Open Book #1: Tom's portfolio
Everything I'm invested in; open to view
“A good prospector, a serious one, who does not want to lie to others, or to himself, should not trust in appearances.”
— Primo Levi, The Periodic Table, 1975
Investing is often a private matter, and the exact details of what's in someone's wallet or account are frequently kept rather vague.
But I think breaching this convention is important: if it helps people to understand more about investing, what to avoid, and what can be gained from it.
I’d love to be able to talk to more people and offer suggestions or help out with their own ventures in investing as well. Ideally I’d find a friendly professional portfolio manager to come in, to rate our portfolios and help illuminate any blindspots we have.
If anyone has a friend like this, do let me know.
NB: Throughout this piece I use ‘stock’ and ‘shares’ interchangeably. I think there is a technical difference but they broadly mean the same thing: pieces of a company that trade on an exchange, like the London Stock Exchange, the Nasdaq in New York or the Deutsche Boerse in Frankfurt. ‘Shares’ is the term more commonly used in the UK, while ‘stock’ is what our American friends tend to say.
I made it to a six-figure investing portfolio after about six years.
It was a strange feeling. I didn't grow up on the breadline, but neither were we super wealthy. As a born drifter and daydreamer who only found paid financial writing work five years ago (it’s probably what I should have been doing all along) I’ve had my fair share of shit jobs.
I felt pretty much a total failure at the age of 36, having to ask my local Costcutter corner shop for a job on the till. I was freelancing (read: unemployed) and had no writing clients, so it was necessary.
One of my late-shift colleagues was the actor and standup comedian Des Sharples, which at least made things interesting. And to be fair, I quite enjoyed the after-last-orders banter with merry drunks, and chatting endlessly about the weather or the dreadful local pothole situation with sweet old dears.
Probably the worst job I ever had, I was 18 or so, working in catering on a generic industrial estate somewhere in the middle of England. When I was adjudged to have been hoovering the carpets ‘wrong’, I was shuffled into the incomprehensible job of going door to door in a mostly empty office block selling ice creams from a leaden and squeaky-wheeled plastic cart. In the middle of October.
Suffice it to say, after a few darkly-grey afternoons of looking into sympathetic but confused faces who didn’t want a frozen-solid Cornetto at 3pm on a Tuesday while it was snowing outside, I left, never to return. Some indignities are too much to bear.
I also started investing pretty late in life.
I only made progress through making a lot of stupid mistakes, and asking for help a lot.
I also made—then lost—a stupid amount of money (a five-figure gain in one week, then a substantially larger five-figure loss the following week) when I first started out, trying to shortcut my way to victory and make up for lost time, by trading stocks with leverage.
This is money borrowed from stockbrokers like IG who allow you to buy options on stocks without buying the actual stocks themselves. Options are basically just bets which say a stock will reach a certain price on that day. They pay you a load of cash if you are right and put you in a load of debt if you are not.
This is not investing. This is daytrading. It’s gambling. It’s addictive. It’s very common in the riskiest end of the market. And I didn’t have a clue what I was doing.
It took me quite a while to grimly clamber back out of that hole. I started back at the beginning. I invested time and energy learning how markets work, how the market routinely misprices cyclical long-term trades. Crucially — and I think this is what really turned the corner — I then got progressively better paid jobs.
Name: Tom Rodgers
Age: 41
Total investments (not including savings or real estate): Six Figures
Investing for: Six years
First investment I ever bought: Lindsell Train Global Equity Fund (£100), May 2018
Investment accounts
Workplace pension? No
Self Invested Personal Pension? Yes
Stocks and Shares ISA? Yes
Lifetime ISA? Yes
How I started investing
In mid-2017, I met my friend Ed in Mother Mac’s, a haven for Manchester City fans amid the sea of United-friendly venues in the city centre. It was one of those back street boozers that time (and fashion) forgot, the kind where you might have to wade past trodden-flat crisp packets and empty cans of Skol on the way in.
It was not explicitly unfriendly inside, but also not the warmest welcome we’ve ever had.
