing in it.ย
๐ญ. ๐๐๐ ๐๐ข๐ค๐ช๐ฃ๐ฉ ๐ค๐ ๐ฝ๐๐ฉ๐๐ค๐๐ฃ ๐๐ซ๐๐๐ก๐๐๐ก๐ ๐๐จ ๐ก๐๐ข๐๐ฉ๐๐.ย
There will only ever be 21 million generated. The current supply is about 19.52 million which very slowly increases due to 'mining'. It is expected that the last Bitcoins will be mined in 2140.ย
๐ฎ. ๐๐๐ ๐๐ข๐ฅ๐ค๐ง๐ฉ๐๐ฃ๐๐ ๐ค๐ ๐ฉ๐๐ '๐๐๐ก๐ซ๐๐ฃ๐' ๐๐ซ๐๐ฃ๐ฉ.ย ย
Bitcoin's growth / declines are cyclical. - Usually over a four year period which centres around an event called halving. This also will affect other crypto such as $XRP and $ETH .ย
๐ ๐๐๐ฃ๐ฃ๐ค๐ฉ ๐๐ข๐ฅ๐๐๐จ๐๐จ๐ ๐๐ฃ๐ค๐ช๐๐ ๐ฉ๐๐ ๐๐ข๐ฅ๐ค๐ง๐ฉ๐๐ฃ๐๐ ๐ค๐ ๐ช๐ฃ๐๐๐ง๐จ๐ฉ๐๐ฃ๐๐๐ฃ๐ ๐๐๐ก๐ซ๐๐ฃ๐ ๐๐ฃ๐ ๐ฉ๐๐ ๐๐ฎ๐๐ก๐๐จ ๐ฉ๐๐๐ฉ ๐จ๐ช๐ง๐ง๐ค๐ช๐ฃ๐๐จ ๐๐ฉ.ย
๐ฏ. ๐๐๐๐ฉ ๐๐จ ๐๐๐ก๐ซ๐๐ฃ๐?ย ย
Halving is an event that occurs when the available supply of Bitcoins reaches a certain number, approximately every four years. When it reaches this point the amount available for mining is halved - meaning that the reward for bitcoin mining is cut in half. The Halving policy was written into bitcoin's mining algorithm to counteract inflation by maintaining scarcity. Like other commodities it is this scarcity that contributes to its value. The next Halving is due about mid April 2024 and will be fourth such event.ย ย
๐ฐ. ๐๐ฉ'๐จ ๐๐ง๐ค๐ฌ๐ฉ๐ ๐๐๐ฃ ๐๐ ๐ซ๐๐ง๐ฎ ๐ง๐๐ฅ๐๐ ๐๐ฃ๐ ๐จ๐ค ๐๐๐ฃ ๐๐ฉ๐จ ๐๐๐๐ก๐๐ฃ๐.ย
Following previous Halvings the price has dramatically risen for 12 to 17 months and then fallen back down quite sharply, each time settling at a new low point. (See attached chart).ย
๐ฑ. ๐ฝ๐ ๐ฅ๐ง๐๐ฅ๐๐ง๐๐ ๐ฉ๐ค ๐๐ค๐ก๐, ๐ค๐ง ๐๐๐ฟ๐. โณย
As with many assets it goes up and down but the swings can be so big that many investors use the phrase Hold On For Dear Life (HODL). The worst thing you can do if the price drops below what you paid for it is to sell. Hold on and settle in for the crypto 'winter', because spring will come again.ย
๐ฒ. ๐๐ฃ๐ก๐ฎ ๐๐ฃ๐ซ๐๐จ๐ฉ ๐ข๐ค๐ฃ๐๐ฎ ๐๐ฃ ๐ฝ๐๐พ ๐ฎ๐ค๐ช ๐ฅ๐ค๐ฉ๐๐ฃ๐ฉ๐๐๐ก๐ก๐ฎ ๐๐ค๐ฃ'๐ฉ ๐ฃ๐๐๐ ๐๐ค๐ง ๐ ๐๐๐ฌ ๐ฎ๐๐๐ง๐จ. This goes with all investments. While I believe if carefully invested BTC can form part of an investment strategy, it should only form a relatively small portion to balance risk.ย ย
๐ณ. ๐๐ฃ๐ค๐ฌ ๐ฌ๐๐๐ง๐ ๐ฉ๐๐ ๐๐ฎ๐๐ก๐ ๐๐จ ๐๐ช๐ง๐ง๐๐ฃ๐ฉ๐ก๐ฎ ๐๐ฉ So if you imagine the four year cycle as seasons, I would say we are now in Crypto 'Spring' - growth has started again, but it won't go in a straight line. There will likely be ups and downs between now and the April 2024 Halving. Crypto 'Summer' is likely to start after the Halving and go on for about 12 months. 'Autumn' may be pleasant also for a few months and we may see some growth, but 'Winter' will likely soon follow.ย
๐๐ค๐ฌ ๐ข๐ช๐๐ ๐ฌ๐๐ก๐ก ๐ฝ๐๐ฉ๐๐ค๐๐ฃ ๐๐ฃ๐๐ง๐๐๐จ๐ ๐๐ฎ ๐ฉ๐๐๐จ ๐๐ฎ๐๐ก๐?ย
