# Personal Investment Strategy



## galumay

I have been reading and learning as much as I can about this investing business for quite a while now, in general i have been attracted to the long term, value based, fundamental analysis approach to the subject, a number of members have attracted my attention with their outlooks and opinions on the market and investing, amongst them,

(in no particular order), ROE, Kermit345, Robusta, McLovin, Oddshot, Ves, Craft, So-Cynical have all taught me how little I know and just how important it is to have a clear plan, have the discipline to follow it, and suppress the emotional desire to speculate instead of invest.

Over the past few months i have swung between feeling I can never learn enough about analysing businesses to ever have long term success at value investing, to constructing a potential portfolio for investment, I have considered just putting my capital in an index fund and not having either the time or effort required to invest myself, I have also thought about just having a dollar cost averaging strategy, invest my capital in a small selection of stocks (5-10) and every time my savings increase by a worthwhile amount, purchasing more of the stocks in the portfolio.

I have very good self discipline, once I have decided on a strategy I will have no problem following it slavishly, I have no fear of falling markets - or rapidly rising ones! I have no need to be 'involved' in the market, if the strategy says sit tight and do nothing then thats exactly what I will do.

I have created my own spread sheets to analyse stocks and calculate IV's, largely based on the Montgomery formula,but I am not really comfortable with the outcomes, i dont have confidence that buying with a MOS below the IV will in fact prove to be valid in the long run. 

I am also not sure that my ability to analyse the underlying financials of a business is well enough tuned to avoid expensive mistakes along the way.

I would appreciate some input into what direction others think might be applicable to me and my situation and what strategies, systems, and formulas would support that!

On a personal level I am 50, married, one dependent, income about $120K, wife earns about $60K with very generous salary sac. conditions. I also run a small business part time, makes money, pays for most of my vices! I have a very good defined benefit super scheme, 20 years with same employer, also salary sac the balance up to $25K into the attached accumulation fund. Free rent, electricity and water. Around $300K to invest, some will go into a positive geared commercial property where i live, some into cash and the balance into the planned investment strategy.

Anyway thats probably enough to generate some discussion! Would love some constructive feedback.


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## So_Cynical

*Re: Personal Investment Strategy Help.*

Welcome to ASF...as you know, we cant give specific advise.

So your 50, have a bit of money thus have something to protect and appear to have discipline and patience..you should do well in the stock market...good luck.


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## McLovin

*Re: Personal Investment Strategy Help.*

Hi Galumay

Can I ask, besides Monty's book have you read any others?

It sounds like you've read one have sort of whet your appetite and need a bit more direction. I think you need to get some perspective, and while Monty's book touches on the very, very basic of understanding businesses it doesn't really have any meat on it. I reckon for someone starting out you need to read, read and then read some more. Eventually certain themes will start to sink-in and you'll find there are certain guys whose ideas stand out to you. For example, I love the cycle theme that Howard Marks always stresses (probably why I spend so much time banging on about margin mean reversion). 

Get a book that explains ratios (I recommend Financial Statement Analysis - A Practioners Guide, by Fridson & Alvarez) and then start working on the ratios, don't actually try and value the businesses, just do the analysis and then try and form an opinion based on your research (this is worth of investing/this isn't). It will show you how different businesses operate, for the newbie the worst bit can be that the first template they see becomes how they judge all business, but investing requires you to be circumspect and understand that no two are alike. You'll find that by crunching numbers you'll probably end up with more questions than answer but you can always use this forum as a soundboard for any analysis you've done. 

Hope that helps a bit.


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## Ves

*Re: Personal Investment Strategy Help.*

I agree with McLovin.  Read as widely as possible, but remember that doesn't mean read just anything!  Use your intuition to figure out if what you are reading is going to be helpful for your approach - if not stop reading it and find something that will! I've enjoyed reading Greenwald and Buffett's shareholder letters the most so far.  There are lots of good posters on here too as you said.  Also try Hotcopper. There's a guy called Camden55.  He has some great insights and is often kind to post detailed analysis in plain English. For instance, check the WES threads for his posts this week, some real gems on why the ROE approach has shortcomings. Also try Geoff Gannon on Gurufocus. He has lots of articles, written in a language that you should be able to follow from the outset.  He has some good ideas, some I don't agree with, but they're there get you thinking, both about process and about how you think about companies.  Remember - there are lots of ways to approach what you are trying to achieve.  Rule nothing out as definitely right or definitely wrong.

What I do (and what I have been doing from the beginning) is to find boring businesses that are as predictable over the cycle as humanly possible. Something even a beginner can understand.  Read lots of financial statements. Read all the presentations, annual report notes and announcements as you can! Check for trends in the major ratios like profit margins (margins - (gross and EBIT), return on invested capital, debt to equity.  Figure out what drives profitability the most for each company. For some it will be volume, others it will be margin expansion, or both etc. The most important thing is cash flow.  Don't always trust reported earnings, always check cash flow! Expand your group of companies that you are familiar with as you go. Start small and build positions as your comfort increases.   But at the same time don't become a historian!  Always question the ability of things to change. Either for the best or for the worst or somewhere in between.  Never invest on hope. Always find scenarios that are probable.  Longshots make big money, but they also lose a lot of money.  If you want to be a long-term investor you need to find stability in your outcomes. Do some reading on the importance of cash flow (and dividends) as being the drivers of long term returns.

There's lots out there.  The best way to learn is have a go, find problems and try to work them out and when you get stuck ask questions. Ask lots. I can't stress that enough!


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## brty

*Re: Personal Investment Strategy Help.*

Welcome Galumay.

This statement of yours stood out to me, and is common among people who come from successful backgrounds..



> I have no fear of falling markets




I do have fear of falling markets, because it is likely my opinion of the investment is incorrect.

As has already been suggested, read, read, read. Though I would add that reading a wide variety of topics would be far better than just one theme. Eventually you will be able to start separating the wheat from the chaff.


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## galumay

*Re: Personal Investment Strategy Help.*



So_Cynical said:


> Welcome to ASF...as you know, we cant give specific advise.




Thanks, sorry if I came across as requesting specific advice on stocks, more looking for feedback on potential strategies and processes. 




> So your 50, have a bit of money thus have something to protect and appear to have discipline and patience..you should do well in the stock market...good luck.




Well, I claim to have discipline & patience! I suspect I am not the first to make that claim here, the proof is in the pudding. I guess one confirmation of it is that I am still in a cash position as I learn.

I did trade/speculate when I was younger, made a tidy sum and then lost the lot, so I do have some experience of what not to do!


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## galumay

*Re: Personal Investment Strategy Help.*



McLovin said:


> Hi Galumay
> 
> Can I ask, besides Monty's book have you read any others?




I have read a few, Intellegint Investor, and a bit of Buffet as well as some general self help type investor books.

I think you hit the nail on the head when you say I seem a bit lost, I have a sense of what I want to learn and know, just not a clear path to get the knowledge. I will look into your other recommendations. Thanks.


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## galumay

*Re: Personal Investment Strategy Help.*



Ves said:


> What I do .......






brty said:


> Welcome Galumay.
> 
> As has already been suggested, read, read, read. Though I would add that reading a wide variety of topics would be far better than just one theme. Eventually you will be able to start separating the wheat from the chaff.




Thanks again for the detailed feedback, your responses give me the chance to articulate one of the dilemmas in my mind, is it worth the enormous amount of learning and research as well as ongoing commitment to the process? That is, are the returns likely to be so much better than say a small portfolio of selected stocks and dollar cost averaging with excess income? 

The reason I ask is because I work full time, run a small business, have a family, have a couple of other passions and would have to sacrifice time and effort to embark on the sort of journey required to become a proficient value investor.


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## So_Cynical

*Re: Personal Investment Strategy Help.*



galumay said:


> Well, I claim to have discipline & patience! I suspect I am not the first to make that claim here, the proof is in the pudding. I guess one confirmation of it is that I am still in a cash position as I learn.
> 
> I did trade/speculate when I was younger, made a tidy sum and then lost the lot, so I do have some experience of what not to do!




Your comfortable with the 'value' approach so explore that, some people seem to like the complexity of the number crunching, some people seem to get confidence from that, perhaps even need the confidence that a great set of numbers can give them.

What i have come to understand is that everyone needs something, a comfort factor that enables them to make investment/trading decisions 'pull the trigger' and for everyone its slightly different, while broadly the same when looked at as groups and sub groups.

You need to find your risk comfort zone and implement a plan that works within that, a profitable plan...it will involve some trail and error so start small and scale up as results come and confidence builds.

-----------

I did some bush fire training years ago and learnt something that i often apply to my investment decisions, when arriving as a first responder to a fire you need to asses the risk factors, slope, terrain, fuel, wind speed and direction, RH, and approaching weather and based on that assessment ask your self...do i need to go there? (to the fire) put your self and crew at risk, or radio in and wait for back up and equipment to arrive.

Before i buy a stock i like to ask myself...You i need to go there? have i assessed the risks adequately? have i forgotten something? what's important here? etc etc etc, always conscious of the fact that the markets not going to kill me  so i don't need to over think it.


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## McLovin

*Re: Personal Investment Strategy Help.*



Ves said:


> There's a guy called Camden55.




Camden is great, reading his posts got me off a bad habit I was developing of staring at PE's.



			
				So_Cynical said:
			
		

> What i have come to understand is that everyone needs something, a comfort factor that enables them to make investment/trading decisions 'pull the trigger' and for everyone its slightly different, while broadly the same when looked at as groups and sub groups.




This.

You have to find what works for you.


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## galumay

*Re: Personal Investment Strategy Help.*



McLovin said:


> Get a book that explains ratios (I recommend Financial Statement Analysis - A Practioners Guide, by Fridson & Alvarez)




Just downloading it now, will have a squiz!


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## odds-on

*Re: Personal Investment Strategy Help*

Hi Galumay,

All I can say is read, read and read some more. It is interesting what you pick up from what you read -  I learnt risk from Mohnish Pabrai, not to take the market seriously from David Dreman,  the importance of probability from Buffett and have only one master from Craft.

IMO private investors try to be too smart (myself included). Get your head round a simple strategy that suits your personality and time constraints. 

Not everybody is Buffett or Soros, so I recommend reading Stephen Bland from the Motley Fool UK. Good practical advice from a grumpy old man! His HYP (High Yield Portfolio) and Value Trader strategies are interesting reading. There is a lot of information on the Motley Fool UK discussion board so no need to post it here – just use Google. See below for a recent interview:

http://www.fool.com/investing/international/2012/08/21/which-is-better-value-or-yield-part-1.aspx

I reckon over a 20 year period his HYP will beat 99% of investors and it requires little or no work. Remember the odds are stacked against you 

Cheers 

Oddson


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## galumay

*Re: Personal Investment Strategy Help.*



Ves said:


> Also try Hotcopper. There's a guy called Camden55.  He has some great insights and is often kind to post detailed analysis in plain English. For instance, check the WES threads for his posts this week, some real gems on why the ROE approach has shortcomings. !




Ok, got round to following up on that reference, it raises two points, you were spot on, a great insight and I learnt a very important lesson in one post, secondly this almost reinforces my concern about my ability to develop enough investment wisdom to be able to properly assess a businesses financials and determine its real value.

Every time I think I understand something its like an onion - it just exposes a hundred more layers to understand!


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## Ves

*Re: Personal Investment Strategy Help.*



galumay said:


> Ok, got round to following up on that reference, it raises two points, you were spot on, a great insight and I learnt a very important lesson in one post, secondly this almost reinforces my concern about my ability to develop enough investment wisdom to be able to properly assess a businesses financials and determine its real value.
> 
> Every time I think I understand something its like an onion - it just exposes a hundred more layers to understand!



Keep in mind that this guy did it as a paid professional for 20 years, and has probably been investing for himself for much longer.  It's just experience, and doing something for so long that you become an expert at it.

Work hard mate - it's possible.  Aim for 12-15% a year and you will have a tidy sum by the time you are 65.


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## McLovin

*Re: Personal Investment Strategy Help.*



galumay said:


> Ok, got round to following up on that reference, it raises two points, you were spot on, a great insight and I learnt a very important lesson in one post, secondly this almost reinforces my concern about my ability to develop enough investment wisdom to be able to properly assess a businesses financials and determine its real value.
> 
> Every time I think I understand something its like an onion - it just exposes a hundred more layers to understand!




Don't worry mate. It wouldn't be fun if you knew everything. You can think about it this way: If it was easy your returns would be lower because everyone would be doing it.

TA or FA, you need to put the hours in and then you'll get rewarded.


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## sydboy007

*Re: Personal Investment Strategy Help*

I've always had an interest in finance and the way economies tick.  Took me over a year of becoming debt free before I found the wherewithal to start investing more within and outside super.

Since you've used the term investment then I'll take it your planning to invest for the long term, though no buy and forget please.

My primary philosophy is the market can't steal a dividend back, but it can with capital gains.  Companies paying good dividends have less to blow on expensive take overs or wasteful "investments".  Fortunately Australia is blessed with a large number of companies able to pay at 6% plus when you include the prepaid tax.

I focus on:

* Consistency of the dividend payments - much prefer a company that is increasing the dividend each year

* Blend of past and future earnings / dividend yield

* Payout ratio - the lower the better as it makes the dividend much more stable

As an example I had heard about STW Communications.  They're in the online media space.  They have a history of buying other companies and growing buy acquisition.  Very successful track record of absorbing the companies - seems the smaller end of town can achieve takeovers that are value increasing for shareholders.  They seem to have now hit a critical mass, where they're able to do a lot of cross selling as the companies they've bought have had the same client across the brands.  They service companies like Coca Cola and L'Oreal

The dividend payout ratio was a bit on the high side at 66% of net profit, but still a decent amount of reinvestment into the company.  I was able to buy in at a 7.6% fully franked yield and currently sitting on a 14%  gain.  2013 full year div is forecast to increase by 6% over 2012.  Is good if the div yield can at least keep pace with inflation, even better to be getting a real pay rise.


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## McLovin

*Re: Personal Investment Strategy Help*



sydboy007 said:


> The dividend payout ratio was a bit on the high side at 66% of net profit, but still a decent amount of reinvestment into the company.  I was able to buy in at a 7.6% fully franked yield and currently sitting on a 14%  gain.  2013 full year div is forecast to increase by 6% over 2012.  Is good if the div yield can at least keep pace with inflation, even better to be getting a real pay rise.




Unless they're making acquisitions, there's not really much need to reinvest in the company.


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## sydboy007

*Re: Personal Investment Strategy Help*



McLovin said:


> Unless they're making acquisitions, there's not really much need to reinvest in the company.




True.  Just nice they have the ability to self fund the acquisitions.  Except for the pay off from M2 last year with their cheap 1 for 4 rights issue to fund the Primus purchase, generally I don't like the dilution of current shareholders to fund future growth.

It's my security blanket   Sometimes having something to give you the confidence to invest is more important than anything else.  I'm willing to accept that I will generally under perform on the capital growth side, generally outperform on the income side, but hopefully with a lower volatility that gives me the sleep at night aspect.

Now that everything is set up I'm enjoying analysing my methodology and seeing how it pans out over the next few years.  Hopefully I wont have to learn the expensive way on what needs to be changed


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## McLovin

*Re: Personal Investment Strategy Help*



sydboy007 said:


> True.  Just nice they have the ability to self fund the acquisitions.  Except for the pay off from M2 last year with their cheap 1 for 4 rights issue to fund the Primus purchase, generally I don't like the dilution of current shareholders to fund future growth.




It's not always dilutionary.

Anyway, you should be happy that you have a business that can grow while still paying almost all of it's earnings. That's a great business.


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## Knobby22

*Re: Personal Investment Strategy Help*

I really enjoyed Unholy Grails by Nick Radge.
Though not particuarly eloquent, the details of trading signals and the interviews with some successful investors at the rear of the book were quite fascinating. I recommend you read it.


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## galumay

*Re: Personal Investment Strategy Help*



Knobby22 said:


> I really enjoyed Unholy Grails by Nick Radge.
> Though not particuarly eloquent, the details of trading signals and the interviews with some successful investors at the rear of the book were quite fascinating. I recommend you read it.




Thanks Knobby, I will add it to my reading list! I remember seeing Radge's name mentioned a few times.

(One of the reasons i love my iPad, I now have Unholy Grails ready to read!)


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## slooi1

*Re: Personal Investment Strategy Help*

Galumay,
I've been in the markets for 17 years or so and found the following helped me:
- Read the books. Value investing, technical trading, economics. They all help in providing a context on the markets and companies. A few I found useful include:
1) Richard Farleigh's 'Taming the Lion'
2) Peter Lynch 'One up on Wall Street'
3) Philip Fisher 'Common Stocks and Uncommon Profits'
- Don't put all your eggs in one basket (unless you're Warren Buffett ) - but fully know that diversification will lead to average results.
- Don't be too dogmatic about one approach over another (eg. Fundamental Investing vs Technical Trading). They both have their usefulness in helping us make money
- Read the press and news regularly - not just about stocks, but about the economic conditions around the world
- Don't rely on leverage.
- Be aware of the best 3 words in investing, "Margin of Safety"
- Most of all - have fun doing it! 

slooi1


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## Julia

*Re: Personal Investment Strategy Help*



slooi1 said:


> - Don't put all your eggs in one basket (unless you're Warren Buffett ) - but fully know that diversification will lead to average results.
> - Don't be too dogmatic about one approach over another (eg. Fundamental Investing vs Technical Trading). They both have their usefulness in helping us make money
> - Read the press and news regularly - not just about stocks, but about the economic conditions around the world
> - Don't rely on leverage.
> - Be aware of the best 3 words in investing, "Margin of Safety"
> - Most of all - have fun doing it!
> 
> slooi1



Good points.  I especially like your suggestion about not being dogmatic about any single approach.


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## Garpal Gumnut

*Re: Personal Investment Strategy Help*



Julia said:


> Good points.  I especially like your suggestion about not being dogmatic about any single approach.




I wouldn't necessarily agree with that statement.

One needs to have a singular approach to the markets.