Ed was freshly back in the country from teaching English in an impossibly large oil drilling megacity on the east coast of China. He was there to make money, and then get out, both of which he did pretty successfully.
I distinctly recall, as we gulped down several litres of cheap stout, he pulled out his phone and showed me the Hargreaves Lansdown app on his phone, with a five-figure sum in a Stocks and Shares ISA.
“I put in a little bit every month,” he said.
“If you just keep doing it, it starts to add up to something worthwhile.”
Best and worst
None of the below makes me an investing genius. I must have benefitted from asset price inflation over the last six years, certainly with quantitative easing running rampant. And I could just have got lucky.
But, I learned the hard way to sell the useless penny stocks and lottery-ticket crap I previously bought, and focus on buying shares in businesses I understood. And above all, I understood how they made money.
Far and away my best investments to date are both crypto-related. This is the sector I know the best, and for three years I was head of research at Europe’s largest cryptoasset exchange-traded product issuer.
I’m up around 92% on my Coinbase investment, and up around 225% on the Ethereum (ETH) I’ve bought since around 2019.
My only regrets are: firstly, putting too much faith in the advice of people who didn’t know anything about crypto; secondly, not buying more Ethereum; and thirdly, during the 2021 bull market euphoria, swapping out my precious ETH for stupid memecoins which, all, predictably, went to zero.
The worst investment I ever made?
Buying shares in Gamestop (NYSE:GME) right at the peak of the “short squeeze” in January 2021.
I sold, rather deflated, 12 months later, after grimly riding the GME train all the way down to a crushing 78% loss.
If the story passed you by, it's honestly fascinating. If you want to see my portfolio, it’s below this little diversion.
The Gamestop Memestock Story; or, How Reddit Went to War with Hedge Funds
In September 2019, Keith Gill, a financial advisor at a boring Midwestern American wealth manager made the biggest bet of his life.
Sporting a far-out cat in sunglasses T-shirt and a wonderfully sunny optimism, Gill was better known online by his Reddit username u/DeepFuckingValue, and his Youtube username Roaring Kitty).
After months of obsessive research, he bought $53,000-worth of Gamestop shares trading at $4, as well as buying long-dated options (which would make him a massive profit if the share price increased significantly).
“I think I’m right, and everyone else is crazy,” he said.
Gill’s research showed there was an incredibly large amount of ‘short interest’ in the shares (people betting on Gamestop shares to fall in price).
Being ‘short’, having ‘short interest’ or ‘selling short’ all mean the same thing.
It’s a bit of a counter-intuitive thing to get your head around, if you’re not super into stock markets, mainly because you find out that people can sell stock first and then buy back later.
So: short-sellers.
Instead of buying shares in a company because you think they are going to rise, you borrow those shares from someone who already owns them (we call these people ‘long’ traders).
You then sell these borrowed shares on the open market, buying them back after a certain amount of time has passed and — you hope — the price has fallen.
A key part of the contract is that short sellers are obliged to — i.e. they must, and can’t get out of this part of the deal — buy the stock back from the market at some point in the future in order to end the bet: we call this ‘closing out a position’.
At this point, you cash in your chips and see if you’ve made any money. It could be a matter of minutes, or days, or weeks after you placed the short bet. Buying back the stock ends the bet.
Traders can keep a short bet open for as long as they want: but it gets progressively more expensive. You have to pay substantial ongoing fees to a broker keep a short bet open: this makes sure everyone’s got enough spare cash to cover a big win or a big loss on the broker or the trader’s side. .
The risks — and the potential rewards from that risk — spiral higher the longer a short bet goes on.
And when you close out your short position, you’ve made money only if when you buy back the stock, the share price is lower.
It’s a bit topsy-turvy compared to how most people think markets work. But shorting is pretty essential for what we say is an “efficient market”, or “market efficiency”.
Traders have to be able to make money in both directions: from stocks that are falling as well as those that are rising.
If you’ve ever seen the jargon words “hedging” or “hedging my exposure,” that’s what this refers to. In the normal world, it’s expressed as “hedging my bets”.