I wish I knew the exact answer but I can't say for certain. Based on the 12 months following previous halvings the price will likely go up several multiples.ย ย
๐๐๐ฎ ๐ ๐๐๐๐๐ ๐ฝ๐๐ฉ๐๐ค๐๐ฃ ๐ฉ๐ค ๐ฉ๐๐ ๐๐ค๐ง๐ฉ๐๐ค๐ก๐๐คย ย
I decided in early September to add a position in Bitcoin to the portfolio. While it is outside the Defense and Aerospace sector I believe that the small portion invested in it will yield an excellent return. There will come a time when I will sell this and re-invest it into other assets. Should the price fluctuate between now and April 2024 one that's more favourable than it's currently at I may add some more.ย
Image Credit: Coindesk
Managing Risk in Investing
Posted on Fri 22 April 2023
In this post I will discuss the importance of managing risk when investing, provide some thoughts on it, & how I manage risk in this portfolio.
๐๐๐ฎ ๐๐๐ ๐๐๐ฌ๐๐ฎ๐จย
๐ฅ Risk is part of life - how it's managed can determine success
๐ธ Everyone has a different appetite for riskย
โ Dollar Cost Averaging mitigates the risk of timing the market wrong
๐ Standard deviation is an important metric to measure the risk of an asset
๐ Understand what you're Investing in
Every day we each take risks & with each risk comes fear or anxiety. So that anxiety - at least a little of it, keeps us alive! It stops is from stepping onto a road out without looking. The same could be said of investing - Every investment carries some risk and should generate at least a small bit of anxiety or unease - without this ๐๐๐๐ก๐ฉ๐๐ฎ ๐๐๐๐ง we might lose it all on aย crypto alt coin!ย
To better manage our investment choices an understanding of risk is very important. This ๐๐๐ก๐ฅ๐จ ๐ช๐จ ๐ฉ๐ค ๐ข๐๐ ๐ ๐ข๐ค๐ง๐ ๐๐ฃ๐๐ค๐ง๐ข๐๐ ๐๐๐๐๐จ๐๐ค๐ฃ๐จ and hopefully avoid big losses. An investorโs personality, lifestyle, age & wealth are some of the ๐๐๐๐ฉ๐ค๐ง๐จ ๐ฉ๐ค ๐๐ค๐ฃ๐จ๐๐๐๐ง for an individual risk appetite. In general as the investment risk rises, the higher the potential return expected.ย
Investment risk is often assessed by ๐๐ค๐ฃ๐จ๐๐๐๐ง๐๐ฃ๐ ๐๐๐จ๐ฉ๐ค๐ง๐๐๐๐ก ๐๐๐๐๐ซ๐๐ค๐ช๐ง or performance / outcomes. This is why many people like to invest in safe, steady companies with long, proven track records. On the other hand a new start up or IPO potentially could offer a stellar return - but the risk of something going wrong is higher.
๐๐ฉ๐๐ฃ๐๐๐ง๐ ๐๐๐ซ๐๐๐ฉ๐๐ค๐ฃ is a common metricย associated with risk. It provides a measure of the volatility of an asset's value in comparison to its historical average. A high standard deviation indicates a lot of value volatility and therefore a high degree of risk.ย
๐๐ฃ๐ค๐ฌ ๐๐ค๐ช๐ง ๐๐๐จ๐ ๐ผ๐ฅ๐ฅ๐๐ฉ๐๐ฉ๐
Your willingness to accept risk should take into account:
๐ข Your current and future ๐๐ค๐ข๐ข๐๐ฉ๐ข๐๐ฃ๐ฉ๐จ. If you have immediate needs, you should invest in liquid and low-risk assets.