It may be a composite of many other approaches, but once attained, it needs to be followed objectively.

Mates of mine who have done their super, in the majority, adopted too many strategies.

Except of course those who went with the likes of Storm Financial. aka The Simple Way to Lose Millions

gg


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## McLovin

*Re: Personal Investment Strategy Help*



Garpal Gumnut said:


> I wouldn't necessarily agree with that statement.
> 
> One needs to have a singular approach to the markets.
> 
> It may be a composite of many other approaches, but once attained, it needs to be followed objectively.
> 
> Mates of mine who have done their super, in the majority, adopted too many strategies.
> 
> Except of course those who went with the likes of Storm Financial. aka The Simple Way to Lose Millions
> 
> gg




I agree.

It's better to be very good at one thing than mediocre at lots of things.


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## slooi1

*Re: Personal Investment Strategy Help*



McLovin said:


> I agree.
> 
> It's better to be very good at one thing than mediocre at lots of things.




I believe that each investor has to find a style (or mixture of styles) that suits their level of experience / involvement / time frame / personality, AND be fully open to changing their style if it is clearly not working. That's what I meant by not being too dogmatic. There is no "right" approach.

Through trial and error, mine is more fundamental based, with awareness of some of the technical aspects for entry and exit points. This is mainly because I haven't enough time to monitor on a daily or hourly basis, and that numbers suit my personality better.

Galumay will need to work out what suits him better, and allows him to sleep at night. 

slooi


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## galumay

*Re: Personal Investment Strategy Help*

Well its certainly turning out to be an interesting journey! As I learn my views are modifying and changing in fact.
I read Nick Radge's book and his arguments for momentum trading seemed compelling, the more links and articles I read about it the more I came to believe that this sort of system or strategy may well be more suited to my temperament.

So I appear to have come full circle from FA to TA! I wont be surprised if my journey takes me somewhere else before I finally commit but I am in no rush and the markets will still be there when I am ready to go!

Thanks to everyone in this thread, elsewhere on the forums and in PM's that has helped me with  my quest, its one of the greatest things about living now - the internet makes it so easy to research and learn. I remember my Dad, who made a living out of trading, learnt what he knew from a couple of books and trial and error plus a notebook & pencil. Traded in a different era but there was no way of accessing the library of knowledge that the net offers.


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## CanOz

*Re: Personal Investment Strategy Help*



galumay said:


> I am in no rush and the markets will still be there when I am ready to go!




This is key, and something we all may have been guilty of...not being patient. Its an unfortunate part of being human. Even today, my biggest weakness is the fear of missing out...Even though i keep telling myself that the markets will always be there, the opportunities will always be there. 

Take your time and learn, observe, test.

Cheers,


CanOz


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## WilkensOne

*Re: Personal Investment Strategy Help*

Hey all,

I am really enjoying these types of threads on the forums, it is really interesting and beneficial seeing everyones different thoughts and opinions.

I just wanted to ask, when backtesting a system especially something that is mechanical, are there thresholds for stats such as Win/Loss ratio, CAGR, MaxDD that people feel they must be within for it to be a successful system? I am about to start looking at some back testing and wanted some opinions of what is/isn't good enough.

Thanks,
Wilkens


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## craft

*Re: Personal Investment Strategy Help*



galumay said:


> Thanks to everyone in this thread, elsewhere on the forums and in PM's that has helped me with  my quest, its one of the greatest things about living now - the internet makes it so easy to research and learn. I remember my Dad, who made a living out of trading, learnt what he knew from a couple of books and* trial and error plus a notebook & pencil*. Traded in a different era but there was no way of accessing the library of knowledge that the net offers.




The bolded bits are all you need. A couple of good books or good posters can speed the trial and error process a bit but it's a catch 22 that you need experience under your belt before you can discern the trash from the treasure - especially on the internet. If your dad is still around I would be picking his brain.

Happy journey


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## odds-on

*Re: Personal Investment Strategy Help*

I recommend this book to an investor trying work out a strategy that suits them. 12 pen portraits of successful retail investors. I lend my copy to anybody who is interested in the stock market.

http://www.amazon.co.uk/Free-Capital-private-investors-millions/dp/1906659745

Read the reviews. Here are some extracts as posted by an Amazon reviewer. 

(p15) "Investment skill consists not in knowing everything, but in judicious neglect: making wise choices about what to overlook."

(p35) "At this stage he was the archetypal part-time trader: the supposedly mercenary activity of trading was really about entertainment, or perhaps a sense of identity."

(p82) "Authorisation for investment advisers is more like a fishing licence than a driving licence. A fishing licence confirms that you have paid a fee, and will not be fined if you are caught fishing. It says nothing about competence."

(p109) "Investment is like swimming or riding a bicycle: difficult to learn without some practical experience."

(p141) "Learning modern portfolio theory to pick investments is like learning physics to play snooker."

(p181) "One wry definition of a value investor: a person who places a high premium on having the last laugh."

(p228) "To the fundamental analyst, technical analysis can seem a sort of cheat sheet, preventing development of proper understanding - and yet often giving infuriatingly good answers."

I wait for the day that somebody interviews a dozen Australian retail investors.

Cheers


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## GG999

*Re: Personal Investment Strategy Help.*



Ves said:


> Keep in mind that this guy did it as a paid professional for 20 years, and has probably been investing for himself for much longer.  It's just experience, and doing something for so long that you become an expert at it.
> 
> Work hard mate - it's possible.  Aim for 12-15% a year and you will have a tidy sum by the time you are 65.




Anyone know who he is?


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## notting

*Re: Personal Investment Strategy Help.*



galumay said:


> I guess one confirmation of it is that I am still in a cash position as I learn.



That may have cost you quite a bit in lost opportunity.  
How long have you been sitting on that?
Have you seen no opportunities in the market that made sense during the time of doing nothing?
Fear is a position.
When you enter the market it can magnify fear dramatically and you cans see things you never saw before entering especially if it moves against you.
That in itself is something you need to get used to or learn just not to look until your programmed SMS tells you to sell or conditional order is filled etc.  Plan what you are going to do once the position is taken not just with the trade.


galumay said:


> Wisdom to be able to properly assess a business’s ............. it just exposes a hundred more layers to understand!




There's a bit of wisdom for you.

Why even assume the market is where the money is?
It may be, mostly it isn't, well not in the quantities that most are expecting - some vague dream of riches!
If it's not blatantly obvious and the odds are stacked against you why the hell would you play it?
As you have sensibly not done since lesson 1.

*What is disturbing, is that you reappear now as global markets are recording highs during recession like environments.  *
Why wouldn't you have perked up when all hell was breaking lose.  
People who were stuck in set and forget mode would have killed for cash at that time.  
Your instincts seem way out, doesn’t matter just know that your instincts are f#(<ed up.  So ignore them!

You can make an entire years profit on one trade if you let it come to you.

You can lose the lot as you know, if you try to make something out of nothing.  
Nothing comes from nothing.

A conservative well tested momentum strategy can be a great safe way to make a modest return from a very risky pool. 
What I feel would be good would be to use a well tested one that is not expensive like Nicks growth, but at the same time if ever the blindingly obvious is staring you in the face……..take it!

Example, I had a friend who hated the stock market and would not invest.  I told her to put everything thing she had to spare in CBA when it was $28 during the GFC and forget about it and just take the dividends.
To me that was as risk free as keeping it in a CBA interest earning account, where it still is at half the price, with half the dividends and all taxed.
There are opportunities.  You just have to allow them to present to you and know yourself well enough to know how you are going to manage them so you stick to them when CBA is punished down to 25.whatever for a day!
For her it would have been easy because she would never have known what was going on.  
She would have just been getting lovely fat tax free dividend cheques. Whilst having smashed every trading strategy around!

Everyone says not to do that kind of thing. 
Everyone can be wrong. But only if you can see the blindingly obvious!

There are consistent strategies that work.
There are also opportunities that present; you don't need to look for them.
But you do need to be open to them.
But it’s all useless unless you know what you can and can’t handle that’s a kind of art or practice.

It comes to some naturally, others learn over time others don’t have it in their nature.
Regardless, there *is* a way for all types.


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## galumay

*Re: Personal Investment Strategy Help*

Been a while since i revisited my thread, I have been continuing to read and learn and consider my options and try to develop a strategy and system that is consistent with my personality.

*Buy & hold strategy based on FA
*Initial entry with 10 or less stocks that I have selected to invest in
*Audit and potentially rebalance 6 monthly
*Only sell a stock where the money can work harder somewhere else
*I have a watch list of about another 10 stocks to consider when rebalancing or for dividend reinvestment
*Continue to research and build the watch list where possible
*Significant % in cash in case of entry opportunities due to market crash
*The strategy goal is to deliver overall yield on the portfolio that provides for growth in the medium term (via reinvestment) and post retirement delivers a healthy income stream.

I have come to suspect there is no 'tape measure' you can put over a business and assess its IV in absolute terms, and even if one measure works for a business, it wont apply to another business. So I have moved more to relying on my overall research, reading the Annual Reports, understanding the financials, discussing potential stocks on forums like this (a really powerful tool IMO), and by so doing getting an overall feel for the business and whether it has the potential to continue to generate growth. I am also working to improve my understanding of economics and the influence external factors have on a business.

I am also putting a portion of capital into a commercial investment property, we have no current property either IP or PPOR so i figure i need a finger in that pie.

I am still yet to actually put any money into the market, the reason being that the money is coming to me via an inheritance and I dont actually have it yet. (which has probably been an absolute blessing in disguise!!) I realise from Notting's comments that I had not made that point clear.


----------



## Julia

*Re: Personal Investment Strategy Help*



galumay said:


> *Audit and potentially rebalance 6 monthly



What is the plan if there is a clear change in a stock inside that six months?
i.e. what is magic about six months as a time frame?

What will you do if there is a substantial overall market fall and all your stocks lose, say, more than 10% of their SP?


----------



## Klogg

*Re: Personal Investment Strategy Help*

Given this is an overall 'personal investment strategy', I have to question this:



galumay said:


> ...we have no current property either IP or PPOR so i figure i need a finger in that pie.




Why do you "need a finger" in  commercial property? 

- Did you find a property that's particularly good value?
- Do you see growth in the commercial property space?
- Is there a great rental yield involved?

Much like stocks, unless you can see you're getting great value for your dollar, why buy the property?


----------



## galumay

*Re: Personal Investment Strategy Help*



Julia said:


> What is the plan if there is a clear change in a stock inside that six months?
> i.e. what is magic about six months as a time frame?




The 6 month idea is to stop me price watching, which is not relevant to a buy & hold strategy. But it recognises that there could be other better opportunities. Its not really a hard and fast '6 months' in my mind - more a 'dont fall into the trap of trading' type rule!



> What will you do if there is a substantial overall market fall and all your stocks lose, say, more than 10% of their SP?




Buy a lot more shares I imagine! I certainly wouldnt be selling out of good businesses just because market sentiment changed. I might be annoyed that i had bought 6 months too early though!!


----------



## galumay

*Re: Personal Investment Strategy Help*



Klogg said:


> Given this is an overall 'personal investment strategy', I have to question this:
> 
> 
> 
> Why do you "need a finger" in  commercial property?
> 
> - Did you find a property that's particularly good value?
> - Do you see growth in the commercial property space?
> - Is there a great rental yield involved?
> 
> Much like stocks, unless you can see you're getting great value for your dollar, why buy the property?




I feel I need to hold some property, and commercial makes best sense to me. I like property for the ease of gearing.

- Yes
- Yes (in my location)
- Oh yes! 10%+ net.


----------



## ROE

*Re: Personal Investment Strategy Help*

galumay: a lot of the time by filter out some business you never invest in you beat the market by default 
because there are a lot of crap business on the market, so it is probably a worth while exercise work out what business you never want to get involve regardless of the temptation......

I don't invest in airlines, miners, commodity (soft or hard), complex business I cant understand, penny hopeful, explorer, probably 70% of the market  I speculate in these area every so often but very small amount of my capital allocate to them......

only one that has +ve cash flow, decent balance sheet, pay ok dividend ..the rest discard with prejudiced.

with that filter out... this week market sold off would not affect you much .... NVT DMP RFG CCV CCP CPU CKF SIP etc...all chucking along happily ...and before you know it another dividend come in the mail box and next year the share may go a bit higher....

There are 2 business I want to buy this week, it frustrating that everything got sold off and the 2 I want price went up 4% 
that just to show with the right business  you don't need to worry too much...

and don't get too hang up with exact IV and all the exact calculation stuff...Keep it simple, invest in the right business when you think it reasonable to enter and don't mind paying that price for long term holding....

your timing may or may not be spot on but holding good business for long term 95% of the time it will pay off.... Good business require time to expand and prosper, it doesn't work like stock stickers where it change value every day ....true value will be recognised over a long period of time ....


----------



## galumay

*Re: Personal Investment Strategy Help*



ROE said:


> galumay: a lot of the time by filter out some business you never invest in you beat the market by default
> because there are a lot of crap business on the market, so it is probably a worth while exercise work out what business you never want to get involve regardless of the temptation......
> 
> I don't invest in airlines, miners, commodity (soft or hard), complex business I cant understand, penny hopeful, explorer, probably 70% of the market  I speculate in these area every so often but very small amount of my capital allocate to them......
> 
> only one that has +ve cash flow, decent balance sheet, pay ok dividend ..the rest discard with prejudiced.
> 
> with that filter out... this week market sold off would not affect you much .... NVT DMP RFG CCV CCP CPU CKF SIP etc...all chucking along happily ...and before you know it another dividend come in the mail box and next year the share may go a bit higher....




ROE, thats basically what I am doing - filtering out the bad businesses rather than finding the small % of really good ones. I also exclude all the sectors you do, and apply similar filters. My watch list includes 5 of those shares you mention!

I guess its not so surprising given the people I have really learnt from here are yourself, McLovin, Kermit345, Robusta, McLovin, Oddshot, Ves, Craft, So-Cynical and others that i have forgotten to mention!


----------



## Ves

*Re: Personal Investment Strategy Help*



ROE said:


> that just to show with the right business  you don't need to worry too much...
> 
> and don't get too hang up with exact IV and all the exact calculation stuff...Keep it simple, invest in the right business when you think it reasonable to enter and don't mind paying that price for long term holding....
> 
> your timing may or may not be spot on but holding good business for long term 95% of the time it will pay off.... Good business require time to expand and prosper, it doesn't work like stock stickers where it change value every day ....true value will be recognised over a long period of time ....



ROE - your posts always make me smile.   You always nail the required psychology and temperament with your comments.   Good work


----------



## VSntchr

*Re: Personal Investment Strategy Help*



ROE said:


> There are 2 business I want to buy this week, it frustrating that everything got sold off and the 2 I want price went up 4%
> that just to show with the right business  you don't need to worry too much...




Tell me about it! Sold one of my weaker holdings as I found a better opportunity, but price keeps rising


----------



## odds-on

*Re: Personal Investment Strategy Help*

Galumay,

Read this extract from a speech by Charlie Munger.

_“The model I like””to sort of simplify the notion of what goes on in a market for common stocks””is the pari-mutuel system at the racetrack. If you stop to think about it, a pari-mutuel system is a market. Everybody goes there and bets and the odds change based on what's bet. That's what happens in the stock market. 

Any damn fool can see that a horse carrying a light weight with a wonderful win rate and a good post position etc., etc. is way more likely to win than a horse with a terrible record and extra weight and so on and so on. But if you look at the odds, the bad horse pays 100 to 1, whereas the good horse pays 3 to 2. Then it's not clear which is statistically the best bet using the mathematics of Fermat and Pascal. The prices have changed in such a way that it's very hard to beat the system. 

And then the track is taking 17% off the top. So not only do you have to outwit all the other betters, but you've got to outwit them by such a big margin that on average, you can afford to take 17% of your gross bets off the top and give it to the house before the rest of your money can be put to work. 

Given those mathematics, is it possible to beat the horses only using one's intelligence? Intelligence should give some edge, because lots of people who don't know anything go out and bet lucky numbers and so forth. Therefore, somebody who really thinks about nothing but horse performance and is shrewd and mathematical could have a very considerable edge, in the absence of the frictional cost caused by the house take. 

Unfortunately, what a shrewd horseplayer's edge does in most cases is to reduce his average loss over a season of betting from the 17% that he would lose if he got the average result to maybe 10%. However, there are actually a few people who can beat the game after paying the full 17%. 

I used to play poker when I was young with a guy who made a substantial living doing nothing but bet harness races.... Now, harness racing is a relatively inefficient market. You don't have the depth of intelligence betting on harness races that you do on regular races. What my poker pal would do was to think about harness races as his main profession. And he would bet only occasionally when he saw some mispriced bet available. And by doing that, after paying the full handle to the house””which I presume was around 17%””he made a substantial living. 

You have to say that's rare. However, the market was not perfectly efficient. And if it weren't for that big 17% handle, lots of people would regularly be beating lots of other people at the horse races. It's efficient, yes. But it's not perfectly efficient. And with enough shrewdness and fanaticism, some people will get better results than others. 

The stock market is the same way””except that the house handle is so much lower. If you take transaction costs””the spread between the bid and the ask plus the commissions””and if you don't trade too actively, you're talking about fairly low transaction costs. So that with enough fanaticism and enough discipline, some of the shrewd people are going to get way better results than average in the nature of things. 

It is not a bit easy. And, of course, 50% will end up in the bottom half and 70% will end up in the bottom 70%. But some people will have an advantage. And in a fairly low transaction cost operation, they will get better than average results in stock picking. 

How do you get to be one of those who is a winner””in a relative sense””instead of a loser? 

Here again, look at the pari-mutuel system. I had dinner last night by absolute accident with the president of Santa Anita. He says that there are two or three betters who have a credit arrangement with them, now that they have off-track betting, who are actually beating the house. They're sending money out net after the full handle””a lot of it to Las Vegas, by the way””to people who are actually winning slightly, net, after paying the full handle. They're that shrewd about something with as much unpredictability as horse racing. 