Keith Gill found to his shock that the short interest on Gamestop shares was impossibly high. In fact, 140% of Gamestop's shares were being sold short.
A figure above 100% means only one thing: traders and hedge funds are engaging in ‘naked’ short-selling. That is illegal.
‘Naked’ shorting basically means setting up bets on a company’s stock to fall, without borrowing the stock first. It means you are basically creating more stock than exists, and forcing down the price to make more profit that you should be able to.
The Securities and Exchange Commission in the US makes these restrictions clear: the stock must be available to be sold: from a long buyer to a short seller.
In London, shorting is covered by Rule 1400 of the London Stock Exchange handbook. While it admits that short selling on a substantial scale can lead to significant settlement problems, the practice is routine, common and allowed.
The caveat is that brokers who sell the stock to set up short bets must be able to make the trades final, and figure out who owns what at the other end, when all the dust has settled.
Evil villains or stock’s top cops?
Short-sellers have long been characterised as the nefarious moustache-twiddling villains directing the show from behind the curtain when share prices or markets crash.
It’s a complaint that has been around as long as stock markets have existed.
The Dutch government outlawed shorting in 1610 during the famous tulip bubble. Napoleon considered it unpatriotic, even treasonous, and banned the practice in 1801, calling short-sellers “enemies of the state”.
‘Naked’ shorting was also banned for most of the eighteenth and nineteenth centuries in England.
Regulators in both the UK and US again banned short-selling of stocks in the aftermath of the 2008 Great Financial Crisis.
Some short-sellers — like Carson Block, of Muddy Waters— are forensic accountants who help to uncover fraud at public companies. They go through financial statements line by line, contact suppliers and work out whether a manufacturer is really selling their products for £2, or actually selling them for £1 and inflating the sales figures to bolster the share price.
In December 2019 Block made waves in the UK by publishing a report attacking a public company it suspected of accounting irregularities. This was the hospital and private clinic operator NMC Health. The shares plummeted 42% on the day the report came out, knocking £2.3bn off the value of the company.
Both Block and Muddy Waters were vindicated. NMC Health’s management later uncovered vast internal fraud, including $4bn of loans it said it did not know about before the Muddy Waters report came out.
Other short-sellers are just traders, or hedge funds, or other large money managers speculating that a company is overvalued relative to its fundamentals (how much money it actually makes).
This naked shorting scandal quickly became a rallying cry on Gill’s favoured WallStreetBets subreddit.
If Reddit users started to buy the heavily-shorted shares (and also refuse to lend the shares to funds who wanted to borrow the stock, and sell it short) this would take supply out of the market, introduce fresh demand, and drive the GameStop share price higher, pushing the evil hedge fund traders out of their short bets and forcing them to buy the stock back at a higher price.
This is what we call a ‘short squeeze’.
Explainer: Short Squeeze
An uncommon event when lots of traders are forced to exit their short-selling bets, and buy a company stock back at a much higher price than they want to.
This flood of new buyers (traders who originally sold short) drives the price ever higher.
And since there is less supply of stock available at lower prices, this causes a feedback loop of traders scrambling to buy stock at whatever price they can get, producing a very rapidly increasing price.
Think of the increasing share price like pieces of paper caught in a tornado. They are spiralling higher and higher, and traders are forced to try and catch them before they get even higher and further out of reach.
Researchers have now shown (some three years after the fact) that Reddit users caused the notorious short squeeze, when the price of the struggling video game retailer shot up 1,915% in less than a month.
I blame Covid, and lockdowns
During the pandemic lockdowns, I think everyone went a bit mad, to some extent.
At the time, it was all fun and games — at a time when there was little fun, and no games to be had — and the memestock frenzy catapulted Reddit and WallStreetBets into the headlines.
Redditors were leaping on the bandwagon and pushing one another to buy. All the comments in the subreddit forum were meme-y phrases like “diamond hands”, “stonks”, “apes together strong” and “we like the stock”.
As the Gamestop share price soared, it wiped out hedge funds with short positions.