๐ข Your ๐๐ฃ๐ซ๐๐จ๐ฉ๐ข๐๐ฃ๐ฉ ๐๐ค๐ง๐๐ฏ๐ค๐ฃ. The longer it is, the more time you have to ride out market fluctuations and grow your investment.
๐ข How much investment capital you can afford to lose. Consider how it could impact your commitments, such as loan repayments and your future goals.
๐๐๐ฃ๐๐๐๐ฃ๐ ๐๐๐จ๐ ๐๐ฃ ๐ฉ๐๐๐จ ๐๐ค๐ง๐ฉ๐๐ค๐ก๐๐คย
I believe in long term investing and in particular investing in companies with proven track records which offer an above average return at a fair price. This helps ๐ ๐๐๐ฅ ๐ค๐ช๐ง ๐ง๐๐จ๐ ๐๐ฉ ๐ ๐ง๐๐๐จ๐ค๐ฃ๐๐๐ก๐ ๐ก๐๐ซ๐๐ก of standard deviation.ย
๐ฟ๐๐ซ๐๐ง๐จ๐๐๐๐๐๐ฉ๐๐ค๐ฃ ๐๐จ ๐๐ข๐ฅ๐ค๐ง๐ฉ๐๐ฃ๐ฉ. If we put all our money into one share there is a risk that the company could go bankrupt - it always exists as a slim possibility - so I diversify within the sector. I also diversify to take advantage of the possibility of one or more of our companies having an unusually high return, or if one or more of our companies underperforms. By owning a basket of stocks we ๐๐๐ก๐ฅ ๐ข๐๐ฃ๐๐๐ ๐ฉ๐๐ ๐ง๐๐จ๐ .
๐ฟ๐ค๐ก๐ก๐๐ง-๐พ๐ค๐จ๐ฉ ๐ผ๐ซ๐๐ง๐๐๐๐ฃ๐ (DCA) is one of my favourite things about investing and along with the marvel of compounding is a cornerstone of my investing strategy. Gradually adding funds allows us to take advantage of market fluctuations. DCA can be utilised both when buying an asset or when selling some of it.ย
๐๐๐ฉ๐๐๐ฃ๐๐ - This is an essential aspect of managing risk in investing. We must be prepared to wait and ๐ข๐๐๐ฃ๐ฉ๐๐๐ฃ ๐ ๐ก๐ค๐ฃ๐ ๐ฉ๐๐ง๐ข ๐ซ๐๐๐ฌ. Warren Buffett says 'if you don't feel comfortable owning a stock for 10 years, you shouldn't own it for 10 minutes'.
๐ฝ๐ ๐ฅ๐ง๐๐ฅ๐๐ง๐๐ ๐ฉ๐ค ๐ง๐๐จ๐ ๐ฃ๐ค๐ฉ ๐๐ฃ๐ซ๐๐จ๐ฉ๐๐ฃ๐ ๐๐ซ๐๐ง๐ฎ๐ฉ๐๐๐ฃ๐ ๐๐ฉ ๐ค๐ฃ๐๐ - You should be willing to keep some cash ready to take advantage of a market fluctuation or acquiring another asset.
๐๐ฃ๐๐๐ง๐จ๐ฉ๐๐ฃ๐ ๐๐๐๐ฉ ๐๐ค๐ช'๐ง๐ ๐๐ฃ๐ซ๐๐จ๐ฉ๐๐ฃ๐ ๐๐ฃ
One of the biggest mistakes some people make when investing is not understanding what they're investing in. Simply looking at an asset's recent returns is not enough. If you don't understand the asset or company how can you possibly assess its risk?
Prior to any purchase I develop a thorough understanding of the company. I am providing my thoughts on these in posts & I hope these improve your understanding of the companies and my approach.ย
๐๐๐ ๐ฟ๐๐๐๐ฃ๐จ๐ ๐๐ฃ๐ซ๐๐จ๐ฉ๐ค๐ง ๐๐ค๐ง๐ฉ๐๐ค๐ก๐๐ค
If you're interested in investing in a range of top Defence, Security and Aerospace companies including $RHM.DE, $HO.PA & $SAABB.ST, which have outperformed the $SPX500 & $UK100, you may wish to consider copying my portfolio.
You can visit my portfolio here: https://www.etoro.com/people/defense_investorย