And the one thing that all those winning betters in the whole history of people who've beaten the pari-mutuel system have is quite simple. They bet very seldom. 

It's not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it””who look and sift the world for a mispriced be””that they can occasionally find one. 

And the wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. And the rest of the time, they don't. It's just that simple. 

That is a very simple concept. And to me it's obviously right””based on experience not only from the pari-mutuel system, but everywhere else.”_

Now read this…http://en.wikipedia.org/wiki/Favourite-longshot_bias

Your approach is going to be about finding the “favourite stock” with true odds of 1.5 to 1 but given odds of 2 to 1. Wire your brain to think like this and you should have success with your approach.

Cheers


----------



## craft

*Re: Personal Investment Strategy Help*

The Charlie Munger pari-mutuel analogy is very good.

But it has implications for the line of though that all you need to do is filter out the bad businesses.   That won’t give you outperformance unless there is associated mis-pricing of the odds. Ie quality companies are systemically underpriced and poor companies are systemically overpriced. (Historically that systemic error has generally been the norm but not always and not a given for the future) 

As we hear regularly, investing or trading needs to adhere to the mathematical concept of positive expectancy to be profitable – which is a factual statement but it needs to be taken further to ask what produces positive expectancy, there is only one universal answer.  Exposing yourself to risk only when it is mispriced in your favour.

I only understand two models for exposure to mispriced risk.

Trading:  Price does X – I do Y  and in doing Y I limit my down side to less than the upside I am exposing myself too.  [Can’t avoid a lot of intimate market knowledge (historical and current) and execution skill to know what Y is and get it done within acceptable levels and without too much transaction cost drag]

Investing:  Buy future cash flows for less than they are worth based on conservative estimates and realistic probabilities. [Can’t avoid a lot of analysis and understanding of valuation methods and valuation drivers in a business]

There may be more models that can capture mispriced risk – If so they will also adhere to the principle of exposing you to risk only when it is mispriced in your favour.  If whatever you do complies with that constraint – you will come out on top after enough occurrences to neutralise the possible impacts of randomness.


----------



## odds-on

*Re: Personal Investment Strategy Help*



craft said:


> The Charlie Munger pari-mutuel analogy is very good.
> 
> But it has implications for the line of though that all you need to do is filter out the bad businesses.   That won’t give you outperformance unless there is associated mis-pricing of the odds. Ie quality companies are systemically underpriced and poor companies are systemically overpriced. (Historically that systemic error has generally been the norm but not always and not a given for the future)
> 
> As we hear regularly, investing or trading needs to adhere to the mathematical concept of positive expectancy to be profitable – which is a factual statement but it needs to be taken further to ask what produces positive expectancy, there is only one universal answer.  Exposing yourself to risk only when it is mispriced in your favour.
> 
> I only understand two models for exposure to mispriced risk.
> 
> Trading:  Price does X – I do Y  and in doing Y I limit my down side to less than the upside I am exposing myself too.  [Can’t avoid a lot of intimate market knowledge (historical and current) and execution skill to know what Y is and get it done within acceptable levels and without too much transaction cost drag]
> 
> Investing:  Buy future cash flows for less than they are worth based on conservative estimates and realistic probabilities. [Can’t avoid a lot of analysis and understanding of valuation methods and valuation drivers in a business]
> 
> There may be more models that can capture mispriced risk – If so they will also adhere to the principle of exposing you to risk only when it is mispriced in your favour.  If whatever you do complies with that constraint – you will come out on top after enough occurrences to neutralise the possible impacts of randomness.




Hi Craft,

To clarify, I am not suggesting that all you need to do is filter out the bad businesses, the point that I am trying to make to Galumay is the approach he is selecting  is that the mispricing in the expected return may be subtle in the short-term and only becomes obvious when increasing the holding timeframe to years (compounding needs to take effect). Valuation depends on investment holding timeframe. 

IMO, the favourite-longshot bias is a useful tool to add to the toolbox. 

Cheers


----------



## craft

*Re: Personal Investment Strategy Help*



odds-on said:


> Hi Craft,
> 
> To clarify, I am not suggesting that all you need to do is filter out the bad businesses





Sorry - didn't mean to impute anything towards you. Just making some generic points that link back to the Munger pari-mutaul peice. 

Keep up the good discussion


----------



## galumay

*Re: Personal Investment Strategy Help*



craft said:


> Keep up the good discussion




Indeed, please do! You and Oddson have once again given me more food for thought. I think largely you have specified with more clarity and in different words what my strategy is. I appreciate the Munger stuff & the links.


----------



## odds-on

*Re: Personal Investment Strategy Help*



galumay said:


> Indeed, please do! You and Oddson have once again given me more food for thought. I think largely you have specified with more clarity and in different words what my strategy is. I appreciate the Munger stuff & the links.




Avoid becoming a "closet indexer". I have never understood why investors go on about stock portfolio diversification so much, in my view it is diversification of net worth that matters.

Have you thought about what advantages you have as a retail investor? 
Have you thought about what disadvantages you have as a retail investor?

I am assuming you want to win. Remember Warren Buffett and Roger the Todger are on the other side of the deal 

Cheers


----------



## galumay

*Re: Personal Investment Strategy Help*



odds-on said:


> Avoid becoming a "closet indexer". I have never understood why investors go on about stock portfolio diversification so much, in my view it is diversification of net worth that matters.
> 
> Have you thought about what advantages you have as a retail investor?
> Have you thought about what disadvantages you have as a retail investor?
> 
> I am assuming you want to win. Remember Warren Buffett and Roger the Todger are on the other side of the deal
> 
> Cheers




I assume by that you mean diversifying so much within the portfolio that i am basically just an indexer? Certainly not my intention, as I said I am only seriously looking at about 10 stocks.

I havent given a lot of consideration to the advantages/disadvantages of being a retail investor other than the advantages of smaller scale compared to say a large fund that has to find somewhere to invest billions. 

I know WB is on the other side of the deal, hope he and his take more from others than I, not so sure which side Roger the Todger squats on!


----------



## odds-on

*Re: Personal Investment Strategy Help*



craft said:


> Sorry - didn't mean to impute anything towards you. Just making some generic points that link back to the Munger pari-mutaul peice.
> 
> Keep up the good discussion




Hi Craft,

To continue the discussion…

If an investor/trader does not have the necessary judgement and skill to produce positive expectancy, they should accept that they are gambling and use a betting strategy to minimise their exposure to the unfair game (i.e. the ASX!) whilst trying to achieve their target fortune. The optimal strategy in an unfair game is bold play; bet as much as you can but no more than necessary. The optimal strategy in an superfair game is timid play: bet as little as possible, be cautious.

How does one play the stock market? Here are my thoughts:

-In the long-term (say 20-30 years), the stock market index goes up. The game is superfair; therefore timid play should be used. My interpretation of timid play when applied to the stock market over the long-term is averaging into an index tracker.
-In the medium-term (say 5 years), the stock market index may not go up but certain stocks will go up. The game is unfair; therefore bold play should be used. My interpretation of bold play when applied to the stock market over the medium-term is holding a concentrated portfolio (not the index).
-In the short-term (say less than a month); the stock market may go up/down and all stocks will go up/down. The game is unfair; therefore bold play should be used. My interpretation of bold play when applied to stock market over the short-term is holding one stock.

The key point is that the optimal strategy for an gambler/investor/trader can be worked out by analysing the following:

-Starting capital
-Target capital
-Investment timeframe
-Realistic appraisal of judgement and skill to produce positive expectancy. 

Cheers


----------



## galumay

*Re: Personal Investment Strategy Help*

Given the recent downturn in the market I see a number of stocks on my watch list as being at prices where I am happy to buy in, i intend to put about $100,000 into the market and I have a watch list that sits at about 50 with 20 shares flagged as potential buys, I suspect that is far too many - parcels of $5000 seem a little small.

What sort of strategies do others use to decide on size of parcels relative to total capital and also number of share investments relative to starting capital?


----------



## Julia

*Re: Personal Investment Strategy Help*



galumay said:


> What sort of strategies do others use to decide on size of parcels relative to total capital and also number of share investments relative to starting capital?



No set amount.  Will put more into something which I believe has more potential for growth and/or more stability of yield.  Would never subscribe to a set allocation of X% of available capital for each share.


----------



## VSntchr

*Re: Personal Investment Strategy Help*



galumay said:


> Given the recent downturn in the market I see a number of stocks on my watch list as being at prices where I am happy to buy in, i intend to put about $100,000 into the market and I have a watch list that sits at about 50 with 20 shares flagged as potential buys, I suspect that is far too many - parcels of $5000 seem a little small.
> 
> What sort of strategies do others use to decide on size of parcels relative to total capital and also number of share investments relative to starting capital?




In my personal situation I do not like to have more than 12-15 stocks in total. Ideally I aim for 8 - I feel this gives me enough diversification without too much burden to keep up-to-date with all the businesses. But I really do not purchase businesses just to gain diversification...

A lot of people don't put large sums into any one investment, but I feel that if you know a business well - this is what you should be doing (at least to some reasonable extent)...

In some of the earlier buffet letters to shareholders he talks about putting 50%+ of his net worth in companies such as GEICO when he was just starting out....I get reminded of this when tech/a talks about finding a train and placing yourself in front of it....


----------



## McLovin

*Re: Personal Investment Strategy Help*



galumay said:


> Given the recent downturn in the market I see a number of stocks on my watch list as being at prices where I am happy to buy in, i intend to put about $100,000 into the market and I have a watch list that sits at about 50 with 20 shares flagged as potential buys, I suspect that is far too many - parcels of $5000 seem a little small.
> 
> What sort of strategies do others use to decide on size of parcels relative to total capital and also number of share investments relative to starting capital?




I usually have 15-20 stocks, 20 is my max. I'm not really sure how to work out a parcel size, so I tend to go with about 5%/position, although I have some over and some under that amount.


----------



## Julia

*Re: Personal Investment Strategy Help*



McLovin said:


> I'm not really sure how to work out a parcel size, so I tend to go with about 5%/position, although I have some over and some under that amount.



So if you had stock XYZ, having allocated 5% of your available capital to it, and a while later it has risen to the point where it's, say, 10%, but showing no indication of reversing its upward trend, would you sell all or some of it, or let it continue?


----------



## McLovin

*Re: Personal Investment Strategy Help*



Julia said:


> So if you had stock XYZ, having allocated 5% of your available capital to it, and a while later it has risen to the point where it's, say, 10%, but showing no indication of reversing its upward trend, would you sell all or some of it, or let it continue?




Wouldn't sell. I guess if it got up near 15-20% then I'd have to reconsider, that hasn't happened yet. My largest position at the moment is about 9% and my smallest is about 2%.


----------



## VSntchr

*Re: Personal Investment Strategy Help*

I agree with McLovin, although I am more risk tolerant - allowing positions to get to 30-40% before I start considering trimming. Some would call this reckless, but I beg to differ.

I think the answer to the question is very personal and should be based on risk tolerance, capital size, relevance of capital to standard of living etc.

For example - someone with $50k in shares who is renting and has no other assets would probably be a lot more adverse to allowing one company comprise 40%....while in contrast - someone with $200k in shares, owns their own home, has $100k in a term deposit and owns an investment property would have a clearly different perspective on the 40% risk allocation.


----------



## craft

*Re: Personal Investment Strategy Help*



McLovin said:


> Wouldn't sell. I guess if it got up near 15-20% then I'd have to reconsider, that hasn't happened yet. My largest position at the moment is about 9% and my smallest is about 2%.




I have found this upper limit for portfolio concentration due to market movements to be one of the most challenging aspects of setting boundaries for myself.

You are basically overriding the principle of letting your winners run to protect yourself (Psychologically) from the volatility associated with a major concentration in the portfolio.  If you can switch into better perceived value its not so bad - More just a prompt then, to do something you should probably be doing anyway.

Personally I knock the top off anything that pokes it head above 25% of its account.


----------



## McLovin

*Re: Personal Investment Strategy Help*



craft said:


> I have found this upper limit for portfolio concentration due to market movements to be one of the most challenging aspects of setting boundaries for myself.
> 
> You are basically overriding the principle of letting your winners run to protect yourself (Psychologically) from the volatility associated with a major concentration in the portfolio.  If you can switch into better perceived value its not so bad - More just a prompt then, to do something you should probably be doing anyway.
> 
> Personally I knock the top off anything that pokes it head above 25% of its account.




The psychology thing is spot on, IMO. I like to sleep at night and I know I make mistakes (although over the years they have become fewer!). So I'd rather take a somewhat lower return with less chance of significant permanent capital loss. Ask me in 10-15 years time and my views may have changed.

I was having a look this afternoon at what I owned back when I was at uni (2000) geez, there are some shockers in there!


----------



## galumay

*Re: Personal Investment Strategy Help*

thanks guys n gals, i must say its very reassuring to have a number of replies from some of the posters i most admire on ASF!

I think I will have a further sort through my short list and see if i can reduce it a bit to less shares that I like more!

cheers, rick


----------



## ROE

*Re: Personal Investment Strategy Help*



galumay said:


> Given the recent downturn in the market I see a number of stocks on my watch list as being at prices where I am happy to buy in, i intend to put about $100,000 into the market and I have a watch list that sits at about 50 with 20 shares flagged as potential buys, I suspect that is far too many - parcels of $5000 seem a little small.
> 
> What sort of strategies do others use to decide on size of parcels relative to total capital and also number of share investments relative to starting capital?




15-20 max I reckon you can get a lot of diversification with 10-15 stocks 
just make sure you don't buy all the big 4 banks and considered that diversification
as that is just one industry and it count as 1 not 4 ...

but if you aren't sure which one to pick for some sector buy 2 of the best and you covered...
you aren't sure WOW or WES I reckon no harm buy both etc...

another good example back in 80s which one would you pick Apple or Microsoft? ...
the answer would be both because picking one you have a chance of being wrong...
and stuffed up your return....

picking both may not deliver absolute highest return but the return of both are
so good it really doesn't matter  so it is a better strategy in my opinion anyway.

and it's not a bad time to deploy some capital some value has emerged ... and how much you 
into each stock is probably dependent on how confident are you with the business...
CCP sits on 27% of my portfolio, CAB 10% etc.. maybe when it go up another 50% I consider doing something about it 
or when  I have something important to do with the cash


----------



## galumay

*Re: Personal Investment Strategy Help*

Thanks ROE, you were one of the posters that i really admire here that hadnt yet replied to my latest questions!!

I had only picked one bank, I dont find much between all of them but went with Westpac. I hadnt made a final decision with WOW/WES so maybe both is a good idea?


----------



## Ves

*Re: Personal Investment Strategy Help*

I was talking to someone about this the other day.

At the moment some general portfolio guidelines that I use personally:

(all figures based on capital outlaid / cost)

As my portfolio is still in its earlier phase and is no where near critical mass I am basing my allocations on a target figure for portfolio size for the next 2-5 years, rather than on current portfolio size   (current size would somewhat limit the maximum actual dollar value of a potential position).

Max would be between 15-18 positions.  Minimum, at least 10, but preferably 12.  

Max size is about 12%.   Minimum size should be at least 3%   (if I cannot get my full allocation at a reasonable price and my portolio is at or is approaching the quantity limit then I would sell).

I don't sort or filter positions by quality  (ie.  I don't have positions that would be 12%, others that would be max 8% etc).   I either buy something with conviction or I don't bother at all   (my company research is where I aim to filter out the dogs and their fleas).  The largest determinant is discount to intrinsic value.  The larger the discount, the higher the position size ends up being if I can get my fill.

I wouldn't break the portfolio rules for any reason.  They are there to protect me from my own impulses.  I also don't do short term positions.  This is to protect myself from trading price action. I don't want two mistresses.   I'm bad enough at trying to keep one!


----------



## odds-on

*Re: Personal Investment Strategy Help*

Concentration (2-3 stocks max). Cash always available. No leverage.

I think there is tipping point in stock picking where the increase in number of stocks to diversify risk reduces the effectiveness of the  judgement/skill of the stock picker to produce excess returns. Finding that tipping point is key.

Cheers


----------



## craft

*Re: Personal Investment Strategy Help*



galumay said:


> Given the recent downturn in the market I see a number of stocks on my watch list as being at prices where I am happy to buy in, i intend to put about $100,000 into the market and I have a watch list that sits at about 50 with 20 shares flagged as potential buys, I suspect that is far too many - parcels of $5000 seem a little small.
> 
> What sort of strategies do others use to decide on size of parcels relative to total capital and also number of share investments relative to starting capital?




Setting a minimum number of stocks you will hold when fully invested is a risk measure. For example if you will hold a minimum of 10 stocks when fully invested then the max you can put into any one stock is 10% of your capital at cost.

Setting a Maximum number of stocks you will hold when fully invested is a focus measure. For example if you will hold a maximum of 20 stocks when fully invested then you won't bother investing unless you are prepared to put in at least 5% of your total capital.

Putting boundaries on your focus and risk is probably one of the most important aspects to getting an approach that suits you. - Where the boundaries correctly lie is to a large extent a personal matter and one of how good your analysis and information is. The boundaries once set in during a calm and reflective period should not be adjusted in the heat of raised emotions from market action.

Here’s a similar discussion that occurred some time ago. 


https://www.aussiestockforums.com/forums/showthread.php?t=23385&page=12&p=658004&viewfull=1#post658004


----------



## Julia

*Re: Personal Investment Strategy Help*



craft said:


> I have found this upper limit for portfolio concentration due to market movements to be one of the most challenging aspects of setting boundaries for myself.
> 
> You are basically overriding the principle of letting your winners run to protect yourself (Psychologically) from the volatility associated with a major concentration in the portfolio.  If you can switch into better perceived value its not so bad - More just a prompt then, to do something you should probably be doing anyway.
> 
> Personally I knock the top off anything that pokes it head above 25% of its account.



I understand what you're saying, craft, and have sometimes followed the same safe path.  But in so doing, don't you sometimes reflect on that stock you sold which went on to make another 50%?

As already observed, one's personal circumstances make a significant difference.  If you're employed and earning more than enough to live on, and save for the future, then you're obviously in a position to take on more risk.