At the turn of the new year in 2021, GME was trading at $4.31 a share. By 20 January it had more than doubled to $9.78.
Over the next seven days, short sellers rushed to close their bets and buy stock. Gamestop underwent the mother of all short squeezes. The price peaked 779% higher on 27 January 2021 at $86.88. (The day after the peak, 28 January, is when I bought Gamestop, because I am an idiot).
I remember my boss at the time, a very savvy bloke by the name of Ben, looking at what was happening with Gamestop and scratching his head, worriedly.
“This is all going to end in tears. You’ve got unsophisticated retail traders running around with pitchforks, thinking this is the start of a revolution. These people are going to get eviscerated.”
He added, presciently: “When all the shorts are closed out and the squeeze ends, retail will just do what they always do — believe the hype, believe the hope and hold at a loss all the way down.”
And guess what. I did exactly that. I didn’t know what I was investing in, and I didn’t know what I was doing. I just wanted to be part of the story that everyone I knew was talking about. So I bought pretty much the precise top, right after Keith Gill had made $9m in two days.
Hollywood made a film about Gill and the Reddit/WallStreetBets/memestock frenzy in 2023 called Dumb Money. I am still waiting for the producers to call me back.
Don’t be Jim Cramer
If you are caught betting on prices to go down — when prices are spiralling higher, in the middle of a short squeeze — you can suddenly owe your broker gargantuan sums.
That’s when the margin calls start. And nobody wants to get a margin call. That is your broker telling you that you need massive amounts of extra funds to keep your account open.
Jim Cramer, the shouting idiot who hosts CNBC’s Mad Money, famously turned away from the camera and answered a phone call while he was on live TV, on 12 March 2020.
The story goes that Cramer was short-selling a particular stock when the price suddenly spiked.
The host had to put the audience on hold for 20 seconds while (we assume) he explained to his broker how he was going to get the cash together to fund his account back up from a severely negative number, or see his other bets liquidated.
My Current Portfolio
This is a snapshot of my current investment portfolio as of late March 2024.
I’d love to invite readers to contact me to share their own portfolio and investing story. I totally understand if you don’t want to. It’s a bit embarrassing having people poke about in your money management strategy. But it could really help open this world up to people who have to lose a ton of money first before they even get started.
And if I could have known this, I could have avoided getting way over my head trading risky options to try to make up for lost time. I think there will be other people out there who feel the same.
I didn’t really believe that I could have a decent investment portfolio just by picking profitable companies and investing small amounts over time.
I’ve also written a separate piece just about the Coinbase risks and investment case. I’ll look to do the same for all of the above.
As for the stocks I own, I’ve chopped and changed a lot. I dread to think of the trading fees I’ve spent buying and selling shares over the last six years.
Cash at 11.5% is cash in my investment account, by the way, not cash savings. That’s from topslicing some profit on my Coinbase shares. I bought at around $45 in the depths of the crypto bear market in late 2022 and I’ve done pretty well out of that cyclical trade.
Things I wish I knew when I started investing
Repeatedly buying and selling stocks is ruinously expensive.
Risk comes from not knowing what you’re doing.
Trading with leverage is the fastest way to lose a lot of money.
Nobody’s advice is worth following to the letter — every investor has different priorities and timelines.
My favourite investing quote
“The first rule of an investment is: don’t lose money. The second rule of an investment is: don’t forget the first rule.”
— Warren Buffett, on his first TV interview on PBS, 1985
End Creditors
If you found this useful, or you’d be interested in seeing more, please leave a like or a comment below. If not, I’ll shuffle Open Book into the background and carry on working through the other cool stuff that’s coming up next.
But of course: caveat emptor.
None of the above should be considered an inducement to buy (or sell) any of the investment assets listed here. This is a story for entertainment purposes only. I am not a registered financial advisor, and legally I cannot give you financial advice. Prices of assets go up and down, my investment timeline may be significantly different from yours and there is risk in every investment. If I don’t want to get cited by the FCA I must also say that crypto is high-risk and you should be prepared to lose any or all of the money you invest.