Ever look at a favourite stock and wonder about going ‘all in’ on it? I’ve thought that about Lloyds Banking Group (LSE: LLOY) shares from time to time.
I’m sure I’d never do it, because of the risk.
As it happens, I know a handful of people who have been able to retire on just one stock. Buy they did each hold the ‘golden goose’ stock in a wider portfolio. Working out which one’s going to fly is the hard part.
Bank value
I do however rate UK bank stocks as the best value today they’ve been in years. And billionaire investor Warrent Buffett famously goes in big when he sees a stock he really likes.
Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons.
Letter to Berkshire Hathaway shareholders, 2016
How big a washtub full of Lloyds shares would I need to retire?
Suppose I’d want another £10,000 a year, on top of any pensions I have, to be comfortable. With a forecast 5.6% dividend yield, I’d need around £180,000 in Lloyds shares.
At the time of writing, that’s about 435,000 shares.
It’s quite a few, but I might be able to get there. In fact, it could be done by investing a little over £400 per month in Lloyds shares for 20 years. That’s assuming the share price and dividend don’t change.
Huge risk
I might not go all in on Lloyds, but I once knew someone who did. Every time there was more money to invest, yep, more Lloyds shares. The last time I heard from them was in 2007, before the big bank crash.
So no, one individual company is way too risky for me, even a good one. But is there any single stock I might go for?
Buffett’s Berkshire Hathaway is a possibility. Many of its shareholders have the bulk of their wealth in it.
But an investment company like that is really many stocks in one. And if we invest, we get a slice of all the big successful companies it holds.
Investment trust
In the UK, I might put the bulk of my money in an investment trust some day. Trusting to a single management team carries risk. I mean, nobody who had Neil Woodford managing their money will forget him in a hurry.
But then I look at City of London Investment Trust, with a whole load of top quality companies. Shell, BAE Systems, Unilever, Diageo, Tesco… the holdings read like the pick of the FTSE 100.
The dividend has also risen for 56 years in a row, now on a 5.3% yield. Would I put all of my cash in it? Maybe not all. But I can see myself transfering more and more as I get older.
And I’d still want a good portion of my cash in Lloyds shares, even if not all of it.