It's a quite different story once retreating from the work force and relying on generating a reliable income from your capital.   My whole risk profile changed then.


----------



## galumay

*Re: Personal Investment Strategy Help*



odds-on said:


> Concentration (2-3 stocks max). Cash always available. No leverage.
> 
> I think there is tipping point in stock picking where the increase in number of stocks to diversify risk reduces the effectiveness of the  judgement/skill of the stock picker to produce excess returns. Finding that tipping point is key.
> 
> Cheers




Oddson, you are the 'odd one out' in suggesting such a low number of stocks, I am always interested in contrary viewpoints and the rational for them.

So would you just continue to cull a shortlist of 12 (which happens to be what i have trimmed mine to), until you had the 2-3 you loved the most?

I do notice the longer i look and more i research, the shorter my list gets!


----------



## galumay

*Re: Personal Investment Strategy Help*



craft said:


> Here’s a similar discussion that occurred some time ago. ...




Thanks craft, I had read that thread from start to finish having stumbled across it in my research!


----------



## odds-on

*Re: Personal Investment Strategy Help*



galumay said:


> Oddson, you are the 'odd one out' in suggesting such a low number of stocks, I am always interested in contrary viewpoints and the rational for them.
> 
> So would you just continue to cull a shortlist of 12 (which happens to be what i have trimmed mine to), until you had the 2-3 you loved the most?
> 
> I do notice the longer i look and more i research, the shorter my list gets!




It depends on your personal circumstances…I allocate capital to stocks as a % of my net worth rather than a % of my stock portfolio. It might seem aggressive but it is not… it is volatile though! From all my reading to date I will be pleasantly surprised that an ordinary investor can achieve decent unleveraged excess returns (CAGR>20%) over a suitable time period (> 5 years) by holding more than 5 to 8 stocks in a portfolio - happy to be proven wrong by those that have.

I think a lot of the time the "risk" in stocks is exaggerated by media and investors. Due diligence (earnings risk) and an appropriate holding timeframe (2-3 years) will greatly minimize the “risk”.

Cheers


----------



## Julia

*Re: Personal Investment Strategy Help*



odds-on said:


> From all my reading to date I will be pleasantly surprised that an ordinary investor can achieve decent unleveraged excess returns (CAGR>20%) over a suitable time period (> 5 years) by holding more than 5 to 8 stocks in a portfolio - happy to be proven wrong by those that have.



Perhaps depends on your approach.  I can understand that if you're going to be doing lots of assessment about value of a company etc, that would be right.  But if, eg, you take a simple trend following approach there's no reason not to hold quite a few more than 8 stocks.


----------



## galumay

*Re: Personal Investment Strategy Help*

Its about 4 months since I started this thread and I have done a lot of reading, a lot of research and run a paper portfolio for most of that time.

Today I bought my first parcel of shares since starting the thread, $5000 worth of CAB @ $3.91.

I had CAB on my list marked as too expensive at round the $5 mark, I have considered the potential impact of the legislative changes and believe the market is now undervaluing the share. Even allowing for a 50% drop in dividend payout it would still provide a yield of over 4.5% before franking, and frankly I will be very surprised if they dont do better than that in the medium term.

I guess the thread will get pretty boring from here on, the occasional addition to the portfolio, very little selling I hope, and the infrequent assessment of how we are travelling!

Thanks for all the ideas and recommendations to help my learning and understanding, this forum has given me the confidence to move forward having a strategy and system that hopefully will be a good match for me.


----------



## galumay

*Re: Personal Investment Strategy Help*

I decided today my position sizing was too small relative to my capital so i increased my holding in CAB by another $5000, they cost me a couple of cents more at $3-96 but I am happy with the average price of the whole parcel.

I also picked up $10,000 worth of NWH at $1.14 which I reckon is a great price for a company with excellent metrics, working in the industry I really think the so called "end of the mining boom" is widely misunderstood. Its not the end of the industry, mining is still a hugely profitable business for many companies, service companies like NWH will continue to pick up work, although it will slow a bit as the boom eases to normal business.

They are well managed, near debt free, lots of contracted work, diversified with a growing civil sector and even with a massive cut in earnings would still provide above average yield based on their financials.


----------



## galumay

*Re: Personal Investment Strategy Help*

Added to the portfolio today with similar sized parcels of TGA, which has been high on my watch list all along, not really much to say about this one, just a good business to own part of, happy to pick it up at $2.03 

Also picked up a parcel of SND at $0.73, again it has been on my watch list from the start, the risks are that its dependent on a small number of customers and its pretty illiquid, but its a niche market that they have a high reputation in and again a company I am happy to own part of for the long term.

Looked to pick up some MOC today too, but they just ran away from me at the end of the day, never mind, other opportunities will present!


----------



## galumay

*Re: Personal Investment Strategy Help*

Well the falling market is kind to me! Picked up the MOC i wanted at 2.16 today.


----------



## galumay

*Re: Personal Investment Strategy Help*

Added 1129 MMS at $8.85 yesterday, this is not part of my long term investing strategy though, its a straight out speculation with money I was prepared to put at risk. I believe the prospects of the price returning to somewhere north of $12 are better than even, I reckon the risk of Labor winning and being able to implement the proposed changes is almost non-existent and I doubt the Coalition in government would implement them. 

In hindsight I should have waited 24hrs and picked them up at a better price, but in the end I took the 'bet' at less than $9 which was my cutoff point.


----------



## galumay

*Re: Personal Investment Strategy Help*

I picked up 5406 CDA today at $1.85, i have had them on my watch list for a while, felt they were overpriced but the near 20% drop today made them more attractive. I think they are oversold at that price and the market over reacted to some caution about next years outcomes.


----------



## sydboy007

*Re: Personal Investment Strategy Help*

I think I'm turning into a lazy investor, at least within my SMSF.

Finding it easier to use AFI / ARG / IHD for shares - they seem to have reasonable history of good performance.

Throw in some decent yielding bonds and slow n steady is the course I've set, especially after getting my head around sequencing risk.

For a bit of extra yield AYF for hybrids and EPX offering 10%.

Most likely wont be making 20% returns like last FY, but fingers crossed the negative events will be fairly mild.  Quite enjoying seeing my strategy is just about at the point where income generated will be more than my employer contributions.

Got to love the magic of compounding interest.


----------



## Greg Einfeld

*Re: Personal Investment Strategy Help*



galumay said:


> Around $300K to invest, some will go into a positive geared commercial property where i live, some into cash and the balance into the planned investment strategy.




As suggested by many others - make sure you do lots of research in relation to investment.  You are competing with professional investors with many years of experience.

Don't forget you can save yourself a lot by getting some basics right.  People often think that financial advice is just about investment.  A good adviser will consider structuring too.  For example - suppose you borrow $100,000 to gear into commercial property and pay an interest rate of 7%.  And then you invest $100,000 in cash at 4%.  Well guess what - you are lending money to the bank at 4% and borrowing it back again at 7%.  That's $3,000 down the drain.

Note I have not provided personal advice here.


----------



## galumay

*Re: Personal Investment Strategy Help*

In line with my intention to review my portfolio every 3 months or so, its time for the first review. I am mindful that my intention is to invest for the long term and so gains or losses over 3 months are pretty irrelevant. 

I guess what is nice to see is my choices outperforming the indexes by a considerable margin - i would be happy with that even in a falling market - i.e. if my portfolio was seeing drawdowns less than the indexes.

I am also mindful of the advice given earlier that in some ways its more dangerous to have good luck when you are starting out as it instills a false sense of ability and skill and share picking.

None the less I am very happy that all my picks are in the black, and an 17% gain across the portfolio is pretty impressive. I have included MMS in my investment portfolio as my thinking has swung around to thinking that its a good investment for the medium to long term at the price I paid. 

Even taking MMS out of the investment portfolio leaves returns at nearly 14%




There are two parcels of CAB because I initially bought a parcel of $5000 and then realised it was too small a parcel for my strategy so i doubled up, all other position sizes sine have been the same ($10K)

In hindsight SND have been the best pick probably, got them at a great price and they have flown since then.(just dropped back a little in the last week.) 
NWH have done really well in the last couple of weeks, but I went in a bit early, if I had waited I would have got in under $1. Still happy though! 
CAB have lost momentum a bit, they were the star early on and carried the slower movers for a couple of months. 
CDA was a recent entry, going fine so far.
MOC have trundled along nicely, thanks very much.
TGA haven't been as strong as some others but I remain happy to hold.
MMS looks impressive but we will have to wait until after the election and see how they manage things going forward to be sure I got this one right.

No dividends have flowed yet, that will of course represent real money - any paper gains are just that, and can be wiped out in the flash of an eye.

I would like to offer my sincere and heartfelt thanks to all those who have contributed to my learning journey on ASF, the advice has been invaluable, I have read more books in the last 6 months than the previous 6 years I reckon! The advice has enabled me to have a clear mind about what I was trying to do and settle on a system to support my strategy. I feel like there is an alignment between my personality and what I am trying to do and its here that I learnt how important that is to ensure I sleep well at night!


----------



## galumay

*Re: Personal Investment Strategy Help*

I have picked up a couple of new positions, 

SIP - I was happy to pick these up for $0.57, i think the market over reacted a bit to their latest results and otherwise they meet my criteria for a buy, happy to pick up the yield and wait for the growth I see coming here.

ITD - a little known micro cap that have a great little business, perhaps the lack of liquidity would scare some off, but with a long term view I am less concerned about liquidity than the strength of the business. Picked up a parcel at $0.30. 

I also made my first serious mistake, it was of course one created out of emotion and human psychology rather than an error in my actual analysis. I had been discussing a new strategy to apply to a small amount of my capital, it was a potential alternative way to have some more involvement in the market aside from my long term investment portfolio.

I got to excited by the potential, my desire to apply the new strategy combined with my impatience meant I ended up applying it to entirely the incorrect type of share. Classic case of FOMO! Anyway, almost straight after purchasing the parcel I started to feel uncomfortable with the decision, (something i have not felt with any of my other buys), I went to sleep realising I needed to understand what caused me to make the poor choice and document it to avoid repeating it.

This morning I woke up and on the document i record my trades, with reasons for purchase, exit strategies and notes, I documented where and how I had gone wrong. Then I placed a sell order for the shares and managed to get out with a small profit and a big lesson!

I guess if I can learn hard lessons along the way without losing capital, then thats a bonus. I will certainly be applying the learnings of this mistake in future.


----------



## KnowThePast

*Re: Personal Investment Strategy Help*



galumay said:


> I have picked up a couple of new positions,
> 
> SIP - I was happy to pick these up for $0.57, i think the market over reacted a bit to their latest results and otherwise they meet my criteria for a buy, happy to pick up the yield and wait for the growth I see coming here.
> 
> ITD - a little known micro cap that have a great little business, perhaps the lack of liquidity would scare some off, but with a long term view I am less concerned about liquidity than the strength of the business. Picked up a parcel at $0.30.
> 
> I also made my first serious mistake, it was of course one created out of emotion and human psychology rather than an error in my actual analysis. I had been discussing a new strategy to apply to a small amount of my capital, it was a potential alternative way to have some more involvement in the market aside from my long term investment portfolio.
> 
> I got to excited by the potential, my desire to apply the new strategy combined with my impatience meant I ended up applying it to entirely the incorrect type of share. Classic case of FOMO! Anyway, almost straight after purchasing the parcel I started to feel uncomfortable with the decision, (something i have not felt with any of my other buys), I went to sleep realising I needed to understand what caused me to make the poor choice and document it to avoid repeating it.
> 
> This morning I woke up and on the document i record my trades, with reasons for purchase, exit strategies and notes, I documented where and how I had gone wrong. Then I placed a sell order for the shares and managed to get out with a small profit and a big lesson!
> 
> I guess if I can learn hard lessons along the way without losing capital, then thats a bonus. I will certainly be applying the learnings of this mistake in future.




Hi galumay,

Our timing seems to still go in sync. Both bought CAB as first investment on the forum, both made a mistake in September that we sold out of, and, now, both looked at ITD.

I have to say I spent quite a bit of time looking at ITD and the more I looked at it, the more I liked it. What is stopping me so far is that BOTH founding directors are selling large chunks of their shareholding. Normally, the liquidity of the stock would not allow them to do so, but the buyback conveniently does.

This is not to talk you out of it, I am still undecided on whether to buy or not. Directors selling is generally not as strong of indicator as directors buying. But it is a red flag, especially if it's in large quantities, and both of them. Would love to hear your opinion on it!

If you don't mind me asking, what was your stock that you sold as a mistake? Mine was PMP.


----------



## galumay

*Re: Personal Investment Strategy Help*

KNP, thanks for the feedback. I did study the movement of director's interests. In the end I was comfortable because the sales actually represented such a small proportion of the shares they hold - Hobbs sold about 2m of his 34m shares. The other director sold about 1.2m out of 10m. 

As far as I could tell they actually weren't picked up as part of the buy back but sold on market. 

Generally i like share buybacks as a way to increase shareholder value and ITD have done well for shareholders with this one. 

The share I made the mistake with is one I still hold, it was just that the strategy I applied was totally inappropriate for that share. As I said, I was lucky enough to be make a small profit and taught a lesson! 

BTW, really enjoy reading your updates on your thread and following your journey.


----------



## galumay

*Re: Personal Investment Strategy Help*

One of the other things about the directors selling shares I forgot to mention in the post above, is that it also helps maintain liquidity as the share buy back scheme reduces liquidity.


----------



## galumay

*Re: Personal Investment Strategy Help*

I felt my portfolio was a little unbalanced with a bias towards smaller caps, so I have been waiting for an opportunity to enter some bigger caps like WOW, TLS and QBE etc.

Last week I felt ANZ were good value for an entry and picked up a position of my standard size of $10k, up nicely this week and I am comfortable with the buy within my overall strategy.

To summarise my portfolio is currently,

ANZ
CAB
CDA
ITD
MMS
MOC
NWH
SIP
SND
TGA

Speculative portfolio is,

AHZ
CEL


----------



## jjtrader

*Re: Personal Investment Strategy Help*

I focus on:

* Consistency of the dividend payments - much prefer a company that is increasing the dividend each year

* Blend of past and future earnings / dividend yield

* Payout ratio - the lower the better as it makes the dividend much more stable


Hi sydboy.
I am just starting to build a long term dividend based portfolio, I will be reinvesting all dividends to compound and making regular contributions to dollar-cost average. it sounds like you know a bit about what to look for in a stock to increase the likelihood of future dividend payouts. After much research,  I will tell you what I am looking for.
1.) Has to have paid dividends consistently for 10 years
2.) has to have increased dividends by more than 4% consistently for 10 years
3.) i want to put some value on the p/fcf ratio. but I dont know what to look for with this. ie whats too high/too low
4.) div yield above 3%

Is there anything else that is crucial to this type of analysis that I need to include ie payout ratios/debt/equity etc. 
I started this analysis with about 20 different fundamentals and it was a lot of work so I decided that I needed to simplify it a bit. I am interested in what you look for. What would you call a low payout ratio?


----------



## galumay

*Re: Personal Investment Strategy Help*

I am wondering what the best way to reinvest my dividends is, I considered adding to one of my existing holdings and opening a new position in something on my watch list.

The issue with buying more shares is the brokerage costs as even if I only reinvest every 6 months its only a few grand - which is also way below my position size, but enough to change the position size of an existing parcel significantly.

I wondered whether maybe buying into something like Vanguard Index International Shares Fund would be a better strategy, it would also be somewhere i could easily and cheaply add other surplus funds to.

What are others doing with their dividend streams?


----------



## coolcup

*Re: Personal Investment Strategy Help*



galumay said:


> I am wondering what the best way to reinvest my dividends is, I considered adding to one of my existing holdings and opening a new position in something on my watch list.
> 
> The issue with buying more shares is the brokerage costs as even if I only reinvest every 6 months its only a few grand - which is also way below my position size, but enough to change the position size of an existing parcel significantly.
> 
> I wondered whether maybe buying into something like Vanguard Index International Shares Fund would be a better strategy, it would also be somewhere i could easily and cheaply add other surplus funds to.
> 
> What are others doing with their dividend streams?




Hi galumay

You probably already know this but a lot of companies have dividend reinvestment plans through which you can automatically reinvest your dividend into their shares sometimes at a small discount to the prevailing market price. The upside is that you can increase exposure without brokerage and perhaps with a discount. The downside is you are not timing your investment decisions as freely as you otherwise might.

Cheers


----------



## galumay

*Re: Personal Investment Strategy Help*



coolcup said:


> Hi galumay
> 
> You probably already know this but a lot of companies have dividend reinvestment plans through which you can automatically reinvest your dividend into their shares sometimes at a small discount to the prevailing market price. The upside is that you can increase exposure without brokerage and perhaps with a discount. The downside is you are not timing your investment decisions as freely as you otherwise might.
> 
> Cheers




Thanks mate, none of the companies I am currently invested in offer that option.


----------



## coolcup

*Re: Personal Investment Strategy Help*



galumay said:


> Thanks mate, none of the companies I am currently invested in offer that option.




ANZ offers a DRP from recollection.


----------



## DrapSnagon

*Re: Personal Investment Strategy Help*

Hello galumay

Can I chip in here?



galumay said:


> I felt my portfolio was a little unbalanced with a bias towards smaller caps, so I have been waiting for an opportunity to enter some bigger caps like WOW, TLS and QBE etc.
> 
> Last week I felt ANZ were good value for an entry and picked up a position of my standard size of $10k, up nicely this week and I am comfortable with the buy within my overall strategy.
> 
> To summarise my portfolio is currently,
> 
> ANZ
> CAB
> CDA
> ITD
> MMS
> MOC
> NWH
> SIP
> SND
> TGA
> 
> Speculative portfolio is,
> 
> AHZ
> CEL




I have an opinion on several of these, FWIW ....


