The Beginners’ Portfolio Buys Barclays PLC!

Barclays PLC (LON: BARC) takes the tenth slot in our portfolio.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

This article is the latest in a series that aims to help novice investors with the stock market. To enjoy past articles in the series, please visit our full archive.

The Beginners’ Portfolio is a virtual portfolio, which is run as if based on real money with all costs, spreads and dividends accounted for.

fivepoundcoinsWe still have some cash left to invest, from the sale of our Vodafone shares and from dividends accumulated since we started the portfolio, and we’ve already used a chunk of it to top up our holding of Rio Tinto.

For the rest, I decided to go for a bank, and it was a choice between Barclays (LSE: BARC) (NYSE: BCS.US) and Standard Chartered (LSE: STAN) (NASDAQOTH: SCBFF.US).

I’ve now made the choice and stumped up the (virtual) cash, and gone for Barclays. Here’s how the transaction went:


We picked up 210 Barclays shares at a price of 254.2p apiece, costing us a total of £546.56 including costs.

So why Barclays?

Similar valuations

The valuations of the two banks are actually pretty similar. PEs for Barclays and Standard Chartered for 2014 currently stand at 8.3 and 9.6 respectively, based on analysts’ forecasts, dropping to 7.3 and 8.8 for 2015 — Barclays is a bit cheaper on that measure.

Forecast dividend yields for the same two years are pretty close too — we’re looking at 3.8% rising to 5.2% for Barclays, with 4.4% and then 4.8% for Standard Chartered. So how do we choose?

A tale of two risks

barclaysIt’s essentially a comparison of different risks. With Barclays, it’s those years of toxic assets, weak liquidity, PPI mis-selling, trying to fiddle LIBOR rates… The bank took a £1.2bn hit on its 203 results for the cost of its ‘Transform’ programme, and we really can’t be sure what further costs will be facing shareholders as compensation claims for mis-selling are going stronger than the banks had expected.

Standard Chartered is cleaner when it comes to such mismanagement, but it is now facing fears of a Chinese crunch as the Middle Kingdom’s credit boom and soaring property market could be heading for a rapid and painful halt — Standard Chartered does the bulk of its business in the Asia region.

Known unknowns

In the end, Standard Chartered seems to me to be more of an unknown unknown, and I prefer the better-known unknowns that face Barclays — and I reckon keeping risk as low as possible is a key part of learning to invest, as we really want as few surprises as possible.

Next time, I’ll bring you an updated list of the whole portfolio, including the latest valuation.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Alan does not own any shares mentioned in this article. The Motley Fool owns shares in Standard Chartered.

More on Investing Articles

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

After crashing 50%, is now the perfect time to buy this world-class FTSE 250 share?

The worst-performing share on the FTSE 250 over the last year is also the most exciting one of all. How…

Read more »

Illustration of flames over a black background
Investing Articles

Just released: July’s higher-risk, high-reward stock recommendation [PREMIUM PICKS]

Fire ideas will tend to be more adventurous and are designed for investors who can stomach a bit more volatility.

Read more »

Investing Articles

Is this one of the FTSE 100’s best-value growth shares?

Looking for great-value recovery shares to buy today? Based on City forecasts, this could be one of the best that…

Read more »

Investing Articles

Will the Tesco share price hit a 10-year high in 2024?

Up from 200p less than two years ago, the Tesco share price has enjoyed impressive growth lately. Now I'm considering…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Nearing its 12-year low, this FTSE growth stock could be the bargain of the year!

Harvey Jones has happy memories of owning this FTSE 100 growth stock. Now he's wondering whether to take a trip…

Read more »

Investing Articles

BT share price: a bargain or one to avoid?

This Fool has been keeping tabs on the BT share price. Despite looking cheap, he's steering clear of the stock…

Read more »

Electric cars charging in station
Investing Articles

Where will Tesla stock be in 5 years? Here’s what the experts say

The analysts' outlook for Tesla stock in the next few years seems to be all over the place, as the…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

3 reasons why I predict UK shares will soar over the next 12 months!

Our writer believes there are plenty of reasons why UK shares will do well over the next year or so.…

Read more »