ANZ: The best of the banks, subject to what they say tomorrow
CAB: Hate it with a passion. Their business model is broken imho and it's been in a downtrend since 2007. The technicians might like to think there's support at 360c or so, but I reckon that's just a pause on the road to oblivion.
MMS: Far too risky imho. A competitor (Fleet-something) is about to float with a similar business model, which ought to take capital for MMS off the table. Regardless, there's also the possibility that the Abbot government will wake up one morning and decide that the previous Labor idea of trashing novated leases wasn't such a bad idea after all. 
SIP: Fabulous headline yield, but I worry about the prospects for generic drug manufacture in the current PBS climate. Seems like they have little upside from innovation and instead are planning on weathering the storm. I've had it on watch for six months but can't see any catalyst for it to move out of the 60c - 80c range. Certainly no indication of getting back to anywhere near the $3 level.
TGA: Terrific pick. I see no probem with this, which puts me at odds with most of the analysts covering it. Their problem seems to be with the ticket price of things that Radio Rentals sells:- as popular electronic goods fall in price, so should revenue. I don't buy it:- this company has a long history of adapting to changing consumer patterns (browngoods -> whitegoods -> tech) and there's no reason to think they'll suddenly get worse at it. Add the recent initiatives in credit and I feel TGA is in good shape.

No opinion on the rest, but I hope this might help your thinking.

Snap


----------



## KnowThePast

*Re: Personal Investment Strategy Help*



galumay said:


> I am wondering what the best way to reinvest my dividends is, I considered adding to one of my existing holdings and opening a new position in something on my watch list.
> 
> The issue with buying more shares is the brokerage costs as even if I only reinvest every 6 months its only a few grand - which is also way below my position size, but enough to change the position size of an existing parcel significantly.
> 
> I wondered whether maybe buying into something like Vanguard Index International Shares Fund would be a better strategy, it would also be somewhere i could easily and cheaply add other surplus funds to.
> 
> What are others doing with their dividend streams?




Hi galumay,

I don't treat dividends any different from any other cash. 

Psychologically, I agree that it sometimes feels like dividens are income that you've earned and need to protect.

But, if you have $10k spare from your salary and $10k built up from dividends, why is investing in ANZ a good decision with the first, but not the second...

This is all assuming that you want to keep that money in shares.


----------



## galumay

*Re: Personal Investment Strategy Help*



KnowThePast said:


> Hi galumay,
> 
> I don't treat dividends any different from any other cash.
> 
> Psychologically, I agree that it sometimes feels like dividens are income that you've earned and need to protect.
> 
> But, if you have $10k spare from your salary and $10k built up from dividends, why is investing in ANZ a good decision with the first, but not the second...
> 
> This is all assuming that you want to keep that money in shares.




Hey KTP, I think you have misunderstood me, I dont feel any different about the dividends, its just that its a fairly small amount of money, even if I invest it every 6 months - my normal parcel size is $10K, and 6 months of dividends is usually around $2.5K. 

I am not keen on having an ever increasing number of different shares in the portfolio, but also aware of brokerage costs with smaller parcels hence the question about maybe using a fund.


----------



## robusta

*Re: Personal Investment Strategy Help*

Hi Galumay just a couple of random thoughts. You could hold onto your dividends until you see a opportunity, this could be a in a existing holding or a new position. If you are anything like me you have a few in your portfolio you wish you had invested more in plus a watch list full of businesses you wish you had a piece of.

The other alternative is to look at the old core and satellite approach with a mix you are comfortable with. This could be with something like LIC's or ETF's. In my portfolio I have recently taken a small position in both IAA and WDIV these ETF's offer a DRP at the NTA of the fund. My current strategy is to not worry about the brokerage and buy/sell spread and just allow the returns to compound. Eventually they will reach a full position size.

Here is a good article by Marcus Padley in today's Age on international ETF's

http://www.theage.com.au/money/inve...posure-with-etf-investing-20140211-32dg9.html


----------



## galumay

*Re: Personal Investment Strategy Help*



robusta said:


> Hi Galumay just a couple of random thoughts....




Thanks Robusta, this past year I did just add to an existing holding once they were all in for the 6 months, I am wary of having too many positions in my portfolio so i am reluctant to open too many new ones. 

I am tending towards just using a fund like Vangaurd for the dividends, that way I can just add them as they come in over the year and it makes it very easy to track performance of re-investment.


----------



## galumay

*Re: Personal Investment Strategy Help*

I realised seeing KTP's update that it was a while since I had updated my portfolio progress, its been about 9 months since I started investing,

Performance is skewed by the inclusion of my speculative holding, AHZ, performance would be more like +15% if it were not included. Obviously CDA has had quite a negative impact on performance, but I have decided to continue to hold as I remain optimistic they can turn the business around in the next few years.

Dividends for the 9 months amounted to $2576 and there was a small capital gain from a transaction that I made in error, as described earlier in the thread, $181.

As a long term value investor this measure of paper 'performance' is largely irrelevant, I guess the takeaway is outperforming the acccumulation index, otherwise I may as well be invested in an index fund and save my time and energy!


----------



## craft

*Re: Personal Investment Strategy Help*



galumay said:


> Performance is skewed by the inclusion of my speculative holding, AHZ, performance would be more like +15% if it were not included.




Hi galumay

Noticed there is no cost base entered for ANZ - suspect that omission is skewing your number even more then AHZ.


----------



## galumay

*Re: Personal Investment Strategy Help*



craft said:


> Hi galumay
> 
> Noticed there is no cost base entered for ANZ - suspect that omission is skewing your number even more then AHZ.




LOL!! The danger of doing stuff quickly, before going to bed!! Not sure why the cost base was missing, its auto filled from my trading account, anyway you are right, its basically doubling my return. I will fix it and repost the image.


----------



## galumay

*Re: Personal Investment Strategy Help*

I have been a little tardy with catching up on an end of financial year check of how my portfolio is tracking, I am busy setting up an SMSF as well as starting a new job after being made redundant from my last job so life has been busy!

Here is a snapshot,




I am not sure what if any conclusions to draw from such a short time span with a long term investment portfolio, first and obvious point is that if AHZ is removed (which is not an investment share, but a speccy), performance was flat. (approx 1.7% in unrealised capital growth excluding AHZ.)

This was because of the negative impact of 3 shares mainly, CDA which as we know fell well out of favour, I still like the long term prospects and continue to hold having averaged down with some of my dividends reinvested.

ITL has also been a very poor performer since purchase, but nothing I can find justifies such a fall based on fundamentals, so I continue to hold and expect it to do fine in the long run.

The last under performer was NWH, they went well earlier in the year but got dragged down with the other mining services companies, I also reinvested dividends from my portfolio into increasing my position in NWH, I continue to rate them one of the cheaper shares in my portfolio and expect time will be kind to this investment.

The standout performers have been MOC which surprised me with its strength, its been very solid and the nice divvy adds to the warm and fuzzy feeling with this one!

SIP has also done very well, again I wasnt expected such a quick turnaround, but its again nice to see another solid performer.

SND is one I have been very happy with, I got in at a really good price and news continues to be good and the business is just one of those small, tightly held businesses that are run really well and keep on keeping on.

Dividends for the year amounted to $4794 fully franked, which represents about 4.6% or 6% grossed up.

I havent bought or sold anything since the end of October other than adding to existing holdings as described above.

I cant see much activity this year as I will be focussing on the SMSF and looking for investment opportunities for those funds, also we are having a 'gap year' from the end of this year so I wont be adding to savings for a while!


----------



## galumay

*Re: Personal Investment Strategy Help*

The last week has not been kind to my portfolio! I am sure I am not alone in that outcome though.

Performance slipped behind my benchmark, the AXJO, this month, portfolio is down 4.25% for the FYTD and the AXJO is down 1.18% for the same period, so outperformance in the wrong direction this month!

The plunge in NWH's price is the biggest impact on my poor performance.

No shares were sold or bought since i last posted.


----------



## Wysiwyg

*Re: Personal Investment Strategy Help*

G'day. Got a portfolio snapshot for a then and now perspective?


----------



## galumay

*Re: Personal Investment Strategy Help*



Wysiwyg said:


> G'day. Got a portfolio snapshot for a then and now perspective?




sure,


----------



## Wysiwyg

*Re: Personal Investment Strategy Help*

Thanks for that. Yes a portfolio remains in a constant state of change with sales being a personal decision.


----------



## tech/a

*Re: Personal Investment Strategy Help*

Galumay

Its really clear where your falling down.
An early exit from the CDA and ITL would have seen an excellent return.
Its only dividends which have kept you ahead--marginally.

You know what they say about falling in love with your holdings.
You aren't the first and wont be the last.

*It doesn't matter that we get it wrong---only how long we choose to stay wrong matters.*

I get it wrong all the time!

But its not about being right its about being profitable.


----------



## KnowThePast

*Re: Personal Investment Strategy Help*



galumay said:


> sure,
> 
> View attachment 60550




Good stuff galumay, 

One problem of running a more concentrated portfolio such as yours, one or two bad stocks can have significant impact on the portfolio. 

Your other companies are going in the right direction, I think you are doing very well with your approach


----------



## tech/a

*Re: Personal Investment Strategy Help*



KnowThePast said:


> Good stuff galumay,
> 
> One problem of running a more concentrated portfolio such as yours, one or two bad stocks can have significant impact on the portfolio.
> 
> Your other companies are going in the right direction, I think you are doing very well with your approach




Oh and missed NWH.
AHZ did get to 16c now 11.5
That 2 is something that should perhaps be addressed.

I'm just pointing out that your ideas can be improved.
That's if your open to improvement.


----------



## Wysiwyg

*Re: Personal Investment Strategy Help*



tech/a said:


> Oh and missed NWH.
> AHZ did get to 16c now 11.5
> That 2 is something that should perhaps be addressed.
> 
> I'm just pointing out that your ideas can be improved.
> That's if your open to improvement.



Investment or speculation.


----------



## galumay

*Re: Personal Investment Strategy Help*



tech/a said:


> Oh and missed NWH.
> AHZ did get to 16c now 11.5
> That 2 is something that should perhaps be addressed.
> 
> I'm just pointing out that your ideas can be improved.
> That's if your open to improvement.




tech/a thanks for your responses. I do think its difficult to reach much common ground when we have such different approaches to investment. 

if i had sold CDA, ITD or NWH when they first fell below what I paid for them, then i would also have sold out of many of my best performing companies as well - they have nearly all been at prices below what I paid for them.

AHZ is the one speccy in my portfolio, it would be pointless to have sold when they hit 16c, I am in them hoping the company will be a multibagger, not to take a small profit. If I had sold them at 16c and they went on to $1 then I would have something to address!!

As a long term investor I am not 'in love' with my underperformers, I do continue to reassess the fundamentals of these companies, and I am comfortable in my analysis that they are currently undervalued. 

Overall I continue to make a healthy return on my invested capital through the dividends, if  sold my entire holdings I would have my original capital back in cash, with a combined capital and yield return way above what I could have achieved with fixed interest or cash.

I dont expect to really start to see the benefits of my strategy for some years, in some ways measuring the performance of this sort of investment on a month by month basis in the first few years is very dangerous because it can lead to a focus on the wrong metrics. 

One point I would take issue with is the comment that my ideas can be improved - if I am open to it, the subtext I read there is that if I listen to you and follow your trading strategies and philosophy I can improve - but if I dont its because I have a closed mind. Maybe thats not how you meant it but its how it reads to me, and that comes across as arrogant and the product of a closed mind!!

Of course I am open to learning, I spend everyday learning more about the companies I invest in, the markets, the tools for analysis, the thoughts of like minded investors as well as the thoughts of those like you with very different approaches to money management.


----------



## tech/a

*Re: Personal Investment Strategy Help*



galumay said:


> tech/a thanks for your responses. I do think its difficult to reach much common ground when we have such different approaches to investment.




Hmm Id be surprised if profit weren't common ground enough. 




> One point I would take issue with is the comment that my ideas can be improved - if I am open to it, the subtext I read there is that if I listen to you and follow your trading strategies and philosophy I can improve - but if I dont its because I have a closed mind. Maybe thats not how you meant it but its how it reads to me, and that comes across as arrogant and the product of a closed mind!!




It appears you do a lot of that. Identifying experience with arrogance. Strange----

Your profit so far is Under $1000 and you've been at it for months.
Last night I made 3 x your profit in an hr?
And I posted it up live as it happened.

https://www.aussiestockforums.com/forums/showthread.php?t=29236&page=3&p=851555#post851555

Arrogance?
Not to those who truly want to improve their trading/investing.



> Of course I am open to learning, I spend everyday learning more about the companies I invest in, the markets, the tools for analysis, the thoughts of like minded investors as well as the thoughts of those like you with very different approaches to money management.




You are open to what makes sense to *YOU*
Not what makes sense.

Maybe this may help.

*"Its not about being RIGHT
Its about being PROFITABLE."*


Carry on.


----------



## galumay

*Re: Personal Investment Strategy Help*



tech/a said:


> \
> Carry on.




*sigh*

oh well i tried. i guess my suspicions are confirmed!


----------



## tech/a

*Re: Personal Investment Strategy Help*



galumay said:


> *sigh*
> 
> oh well i tried. i guess my suspicions are confirmed!




**Sigh**

We all know *exactly* how you feel.


----------



## tech/a

*Re: Personal Investment Strategy Help*

Galumay

I'm curious.
What do you think I or anyone else for that matter
could pick up from your method
When I and anyone else for that matter can
make 3x your 6 monthly return in an hr?


----------



## TPI

*Re: Personal Investment Strategy Help*



tech/a said:


> Galumay
> 
> I'm curious.
> What do you think I or anyone else for that matter
> could pick up from your method
> When I and anyone else for that matter can
> make 3x your 6 monthly return in an hr?




tech/a, his total return over 6 months would also include dividends though....


----------



## McLovin

*Re: Personal Investment Strategy Help*



TPI said:


> tech/a, his total return over 6 months would also include dividends though....




I'd say if you can make $3k/hour with $100k you should be stomping around on a private jet forum...

Then again the way some people cr@p on about how easy it is to make money you wonder why they're not flying around the world selling their wares to hedge funds.


----------



## tech/a

*Re: Personal Investment Strategy Help*



TPI said:


> tech/a, his total return over 6 months would also include dividends though....




Yes I'm aware of that and that's what puts him in the black---or green in his case now.
If he didn't have dividends then he would be in the red on the whole portfolio.

I also note its more like 9 mths.
I also note he has around 100K generating his return.
My trade last night had around 8K generating mine (My margin)
I could be wrong but that represents great "Value investing"  to me.


----------



## Ves

*Re: Personal Investment Strategy Help*



tech/a said:


> make 3x your 6 monthly return in an hr?



If I recall you had a trend trading (stop to BE)  thread on here with Pav that ran for six months.

Barely made a cent.   Then the toys went out of the cot and you didn't post on the forums for months when a few of people questioned your strategy.

Same with a trading contest with CanOz.

Let's not get our e-peens out over a single trade though.


----------



## McLovin

*Re: Personal Investment Strategy Help*



Ves said:


> If I recall you had a trend trading (stop to BE)  thread on here with Pav that ran for six months.
> 
> Barely made a cent.   Then you the toys out of the cot and didn't post on the forums for months when a few of people questioned your strategy.
> 
> Let's not get our e-peens out over a single trade though.




Bam! Spot on.


----------



## tech/a

*Re: Personal Investment Strategy Help*



McLovin said:


> I'd say if you can make $3k/hour with $100k you should be stomping around on a private jet forum...
> 
> Then again the way some people cr@p on about how easy it is to make money you wonder why they're not flying around the world selling their wares.




You didn't see the thread Mc L.

https://www.aussiestockforums.com/forums/showthread.php?t=29236&page=3&p=851555#post851555

Haven't seen anything you've posted up?

There are a few here who asked legitimate questions and I gave/give ligit answers.
And i often do what many don't and post real time--

Cant win
You try to help people out and its arrogant or Cr@p

If I started flying around selling my cr@p you'd be calling over priced rubbish.
Seriously the "Value investing " stuff is practiced by 80% of investors.
It makes sense 90% of people understand it---its something everyone else does.
It sounds and feels safe and logical.

Truth is its returns are terrible year in year out.

If people want to look at a way that 90% of the others aren't looking at Ill pass it on.  

And sure enough one day I wont and one day I/We may just have something people may just pay for.
Right now its free.


----------



## McLovin

*Re: Personal Investment Strategy Help*



tech/a said:


> Haven't seen anything you've posted up?




So what? 



			
				tech/a said:
			
		

> Cant win
> You try to help people out and its arrogant or Cr@p




Geez you're predictable. Talk yourself up. When questioned play the victim. Start thread about leaving forum. Wash. Rinse. Repeat.

If your ego matched your ability you wouldn't be building townhouses in Adelaide. 

Carry on.


----------



## tech/a

*Re: Personal Investment Strategy Help*



McLovin said:


> So what?




I seem to only see personal slights from you.
Id have thought you may actually have some content to contribute---clearly not.





> Geez you're predictable. Talk yourself up. When questioned play the victim. Start thread about leaving forum. Wash. Rinse. Repeat.




There is one thing however I have noted from you and a few others.
You have limited ability to contribute and as a compensator you play the ego and arrogance card. You attempt to discredit and belittle--wash rinse repeat.



> If your ego matched your ability you wouldn't be building townhouses in Adelaide.




My point here on display.
Pretty childish--

They say we all rise to our level of incompetence.
"They" seem to have it about right in your case.

Carry on.


----------



## Julia

*Re: Personal Investment Strategy Help*



McLovin said:


> So what?



So it's easy to criticise.  It would be more meaningful to put up some of your own thoughts with examples, wouldn't it?  You know, offering something better than Tech/A has given.



> Geez you're predictable. Talk yourself up. When questioned play the victim. Start thread about leaving forum. Wash. Rinse. Repeat.
> 
> If your ego matched your ability you wouldn't be building townhouses in Adelaide.
> 
> Carry on.



Why on earth do these threads always have to become personally insulting and nasty?
galumay put up a p/f with some astonishing losses using a small capital base.  Tech/A made some suggestions which would have improved his profitability.

What's wrong with that?  Isn't a forum about exchanging ideas, all learning from one another?

And when the rest of us are running our own civil construction companies, then perhaps we might be able to justify making derisive comments toward others.

At least Tech/A has over many years offered genuine assistance to many in understanding a technical approach.
I doubt many others have made such an effort.

PS  After doing this post I flicked through the other threads.  Here is yet another example of Tech/A responding to requests for tech guidance.
https://www.aussiestockforums.com/forums/showthread.php?t=29236&page=3&p=851725#post851725

If anyone can suggest another forum member who has put more time and effort into attempting to help others, why don't they nominate that person?


----------



## galumay

*Re: Personal Investment Strategy Help*



Julia said:


> If anyone can suggest another forum member who has put more time and effort into attempting to help others, why don't they nominate that person?




I can think of half a dozen that half actually helped me greatly, not done what tech/a does which is to blindly promote HIS personal approach and imply that anyone who doesnt share his world view doesnt want to learn - thats not help.

The boasts about 'gambling' successes are irrelevant in a thread about long term investing and just make him look silly. 

Its annoying that the discussion becomes so polarised and poisonous, but its not hard to see where and why that happened.


----------



## tech/a

*Re: Personal Investment Strategy Help*



tech/a said:


> Galumay
> 
> I'm curious.
> What do you think I or anyone else for that matter
> could pick up from your method
> When I and anyone else for that matter can
> make 3x your 6 monthly return in an hr?




I'm still interested in this reply.



> I can think of half a dozen that half actually helped me greatly, not done what tech/a does which is to blindly promote HIS personal approach and imply that anyone who doesnt share his world view doesnt want to learn - thats not help.




I present and always have presented a technical alternative. My personal approach has been refined over 20 yrs. From Systems design and implementation to my current discretionary trading.

*Techtrader* was traded live on The Chartist website for 7 yrs. We turned 30K traded on margin and at that time it was 3:1 with BT into $378K when I shut down the system 6 mths before 2008.
That method was pulled apart by 100s of traders World Wide. It stood the test of time and when it traded outside of its blueprint--I shut it down. I actually know 3 people who are currently trading it and continued through the GST about 18 mths ago one of them contacted me to advise he was making new all time highs.

As an aside it was also published in Radges book Un Holy Grails where you'll find it in pages 103-109

Technical analysis is a passion for me one which I'm fortunate enough to share with a myriad of very talented "out of Mainstream" thinkers. Dr Bruce Vanstone and Dr Kris Rowland -- who happens to be related and on my payroll now (Kris) working on some really exciting innovative trade related projects.

So when ever you wish to discuss your passion in trading of course Ill have a look at it relative to my own---expect that. If you can add something to my own findings and those of the other enthusiasts I keep in contact with--I and they are all ears.
If you have anything published than please direct me to it.

But as has been shown before If you (Me or anyone else post up anything to do with experience and quantified success its EGO and ARROGANCE.

Generally from people with Ideas and Rhetoric in their resume'.



> The boasts about 'gambling' successes are irrelevant in a thread about long term investing and just make him look silly.




I must be a particularly good gambler as I have posted many trades which have returned excellent profit.
And of course Techtraders returns.
Many that return B/E and I'm sure a few "Gamblers" would love to have broken even on some of their gambling exploits. I suppose PAV is also a really good gambler who now trades---errr gambles--- well enough to add an extra wage to his own working wage.
I present the result of the other night with my question---so you can see what it is I'm comparing it with. *Of course it relevant!*

*My question still stands--I await your answer??*



> Its annoying that the discussion becomes so polarised and poisonous, but its not hard to see where and why that happened.




Its only you that makes it polarized.

If you can show me why I should invest $114K and get a $5K return in 9 mths including Dividends then I'm all ears.* If its all you capable of* then that's fine---I understand your frustration.

I strongly believe that I could increase your return 3-5 fold---but it is you who are so polarized in your ideology
that anything which doesn't fit in with your Mainstream thinking MUST be gambling.

Dr Bruce Vanstone Proved that its anything but (Technical Analysis does deliver an edge)
http://works.bepress.com/bruce_vanstone/. You might want to brush up on some light reading---and Id love to discuss anything of interest you find there. Kris would also love to be involved---

*YOU* May not be interested but from my private replies in my in box other are.
You'd be surprised the innovative Stock and trading related projects we are working on.

*Stay tuned!*


----------



## galumay

*Re: Personal Investment Strategy Help*



tech/a said:


> I'm still interested in this reply.




I am not so presumptous as to assume others would learn from me.



> But as has been shown before If you (Me or anyone else post up anything to do with experience and quantified success its EGO and ARROGANCE.




Arrant nonsense, its not your posting of your trading examples that raise the allegations of arrogance and ego, its the arrogance and ego when you suggest that people who dont adopt your personal strategy and philosophy have closed minds and dont want to learn.



> *My question still stands--I await your answer??*




I still dont see your question as having any relevance.



> Its only you that makes it polarized.




what an odd conclusion! 



> If you can show me why I should invest $114K and get a $5K return in 9 mths including Dividends then I'm all ears.




*sigh* I am a long term investor, the only return I have is dividends, i havent realised any profits or losses at this time, performance comparisons over 9 months have to be taken in context when you are not trading. You know this very well and its really rather disingenuous of you.



> * If its all you capable of* then that's fine---I understand your frustration.




...and you wonder why so many consider you arrogant!!



> I strongly believe that I could increase your return 3-5 fold---




thanks for the kind offer, but no thanks.



> but it is you who are so polarized in your ideology
> that anything which doesn't fit in with your Mainstream thinking MUST be gambling.




strawman argument



> You might want to brush up on some light reading---




..and you wonder why so many consider you arrogant



> *YOU* May not be interested but from my private replies in my in box other are.
> You'd be surprised the innovative Stock and trading related projects we are working on.
> 
> *Stay tuned!*




I can hardly wait!


----------



## tech/a

*Re: Personal Investment Strategy Help*



galumay said:


> I am not so presumptous as to assume others would learn from me.




Rightly so in your case.




> Arrant nonsense, its not your posting of your trading examples that raise the allegations of arrogance and ego, its the arrogance and ego when you suggest that people who dont adopt your personal strategy and philosophy have closed minds and dont want to learn.




If you can just point me to where Ive done this!




> I still dont see your question as having any relevance.




From your response your correct
it doesn't as there is nothing more
you have to offer---so thanks for the reply.





> what an odd conclusion!




What a defining reply.





> *sigh* I am a long term investor, the only return I have is dividends, i havent realised any profits or losses at this time, performance comparisons over 9 months have to be taken in context when you are not trading. You know this very well and its really rather disingenuous of you.




*sigh* So you don't want help. A the title of the thread reads.
Just have Joe re name it to Personal Investment Strategy and all this annoying help will disappear.




> ...and you wonder why so many consider you arrogant!!




Currently we have 2 you and Mc Lovin.

But it really is OK if you don't have anything more to add---Just say so..




> thanks for the kind offer, but no thanks



.

Fine I guess you don't really want help--you just want to demonstrate that which you understand.
That's fine too but the thread title is mis leading.




> strawman argument




No I think its accurate. In particular where you cant see any other suggestion as being capable of improving your method.





> ..and you wonder why so many consider you arrogant




Its ok if its not your bag fine---calling someone arrogant for suggesting some reading--yeh its heavy but really interesting--is a feeble attempt at recourse.

Actually I don't wonder.

I know that its a last retort used by a few who have nothing more to add to the discussion.
When their ideas are found to be lacking that's when the Arrogant--Ego cards are played.
You've left out Condescending---a personal favourite. 





> I can hardly wait!




I see you also enjoy sarcasm---
Some common ground at last!


----------



## Joe Blow

*Re: Personal Investment Strategy Help*

Why does this have to happen time and time again?

If you find someone objectionable for some reason, as some clearly do, then just ignore them. There's even an ignore list you can use to filter out their posts. Simple.

What I personally find irritating - far more irritating than the posting style of any particular ASF member - is the way threads are taken off topic like this. What has been achieved by making personality and posting style an issue in this thread? Nothing, of course, other than taking it off topic.

If you find another ASF member irritating, tell your Mum, or your cat. I'm sure they'll care, or at least pretend to. But posting about it here serves absolutely no purpose whatsoever. This thread is evidence of what happens when people lack the self control to bite their tongue, take the high road, and move on.

If you have something of value to contribute, feel free to do so. Otherwise please have the courtesy to allow the discussion to continue unhindered by off topic remarks and personal slights.

Thank you!


----------



## DeepState

*Re: Personal Investment Strategy Help*



tech/a said:


> Technical analysis is a passion for me one which I'm fortunate enough to share with a myriad of very talented "out of Mainstream" thinkers. Dr Bruce Vanstone and Dr Kris Rowland -- who happens to be related and on my payroll now (Kris) working on some really exciting innovative trade related projects.




I have no dog in this exchange.  

I am interested in the fields that Vanstone and, perhaps by association, Rowland are investigating in relation to investment at any time horizon. Vanstone's field is vastly different to just about anything else which has been posted on this site and sits within a wider class that is prospective and which is successfully used in very serious high end work.  I imagine that any collaboration with Rowland would produce interesting work.  Any chance of inviting them onto this forum (in another thread)?  I would welcome the opportunity to learn more.


----------



## galumay

*Re: Personal Investment Strategy Help*

In reflecting on my portfolio structure the interesting thing for me is that of the 11 companies I have invested in, 8 of them have shown significant unrealised capital gains well in excess of the benchmark. 

Just 3 of them have shown significant unrealised losses, and when I revisit my analysis of these 3 companies I am most comfortable with ITD, i expect the benefits of their growth strategy to start bearing fruit and I am confident that they will continue to provide a healthy yield in the mean time. 

CDA was a mistake - with the benefit of hindsight - no one predicted the turnaround in earnings that CDA suffered with the collapse of their metal detector sales. But the saving grace is that they were in a good position to weather the storm, they have other profitable if smaller segments, low debt and management that have reacted quickly to gain control of the situation. It will take them a while to recover and for the results of rebuilding the business to flow through, and the dividends have and will suffer in the mean time. An increase in earnings back to about 9c per share would mean a price similar to my cost at a p/e of 14 which is not to difficult to imagine in the medium term.

NWH is obviously the worst performer of the portfolio, we all know the reasons mining services companies have had their share prices savaged, as I have expressed elsewhere, I hold a contrarian view about the extent of the impact in this sector going forward, nothing I am reading currently would support that view!! It probably comes down to a question of whether NWH can survive the cycle financially, and the concern with that is only the debt. When I first purchased NWH I failed to pay enough attention to the debt, particularly the interest coverage ratio - that was something I didnt even know about when I started and it was only ROE's help that expanded my understanding of the importance of considering this metric.

I expect the share price to drop further before it shows any sign of recovery, there is likely more bad news with the impairment that has been flagged and sentiment is so poor towards this sector that any negative news has a disproportionate effect. 

I had a long hard think about averaging down into NWH, but I think the capital can be employed better elsewhere and the risk of them not surviving the cycle, while low, does exist. 

I reckon MND would have been a better choice for my contrarian entry into this sector, and with what I have learnt from others about reading and analysing financial reports it would have been apparent to me. Either way its not going to be a quick turn around for the sector and it will require patience and nerves to ride it out.


----------



## The Falcon

*Re: Personal Investment Strategy Help*

Galumay, viz. NWH, I'm in a similar position with SVW, have averaged down to $6.33 but not willing to keep adding to the position, as it would break my self imposed exposure limit per position. I really moved to fast on this one, but I am comfortable with the business and happy to wait. There is a buy back in place which is chewing up the free float, and its trading well below NTA, so if I could reset that one I would 

I am starting to look at ASX O&G stocks and US O&G but not rushing in to anything, I think prices will be depressed for a while. Most of my portfolio is Broad index ETFs (VAS/VHY/VTS), LICs and US float investors (BRKB/MKL/Y) but I like to take some individual positions when I have time.


----------



## Julia

*Re: Personal Investment Strategy Help*

galumay, the above represents a clear summary of your thinking.  It's clear that it's not an approach that we all embrace, but we all make our own choices.

Reading through other threads this morning, I noticed this also of yours from a while ago:


> Default Re: My Brush with Technical Analysis
> 
> I guess if you believe in TA then by default you have to believe that patterns will recur in the graphs you plot and that its possible to gain an edge by looking for events (volume, price changes etc), that have led to outcomes in the past and betting that its more likely than not that they wll happen again.
> 
> I suspect that having confidence in whatever strategy you use, and the discipline to stick to it, is more important than all the discussion about whether the strategy is 'correct' or not.
> 
> We know the % of successful traders is minute, I suspect the % of successful longer term investors is not too good either.
> 
> My believe is that its human psychology that gets in the way of the implementation of successful strategies - regardless of whether they are TA, FA, short term, trading, investing, buy & hold, whatever.
> 
> I know in my early days I researched all sorts of approaches, I could never get past the logical and mathematical issues I had with TA, so I knew it wasnt for me - because I would never have developed any confidence in a strategy based on it.
> 
> That doesnt mean its not a perfect approach for tech/a, pixel or anyone else. I still follow a lot of what the TA guys post because it helps me think about what i do and why I do it.




Again, a perfectly reasonable outline.  I don't actually agree about the involvement of psychology to the extent you suggest in all approaches, but the idea is put forward reasonably and with thought.

As I've suggested before, most of us come to a forum like ASF to learn from one another, to check out our conclusions with others who might see a flaw in our strategy that we've missed.  So it just seems to me a great shame that there always arises inflammatory exchanges which provoke further retaliation, and so the whole conflagration escalates.

It serves none of us usefully.

I'd just like to suggest that we all try a bit harder to be more careful about making remarks that we must know will be like a red rag to a bull to someone who thinks differently from us.  We can all come up with examples but to list them here would not be helpful.

Now maybe we're not up for a group hug, but I hope we can agree - even if to prevent Joe from having to constantly intervene - to maybe just agree to disagree when necessary, and do it reasonably respectfully.


----------



## galumay

*Re: Personal Investment Strategy Help*



Julia said:


> I'd just like to suggest that we all try a bit harder to be more careful about making remarks that we must know will be like a red rag to a bull to someone who thinks differently from us.  We can all come up with examples but to list them here would not be helpful.




In my defence, go back to my post number 107 and look how carefully i worded my comments to tech/a regarding my perception of his comments. Then look at how it escalated from there, its a slippery slope!


----------



## KnowThePast

*Re: Personal Investment Strategy Help*



tech/a said:


> Dr Bruce Vanstone Proved that its anything but (Technical Analysis does deliver an edge)
> http://works.bepress.com/bruce_vanstone/. You might want to brush up on some light reading---and Id love to discuss anything of interest you find there. Kris would also love to be involved---




Hi tech,

Thank you so much for this link. I've now read a few of his articles, not only was it an exceptionally interesting read, it was also very close to many experiments that I run with my own software. We've talked about Kris before, I'd love to have a "knowledge session" with him 

To keep things somewhat relevant to this thread, Bruce does have a paper on stop losses, this is an abstract:

"A great many traders use stop-loss rules in their everyday trading. In addition, during periods of high volatility, many traders attempt to protect their downside by moving their stops closer to the price action. However, there appears to be little real justification for doing this. There is a shortage of evidence that demonstrates that stops are actually providing the benefits that traders believe they are. This paper is an empirical study of the use of stops within a defined trading strategy. The methodology used within this paper can easily be ported to any
individual traders’ strategy. In the specific case studied in this paper, the results suggest that initial stops degrade long-term portfolio performance."

And in conclusion:

"Many traders may feel uncomfortable with the idea of not using initial stops. However, from conducting this study on a variety of trading systems, one observation is crystal clear: If a trading strategy has a positive
expectation, then the use of initial stops will only serve to degrade performance."


Having personally played around with some backtests, I wouldn't go so far as to say they are always degrading, it very much depends on the system used. But I also found that most fundamental, value oriented strategies do not benefit from them.

P.S. Stop arguing you all, it's only a game 

P.P.S To be read while looking at my new avatar for context.


----------



## burglar

*Re: Personal Investment Strategy Help*



KnowThePast said:


> ... P.S. Stop arguing you all, it's only a game  ...




It's only a game, ... but it's the stoopidest game in the world!


----------



## tech/a

*Re: Personal Investment Strategy Help*



> "A great many traders use stop-loss rules in their everyday trading. In addition, during periods of high volatility, many traders attempt to protect their downside by moving their stops closer to the price action. However, there appears to be little real justification for doing this. There is a shortage of evidence that demonstrates that stops are actually providing the benefits that traders believe they are. This paper is an empirical study of the use of stops within a defined trading strategy. The methodology used within this paper can easily be ported to any
> individual traders’ strategy. *In the specific case studied in this paper,* the results suggest that initial stops degrade long-term portfolio performance."
> 
> And in conclusion:
> 
> "Many traders may feel uncomfortable with the idea of not using initial stops. However, from conducting this study on a variety of trading systems, one observation is crystal clear:* If a trading strategy has a positive
> expectation*, then the use of initial stops will only serve to degrade performance."




A vast and very important topic.
I think though the comments should be read in the context of the highlighted areas.



> Stop arguing you all, it's only a game




A presentation of opposing views isn't arguing particularly if argument is placed up for discussion.
If its only a game to the O/P why title the thread 

Personal Investment Strategy* Help*


----------



## DeepState

*Re: Personal Investment Strategy Help*

If a strategy has positive expectancy, stops and risk management will reduce expected returns.  Stops are options of a type.  Buying them comes at a price. You are paying this to the market. Their cost/value increases as your expectancy increases. In expectations terms, it's a given that stops etc will bring returns closer to zero/risk-free.  What actually happens can vary from this.  

Introducing risk management which reduces expected outcomes does not diminish their value if an investor/trader is affected by the pathway taken or does not regard any outcome as proportionately good or bad.  That is, does not regard a loss of 50% to be equally bad in the sense that a profit of 50% feels as good.  It is more vital under conditions of leverage where ruin could occur despite positive expectancy.  Under these conditions (which are much more relevant than unconditional expectations as a basis for portfolio management), risk management adds value.


----------



## So_Cynical

*Re: Personal Investment Strategy Help*



galumay said:


> In reflecting on my portfolio structure the interesting thing for me is that of the 11 companies I have invested in, 8 of them have shown significant unrealised capital gains well in excess of the benchmark.
> 
> Just 3 of them have shown significant unrealised losses.




galumay

While i could care less about "value" investing we do have some things in common.

 No Stops
 Patience
 Long Term Outlook
i have found that over the last 7 years, given a 12 month time frame i have consistently chosen 1 loser for every 4 winners, so your 8 winners and 3 losers from 11 stocks is about right...cant win em all hey.


----------



## DeepState

*Re: Personal Investment Strategy Help*



So_Cynical said:


> galumay
> 
> While i could care less about "value" investing we do have some things in common.
> 
> No Stops
> Patience
> Long Term Outlook
> i have found that over the last 7 years, given a 12 month time frame i have consistently chosen 1 loser for every 4 winners, so your 8 winners and 3 losers from 11 stocks is about right...cant win em all hey.




Given you apply a martingale strategy and don't care about 'value', how do you decide to close out a position at a loss rather than continue the progression of averaging down into losses?


----------



## tech/a

*Re: Personal Investment Strategy Help*



DeepState said:


> If a strategy has positive expectancy, stops and risk management will reduce expected returns.  Stops are options of a type.  Buying them comes at a price. You are paying this to the market. Their cost/value increases as your expectancy increases. In expectations terms, it's a given that stops etc will bring returns closer to zero/risk-free.  What actually happens can vary from this.
> 
> Introducing risk management which reduces expected outcomes does not diminish their value if an investor/trader is affected by the pathway taken or does not regard any outcome as proportionately good or bad.  That is, does not regard a loss of 50% to be equally bad in the sense that a profit of 50% feels as good.  It is more vital under conditions of leverage where ruin could occur despite positive expectancy.  Under these conditions (which are much more relevant than unconditional expectations as a basis for portfolio management), risk management adds value.




One area overlooked Is the removal of the initial stop loss and moving it to B/E as soon as practical.
I have found this in discretionary trading to boost my R/R dramatically. On a few stock trades Its also been much better. You cut the bleeding down by around 50%---but I would like to investigate more.

Haven't done formal testing as I'm trading futures. But is on the list.


----------



## So_Cynical

*Re: Personal Investment Strategy Help*



DeepState said:


> Given you apply a martingale strategy and don't care about 'value', how do you decide to close out a position at a loss rather than continue the progression of averaging down into losses?




While there are some martingale elements to my strategy i don't thinks its fair to describe it as martingale, i have a position size limit to my losers and in general limit my self to 2 average downs, each of about 30/40% of the original investment.

Lets not side track this thread though...i only posted my thoughts to support galumay's 3 losers from 11 result.


----------



## DeepState

*Re: Personal Investment Strategy Help*



tech/a said:


> One area overlooked Is the removal of the initial stop loss and moving it to B/E as soon as practical.
> I have found this in discretionary trading to boost my R/R dramatically. On a few stock trades Its also been much better. You cut the bleeding down by around 50%---but I would like to investigate more.
> 
> Haven't done formal testing as I'm trading futures. But is on the list.




Take it off your list. Kris could do it for you with a binomial lattice in less than an hour or two with some knowledge on thermonuclear turbulence that he probably already has.   It's a variation in options pricing.  But, without wanting to trigger off an avalanche of stuff, it looks to me that a widely held belief amongst T/A practitioners  is that stops do not come at a cost and may actually increase expected (positive) profit.  I have seen examples of the rationale in very highly regarded educators quoted liberally in this forum.  Kris can crush that if he wants as a byproduct.  I'm going to avoid that third rail.

With positive expectancy unchanged, the move to tighten the stop to B/E once in profit vs leaving it will reduce expected return.  It will skew the outcomes to be more positive (so you will notice higher average wins when a trade works), but will obviously hit the revised stop more frequently (but these don't seem painful at all). Hence, it will seem like a superior strategy on gut feel given how we generally notice things. It may even turn out that way for a given experience pathway. However, if long term return is what you want, and you are skilled, leaving the stop as it was will make you richer on average.

That all said, in real life, we get slogged by despair and give up with higher likelihood after a string of losses.  This may include wiping out net capital if the face of leverage. Anyone with skill can encounter this.  By limiting the likelihood of this occurring, we may actually end up richer in the end once we factor in probabilities of staying-in/exiting-from the game.  This is the value of insurance.  Bet with skill.  Insure what you cannot hack.  The rest is excess payment.  For you, the right amount of insurance might be B/E.  If it lifts your boat...and bank account...why not.


----------



## tech/a

*Re: Personal Investment Strategy Help*

Hmm must start or find the stops thread.


----------



## Miner

*Re: Personal Investment Strategy Help*



Joe Blow said:


> Why does this have to happen time and time again?
> 
> If you find someone objectionable for some reason, as some clearly do, then just ignore them. There's even an ignore list you can use to filter out their posts. Simple.
> 
> What I personally find irritating - far more irritating than the posting style of any particular ASF member - is the way threads are taken off topic like this. What has been achieved by making personality and posting style an issue in this thread? Nothing, of course, other than taking it off topic.
> 
> If you find another ASF member irritating, tell your Mum, or your cat. I'm sure they'll care, or at least pretend to. But posting about it here serves absolutely no purpose whatsoever. This thread is evidence of what happens when people lack the self control to bite their tongue, take the high road, and move on.
> 
> If you have something of value to contribute, feel free to do so. Otherwise please have the courtesy to allow the discussion to continue unhindered by off topic remarks and personal slights.
> 
> Thank you!



Dear Joe 

Thanks for your intervention.
My  is I already have followed to have one poster in my ignore list and when have an issue / or query which could be off topic  with a particular poster then I write the poster a PM. It works and people are very courteous to reply and that includes you Joe  . Thanks a lot.
One suggestion I may make to Mr God Father Avatar rolleyes that todays world is very sensitive on non issues. So if I am you, then will not make comments like 'mums and cats' . It could be seen as sexist, male chauvinist while comparing mum with cats leaving the other parent absent. Saying that for fun but my experience says we need to be carefully in referring genders. Sorry for the lecture .


----------



## Joe Blow

*Re: Personal Investment Strategy Help*



Miner said:


> Dear Joe
> 
> Thanks for your intervention.
> My  is I already have followed to have one poster in my ignore list and when have an issue / or query which could be off topic  with a particular poster then I write the poster a PM. It works and people are very courteous to reply and that includes you Joe  . Thanks a lot.
> One suggestion I may make to Mr God Father Avatar rolleyes that todays world is very sensitive on non issues. So if I am you, then will not make comments like 'mums and cats' . It could be seen as sexist, male chauvinist while comparing mum with cats leaving the other parent absent. Saying that for fun but my experience says we need to be carefully in referring genders. Sorry for the lecture .




Hi Miner, I was a little cranky when I made that post and I think it shows. However, I am pleased to see that this thread is now back on topic and I don't wish to be responsible for it going off topic again. Apologies for any offence caused.


----------



## Julia

*Re: Personal Investment Strategy Help*



KnowThePast said:


> P.S. Stop arguing you all, it's only a game



It might be only a game to you, but it's very much not a game when you have the responsibility of generating a full living from invested capital in retirement.

If someone is, after a working life of saving and profitable investment, able to retire at, say, 50, they'll have around another 30 years where that capital has to go on providing an income.  
How long do you think it will last if you don't prioritise protecting that capital, ensuring sufficient capital gain, in addition to yields, to account for inflation?  
If you don't have an income stream from public Super or other source, and you continually burn through your capital with losses, ultimately the option is going to be the government pension, an amount most of us would find pretty hard to live on, not to mention the lack of independence.




So_Cynical said:


> While i could care less about "value" investing we do have some things in common.
> 
> No Stops
> Patience
> Long Term Outlook
> i have found that over the last 7 years, given a 12 month time frame i have consistently chosen 1 loser for every 4 winners, so your 8 winners and 3 losers from 11 stocks is about right...cant win em all hey.



What is the relevance, in itself, of ratio between winners and losers?   If you have, say, ten stocks in your p/f and nine of them are winners, but one loser outweighs the combined profit of the nine, you're not overall profitable.

Surely what counts is the overall % gain or loss on capital invested.


----------



## galumay

*Re: Personal Investment Strategy Help*



Julia said:


> Surely what counts is the overall % gain or loss on capital invested.




Ultimately, of course that is correct, perhaps the approach outlined by So_Cynical, myself and others is akin to the point that Peter Lynch makes so often in his books, if you buy for the long term, invest in owning a share of well managed, profitable businesses that dont have too much debt etc. then you can afford to be wrong about a few of them because over time you will do so well out of the winners. 

After all the worst that can happen is you lose all of your capital in a bad choice, whereas one multi bagger in a portfolio covers the total loss in another plus delivers a capital gain. (assuming same position sizes.)

Please understand this is my reflection of the intent of So_Cynical's comments and is not a hard and fast investment strategy!


----------



## tech/a

*Re: Personal Investment Strategy Help*

Burglar
Why do you insist on drilling your opinion in when Julia has adequatly explained why it's not a game to her and people like her.
Perhaps you mean---to you it's a game.


----------



## KnowThePast

*Re: Personal Investment Strategy Help*



tech/a said:


> Burglar
> Why do you insist on drilling your opinion in when Julia has adequatly explained why it's not a game to her and people like her.
> Perhaps you mean---to you it's a game.




Relax people, Julia especially. It was a joke, no hidden meaning intended. Subtleties often get lost behind the keyboard, but come on, I thought this one was obvious enough. Again, look at my avatar - that is my serious self.

Tech, thanks for reviving the stop loss thread. I'll post up some backtest results when I get some time, we can continue the discussion there.


----------



## darkhorse70

*Re: Personal Investment Strategy Help*

just got me self some popcorn haha. At least im not getting my head bashed in this time haha.


----------



## KnowThePast

*Re: Personal Investment Strategy Help*



darkhorse70 said:


> just got me self some popcorn haha. At least im not getting my head bashed in this time haha.




Hey, you, over there, with popcorn. What do you think you are laughing at?!?


----------



## DeepState

*Re: Personal Investment Strategy Help*



KnowThePast said:


> Tech, thanks for reviving the stop loss thread. I'll post up some backtest results when I get some time, we can continue the discussion there.




Sh!take mushrooms.  Gather ye popcorn.


----------



## darkhorse70

*Re: Personal Investment Strategy Help*

haha


----------



## galumay

*Re: Personal Investment Strategy Help*

oh dear, my poor old thread is torn to bits!!


----------



## KnowThePast

*Re: Personal Investment Strategy Help*



galumay said:


> oh dear, my poor old thread is torn to bits!!




Sorry galumay.

But to be fair, after almost two years of investing, your thread was only 6 pages long. Boring.

Either trade more, or provide other forms of entertainment for us masses


----------



## Julia

*Re: Personal Investment Strategy Help*



galumay said:


> After all the worst that can happen is *you lose all of your capital *in a bad choice,



1.  So what would you do then?  You're retired, no alternative source of generating income.
2.  Why would you so put all your capital at risk?
3.  How are you guaranteeing all those multibaggers to make up for such a material loss?

Have a read through the Storm Financial thread for some understanding of the absolutely awful impact on investors of their losing everything.  According to some of these people, there have been suicides, and long term severe depression.
Similar results in various publicly broadcast accounts of people who have, via crap investments, lost all their capital.  Hardly something to regard lightly.

There's probably not much point in attempting to further contribute here, when the notion that generating an income for 30+ years from existing capital is not going to happen without proper management is dismissed as being too serious or irrelevant .


----------



## TPI

*Re: Personal Investment Strategy Help*



Julia said:


> 1.  So what would you do then?  You're retired, no alternative source of generating income.
> 2.  Why would you so put all your capital at risk?
> 3.  How are you guaranteeing all those multibaggers to make up for such a material loss?
> 
> Have a read through the Storm Financial thread for some understanding of the absolutely awful impact on investors of their losing everything.  According to some of these people, there have been suicides, and long term severe depression.
> Similar results in various publicly broadcast accounts of people who have, via crap investments, lost all their capital.  Hardly something to regard lightly.
> 
> There's probably not much point in attempting to further contribute here, when the notion that generating an income for 30+ years from existing capital is not going to happen without proper management is dismissed as being too serious or irrelevant .




Julia, when you talk about protecting capital, with your approach, if a stock you have been holding for many years and that has been providing you with a growing income stream falls in price by 10-20% over a 6 month period, for no fundamental reason other than a short-term change in sentiment or no obvious reason at all, would you have sold that stock in the interest of protecting capital? Either via a stop loss or just manually as you saw the change in share price trend? Just interested in your process.


----------



## Julia

*Re: Personal Investment Strategy Help*



TPI said:


> Julia, when you talk about protecting capital, with your approach, if a stock you have been holding for many years and that has been providing you with a growing income stream falls in price by 10-20% over a 6 month period, for no fundamental reason other than a short-term change in sentiment or no obvious reason at all, would you have sold that stock in the interest of protecting capital? Either via a stop loss or just manually as you saw the change in share price trend? Just interested in your process.



TPI, it would depend on the stock and the broad national and global environment at what % down I sold but I'd never let it go to 20%.  

The brokerage is a very small consideration and I'll always prefer to take the option of buying back in later if /when it turns round.

What you might initially assess as a short term change in sentiment might extend for some time, the downtrend becoming more pronounced in which case a small loss becomes a large loss.


----------



## tech/a

*Re: Personal Investment Strategy Help*

If I remember rightly you did exactly that with a zinc stock
Can't remember what it was.


----------



## TPI

*Re: Personal Investment Strategy Help*



Julia said:


> TPI, it would depend on the stock and the broad national and global environment at what % down I sold but I'd never let it go to 20%.
> 
> The brokerage is a very small consideration and I'll always prefer to take the option of buying back in later if /when it turns round.
> 
> What you might initially assess as a short term change in sentiment might extend for some time, the downtrend becoming more pronounced in which case a small loss becomes a large loss.




Ok, so what is the longest period of time you have held a stock with this approach?

Given the natural level of volatility most stocks display, does this approach preclude you from holding a stock for many, many years?

Also, by doing so aren't you losing the income stream provided by the stock and then at least partly relying on savings or interest on savings to provide that income stream, and interest on savings may be at a much lower rate of return?


----------



## galumay

*Re: Personal Investment Strategy Help*



Julia said:


> 1.  So what would you do then?  You're retired, no alternative source of generating income.
> 2.  Why would you so put all your capital at risk?
> 3.  How are you guaranteeing all those multibaggers to make up for such a material loss?




I think you have chosen to take the comment slightly out of context, i talked about one position becoming worthless, in a worst case scenario if some catostrophic event befell the company, not all my capital.



> Have a read through the Storm Financial thread for some understanding of the absolutely awful impact on investors of their losing everything.  According to some of these people, there have been suicides, and long term severe depression.
> Similar results in various publicly broadcast accounts of people who have, via crap investments, lost all their capital.  Hardly something to regard lightly.




Totally agree about the impact of these sort of events, not sure what that has to do with the point I was making, though!



> There's probably not much point in attempting to further contribute here, when the notion that generating an income for 30+ years from existing capital is not going to happen without proper management is dismissed as being too serious or irrelevant .




Surely the point is that there are different forms of "proper management", and you need to use one that both matches your personal investment strategy and personality. 

As I started with using Peter Lynch as an expample of the thinking that understands that not all our stockpicks will or have to be winners, consider his incredible record over many decades - without the sort of management that you use Julia. I am certainly not dismissing your approach as "too serious" or "irrelevant" - its just not for me!


----------



## Julia

*Re: Personal Investment Strategy Help*



tech/a said:


> If I remember rightly you did exactly that with a zinc stock
> Can't remember what it was.



Probably ZFX:  Zinifex.  It went from $1.80 in  2004 to over $18 in December 2006.
Merged with Oxiana, I think it was, to become Oz Minerals around 2008.  Soon after that I think there was a refinancing problem (probably part of the credit squeeze around then) and I got out which turned out to be the right decision.



TPI said:


> Given the natural level of volatility most stocks display, does this approach preclude you from holding a stock for many, many years?



I'm not interested in the time.  Just the price and the factors affecting it.



> Also, by doing so aren't you losing the income stream provided by the stock and then at least partly relying on savings or interest on savings to provide that income stream, and interest on savings may be at a much lower rate of return?



Example:
You take a position in XYZ of $100K.   
Grossed up yield is, say, 7%.
A 20% fall in your capital investment is $20,000.
I wouldn't have to think too hard about which way to go.

And if you 'lose the income stream', you're not going to allow the released funds to just fall into a black hole.
You'll reinvest elsewhere.  Always more opportunities, not necessarily in the share market.

When the GFC happened you could get 8% on a term deposit.
I'm presently looking at a commercial development of professional medical suites, 8% net yield plus potential capital gain.
Also forced sale of residential house where they urgently want the money.  A cash offer will likely see it sell well below market price, get it tidied up, in the process getting rid of a tree that's a problem to me, and sell it on.



> .....relying on savings or interest on savings to provide that income stream,



As long as total income is around twice what I need to live on, I have plenty of flexibility.
As long as capital and profits are properly protected, I'm not focused on growing the capital.  Enough is enough.

What gives me pleasure and a sense of purpose is being able to use some of it for people with fewer opportunities.  This Christmas five women and their respective children will each be in a place of their own (albeit rented) rather than huddled in fear in a refuge because they have had the bonds and advance rental paid on a house or apartment.  
And the RSPCA will have a bit more support for all the abandoned animals.



galumay said:


> Totally agree about the impact of these sort of events, not sure what that has to do with the point I was making, though!



It had to do with your statement about losing all the capital.



> I am certainly not dismissing your approach as "too serious" or "irrelevant" - its just not for me!



I have said over and over that we will all do what suits us best.  

One of the purposes of a stock forum should, imo, be to provide anyone who might be interested with the range of strategies people employ rather than conveying the impression that there is just the one holy grail and that everything else is without validity.


----------



## Ves

*Re: Personal Investment Strategy Help*



Julia said:


> As long as total income is around twice what I need to live on, I have plenty of flexibility.
> As long as capital and profits are properly protected, I'm not focused on growing the capital.  Enough is enough.



Have you ever considered capital protected annuities? I don't know much about them...  but a rough idea of what they are seems to fit a lot of the issues that you are focused on mitigating.


----------



## Julia

*Re: Personal Investment Strategy Help*



Ves said:


> Have you ever considered capital protected annuities? I don't know much about them...  but a rough idea of what they are seems to fit a lot of the issues that you are focused on mitigating.



Thank you for the suggestion.

There are many variations of annuities.  I've only had a cursory look but don't see any advantages.  The % return on capital is low, presumably on the basis that people pay extra for a guaranteed regular income.

Might be useful for people who cannot or don't want to manage their own investments, but certainly not attractive enough to persuade me to hand over a lump sum of capital to anyone.  No firm or individual will have my best interests at heart as much as I will on my own behalf.


----------



## Bill M

*Re: Personal Investment Strategy Help*



Julia said:


> Might be useful for people who cannot or don't want to manage their own investments, but certainly not attractive enough to persuade me to hand over a lump sum of capital to anyone.  No firm or individual will have my best interests at heart as much as I will on my own behalf.




I agree, I was doing some homework on the Challenger website about these and it is very difficult to see what percentages they are paying. They quote returns on capital but I find it more useful to quote percentages.

Ves, question for you about annuities. Why is it so hard to find exact percentages and duration's of annuities on their websites? Why wouldn't they just be up front and put a table of returns up on their website? Make it easy and simple for all to see, are they hiding something?


----------



## TPI

*Re: Personal Investment Strategy Help*



Julia said:


> Example:
> You take a position in XYZ of $100K.
> Grossed up yield is, say, 7%.
> A 20% fall in your capital investment is $20,000.
> I wouldn't have to think too hard about which way to go.




Thanks, so if you exited XYZ well before this after say a 10% fall in value and crystallise a loss then, but XYZ 3 months later is now worth $110k after a change in short-term sentiment, you are happy with this outcome in trying to protect capital?

If you had done nothing and ignored the short-term noise your capital may have grown instead?


----------



## Triathlete

*Re: Personal Investment Strategy Help*



Bill M said:


> I agree, I was doing some homework on the Challenger website about these and it is very difficult to see what percentages they are paying. They quote returns on capital but I find it more useful to quote percentages.
> 
> Ves, question for you about annuities. Why is it so hard to find exact percentages and duration's of annuities on their websites? Why wouldn't they just be up front and put a table of returns up on their website? Make it easy and simple for all to see, are they hiding something?




What about inflation linked corporate bond such as Sydney Airport 2030 
they are paying 3.7440 + CPI 2.5% = 6.24%
Might be better than annuities from insurance companies as no ongoing fees.

Look at www.fiig.com.au

I am not making any suggestions but maybe another option


----------



## Ves

*Re: Personal Investment Strategy Help*



Bill M said:


> Ves, question for you about annuities. Why is it so hard to find exact percentages and duration's of annuities on their websites? Why wouldn't they just be up front and put a table of returns up on their website? Make it easy and simple for all to see, are they hiding something?



Absolutely no idea.  All I know is that you can choose the term,  and also whether you want the capital returned as a lump sum at the end,  or progressively each payment,  or a mixture of both.   There's probably a lot of possible scenarios,  hence the lack of any calculators or tables.

Annuity providers profits would appear to come from the excess return that they can achieve with your funds above the agreed rate of return at the start of the contract they made with you.    Since they bear all of the market risk by guaranteeing your capital,   you could assume your return would be low to compensate.

I guess the difference between this & giving your money to a managed fund,  is that their profits come from their performance in the market,  rather than FUM fees.   Someone may want to confirm this.

Any financial planners here who can shed some light?   DeepState might know something?


----------



## tech/a

*Re: Personal Investment Strategy Help*

Ive only had one dealing with annuities

My past Father in law.
One thing I noticed was that he used equity capital in his Managed annuity to 
bring his drawings up to the amount required each (insert period). So if things were good
'he wouldn't be drawing on funds infact funds could be added.
If things were bad then he would be eroding capital.

It was worked out in someway that he wouldn't (Or very unlikely) run out of funds.


----------



## RandR

*Re: Personal Investment Strategy Help*



Ves said:


> Absolutely no idea.  All I know is that you can choose the term,  and also whether you want the capital returned as a lump sum at the end,  or progressively each payment,  or a mixture of both.   There's probably a lot of possible scenarios,  hence the lack of any calculators or tables.
> 
> Annuity providers profits would appear to come from the excess return that they can achieve with your funds above the agreed rate of return at the start of the contract they made with you.    Since they bear all of the market risk by guaranteeing your capital,   you could assume your return would be low to compensate.
> 
> I guess the difference between this & giving your money to a managed fund,  is that their profits come from their performance in the market,  rather than FUM fees.   Someone may want to confirm this.
> 
> Any financial planners here who can shed some light?   DeepState might know something?




Hi guys,

From the position of an annuity provider like challenger and for why they can't provide rates on their website, simply think of them as an insurance company and how an insurance company won't provide a 'rate' without gathering some simple details first before offering you a 'premium' and a contract to accept.

So like an insurance company whenever you enter a contract to purchase one of their products they need to do a little 'underwriting'. For them it's not just a simply case of paying you an interest rate and then going away and making a higher return on investment for a year or a couple of years. They need to calculate and balance their investment portfolio and books and thus return offered depending upon the type of contract they are signing. (eg, if you sign up for a lifetime annuity that is linked with CPI, essentially the annuity provider challenger etc are doing some simple calculations around your expected life left and their forecast for CPI growth over that period of time prior to offering you the 'interest rate' on top). So they are making a bet that you will live for a certain amount of time and inflation will be a certain rate when calculating the interest return they will offer you. It is fairly important for a company signing contracts such as these to get their assessments around longevity and inflation correct, if they get them wrong and find their annuity book overexposed to these kind of deals things could turn sour quite quickly for them.

So someone who tries to sign up for a lifetime annuity in their 30's should be obtaining a rate different to someone who is in their 50's. The size of annuity contract you are signing could also have an impact on the rate offered, they won't offer the same rates to someone investing 10k vs 500k etc. If not a lifetime annuity the length of term will have an impact on the rate offered. It also could obviously differ if the annuity is to be in superannuation or with funds not in super.

Annuity terms can be fairly negotiable and the variables and time of signing ensure that there is no standard rate that they can provide on a website etc, so each can be tailored to the particular persons needs. 

The truth is we fairly rarely use them (at a rough guess it probably only comes under consideration for 1 in 50 of the clients we see and we probably only include them as part of end strategy in about 1 in 400 of the clients we see), obviously the loss of liquidity and ability to move your capital once you are in can be difficult to justify and overcome if there are other low risk products that suit your needs and offer a comparable or better return. I do know that our business has a deal with Challenger to provide our clients slightly higher rates on quoted annuities (I believe this to simply be an extra 0.25% on the contract). We are fee for service and charge 0 commissions on any product. I would suggest if you are interested in the idea of annuities but don't know if the returns will be attractive or not, simply use their websites or call them to obtain a couple of quotes (you will probably have to put up with a follow up call or two from them after to try to close the deal).

 But if you can put up with that inconvenience it will allow to see what rates they will currently offer you. I would suggest if you think it looks like a good deal for you to come seek the help of a financial adviser, 1. to see if it is really the right thing for you to lump into an annuity and make sure there are no other alternative strategies to consider. 2. to simply see if the quotes they can obtain on your behalf can get you a better deal. You could probably ask them before paying or seeing if they can get better than market annuity rates, which could make your outlay for seeing the advisor pay back quite easily over time.


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## Bill M

*Re: Personal Investment Strategy Help*

^^^Thanks for that detailed reply RandR, that gives us all a much better understanding of annuities, cheers.


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## tech/a

*Re: Personal Investment Strategy Help*



Bill M said:


> ^^^Thanks for that detailed reply RandR, that gives us all a much better understanding of annuities, cheers.




Yes thanks Randy

Is it common for the Annuity to use base capital funds.
In the case I mentioned he died before the funds ran out.

It appears though that as he got older more of the initial capital was distributed to him
through the Annuity.
A cursory look didn't seem to reveal much more than a small interest ---benefit---payment added to his own capital and a quarterly payment.

Seemed very conservative and just really a funds organizer!


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## Ves

*Re: Personal Investment Strategy Help*



Bill M said:


> ^^^Thanks for that detailed reply RandR, that gives us all a much better understanding of annuities, cheers.



+1


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## RandR

*Re: Personal Investment Strategy Help*



tech/a said:


> Yes thanks Randy
> 
> Is it common for the Annuity to use base capital funds.
> In the case I mentioned he died before the funds ran out.
> 
> It appears though that as he got older more of the initial capital was distributed to him
> through the Annuity.
> A cursory look didn't seem to reveal much more than a small interest ---benefit---payment added to his own capital and a quarterly payment.
> 
> Seemed very conservative and just really a funds organizer!




Yes pretty common. Mostly it would be used as part of the income stream where there is an inability for the capital to generate a sufficient income stream on it's own.

IE: Jim decides he needs a 'guaranteed' income stream of $30,000k but ideally would prefer to have a bit more and earn somewhere around $50,000k per year in retirement. Jim does not have sufficient capital to achieve this income stream solely from interest on an annuity, so he chooses an annuity with a gradual return of his capital + interest over a 30yr term to enable him to obtain the $30k he needs, than uses a diversified portfolio that is still designed to be fairly low risk but will have the ability to have gains to provide the additional money that he would ideally like to get to the $50k.

I can assure most people here, including yourself tech if you obtain an annuity quote you most likely *will not * be impressed by the return offered as opposed to other investment options. The underlying investment manager (like challenger) can simply not offer up a capital guaranteed income stream potentially for someones lifetime or linked to annuity and take that money and invest in a high risk portfolio. (which could become problematic if something goes wrong) The underlying investments they make being fairly low risk overall themselves will be heavily influenced by the ongoing cash rate.  (IE: If you talk with most of the large investment managers right now they will honestly tell you they see a historically low return environment in most asset classes going forward in the near future, they simply do not believe they will achieve historically high levels of returns in most traditional asset classes with underlying interest rates so low) So with this in mind and with the current interest rate environment being so low not only here in Australia still but in a lot of the world, I can assure 99% of the people on this forum will not be blown away or impressed by an annuity offering if they obtain a quote. Also always keep in mind just because the annuity is capital or income 'guaranteed' does not mean it is without risk, Although extremely unlikely if the managers of these companies do their job and contain risk adequately. Tbh the more relevant risk you need to think about if you do not inflation link your annuity will be inflation risk. IE: deciding you need a $30k annuity stream to survive in 2014 might be fine now, but what is your $30k a year going to do for you in 10, 20 or 30years.  The biggest challenge to a long term successful retirement that is more comfortable than social security is being able to have your income stream source grow with inflation without running out of puff too quickly.

I don't see annuities as being the 'sole' answer, but they can definitely have their uses.

Can be rather handy if someone in the later years of their life really needs access to finance for whatever reason (if they are still staying in business of some form/developing property etc) has the asset base to satisfy a lenders criteria but if the lender won't help them because of the perceived lack of income. Even a small annuity could just do the trick for the lender to release the purse strings.


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## galumay

*Re: Personal Investment Strategy Help*

Added SGN to the portfolio, had been on the watchlist for some time, got in at 91c early this week, closed on friday at 98c.


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## tech/a

*Re: Personal Investment Strategy Help*



galumay said:


> Added SGN to the portfolio, had been on the watchlist for some time, got in at 91c early this week, closed on friday at 98c.




Why then didn't you say so "Earlier this week"---(in the last 2 hrs of Tuesday)?
91c is at the very low of the last 52 weeks.
Very sus!---guess its Seemingly safer to call after a 10% rise.

Not one this techie would have bought---Not yet!


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## galumay

*Re: Personal Investment Strategy Help*



tech/a said:


> Why then didn't you say so "Earlier this week"---(in the last 2 hrs of Tuesday)?
> 91c is at the very low of the last 52 weeks.
> Very sus!---guess its Seemingly safer to call after a 10% rise.
> 
> Not one this techie would have bought---Not yet!




Fair crack of the whip! I was flying out to NZ on Wednesday morning, staying at my brothers farm, when I placed an order at 91c on tuesday morning, it was filled late in the day. 

I then thought this morning that i had yet to add that holding to my thread, didnt expect to be attacked for doing so!


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## Triathlete

*Re: Personal Investment Strategy Help*



galumay said:


> Fair crack of the whip! I was flying out to NZ on Wednesday morning, staying at my brothers farm, when I placed an order at 91c on tuesday morning, it was filled late in the day.
> 
> I then thought this morning that i had yet to add that holding to my thread, didnt expect to be attacked for doing so!




Keep an eye on it galumay, from my own technical view the weekly and monthly charts are still down and only the daily chart is up. I would feel more confident if it closed above $1.20 on the weekly chart as this is a 50% retracement level of a previous range and would be just one technical indication  for another run towards $1.65.It has strong support at around $0.76 so it could still come back here and test this support just be aware.


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## tech/a

*Re: Personal Investment Strategy Help*



galumay said:


> Fair crack of the whip! I was flying out to NZ on Wednesday morning, staying at my brothers farm, when I placed an order at 91c on tuesday morning, it was filled late in the day.
> 
> I then thought this morning that i had yet to add that holding to my thread, didnt expect to be attacked for doing so!




Fair enough.
Looked really sus.

But hey to get the *EXACT* bottom (Currently) on your buy stop order---exemplary.

Personally think its testing the gap.
Fundamentally I read the  Earnings update of 15/12 as soft.


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## galumay

*Re: Personal Investment Strategy Help*

half yearly report has me +2.50% total returns versus the AXJO at 2.87% - all taken with a grain of salt as a long term investor.


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## qldfrog

*Re: Personal Investment Strategy Help*



galumay said:


> half yearly report has me +2.50% total returns versus the AXJO at 2.87% - all taken with a grain of salt as a long term investor.




not bad, after last two days I  end up for my australian share play at a 1.09% loss 1/07 to 31/12 and not that unhappy as it was break even two days ago
obviously, I could also have put the lot in term deposit and be 1% ahead after tax....


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## galumay

*Re: Personal Investment Strategy Help*

Well another month has passed, obviously the benchmark performed pretty well, up 3.28% on PP and up 6.25% for the FY.

I continued to suffer the adverse winds in the mining sector, so overall PF is up 5.45% for FY, slightly trailling the benchmark.

I also realised I had made a mistake in the way I have been calculating my performance - which led to a significant under reporting of performance. A nice mistake to find!

What I had been doing is increasing the initial amount invested as I purchased more shares, but I was reducing the income component by the amount I had reinvested into more shares. It was one of those errors I made at the start of setting up my spreadsheet and then didnt pick up until now. 

I only picked up because I was running a Time Weighted Internal Rate of Return model to compare that as a benchmarking indicator and there was such a large discrepency that I realised I must be doing something wrong in my calculations!


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## themeinvestor

Hi All

Just personally, I look for themes when I invest.

My view is the retail investor can't beat the professionals and the robots without a long term view.

The professionals will arbitrage any value in the market long before a retail investor will.

Thoughts?

Happy investing!


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## galumay

themeinvestor said:


> Hi All
> 
> Just personally, I look for themes when I invest.
> 
> My view is the retail investor can't beat the professionals and the robots without a long term view.
> 
> The professionals will arbitrage any value in the market long before a retail investor will.
> 
> Thoughts?
> 
> Happy investing!




Hi you, not sure why you popped up in my thread, but...

I hope you find a theme!

My view is the retail investor doesnt need to 'beat' the pros and bots, there is room for everyone to play the game!

The pro's have shown a remarkable consistency over generations of having not the slightest idea of what value is, let alone arbitraging it. Do some analysis of every boom and every crash.


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## lemongrass1

Any updates, galumay?


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## galumay

lemongrass1 said:


> Any updates, galumay?




Not really, I havent bought anything or sold anything, i used to reinvest the dividends so I could post about that, but now i put the dividends into my SMSF as its more tax effective to invest them in there.

The only other general comments I would make is that CDA are a nice turn around story, I averaged down into these and now they are not far off being in the black again. In my mind it shows the importance of buying companies where the fudamentals are good enough to survive a business disaster. 

ITL are still in the red, its just a matter of time before the market reprices this company, its worth so much more than where it is. 

NWH, obviously the big drag on the portfolio, I clearly paid way too much for it, wish I was buying it now at sub 20c!! I believe it will be a long term turn around story, but you need big hairy, contrarian balls to have a position in this company! 

Because I am fully invested and the divvy stream goes to the SMSF its not likely that I will post here very frequently, but always happy to discuss strategies, philosophies and so on!


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## sydboy007

well worth a read if you're a semi passive value investor

http://blog.alphaarchitect.com/2015...cision-when-selecting-a-value-investing-fund/



> It is a strange, and somewhat tragic reality that investors’ “timing” behavior is not reflected in the time-series performance numbers of value investing funds. One wonders if people would do better, and be less active, if they knew how much they were hurting themselves through their timing efforts, and all their buying and selling. Probably not. But maybe that’s a good thing for committed, hard-core value investors, since this may be a source of sustainable alpha in the value anomaly. Under this interpretation, in a sense, value works because value underperforms at times, and return-chasing fund investors get discouraged and leave the strategy, setting the stage for outperformance for those who remain.


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## galumay

sydboy007 said:


> well worth a read if you're a semi passive value investor
> 
> http://blog.alphaarchitect.com/2015...cision-when-selecting-a-value-investing-fund/




Thanks sydboy007, an interesting article. I hadnt seen that blog before so added to my (lengthy) reading list.


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