# Buy and hold vs. active portfolio management



## Value Collector (29 September 2021)

I increased my FMG holding today, I think once we are over the price drop shock, and FMG again demonstrates it’s earning power at sub $100 Iron Ore the shares will be worth a lot more.

Of course in the mean time there may well be choppy waters, but that can largely be ignored if you have a long holding period.


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## tech/a (29 September 2021)

Value Collector said:


> I increased my FMG holding today, I think once we are over the price drop shock, and FMG again demonstrates it’s earning power at sub $100 Iron Ore the shares will be worth a lot more.
> 
> Of course in the mean time there may well be choppy waters, but that can largely be ignored if you have a long holding period.




i understand where you are coming from personally.
I think it was you that purchased 20000 of these at around $9 and as I saw prices move to $20+ 
thought it was an excellent decision. but as you know i just cant swallow giving back $200k

i see two issues in front of FMG
(1) it needs a market 
(2) The AUD is likely to rise long term.


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## Value Collector (29 September 2021)

tech/a said:


> i understand where you are coming from personally.
> I think it was you that purchased 20000 of these at around $9 and as I saw prices move to $20+
> thought it was an excellent decision. but as you know i just cant swallow giving back $200k
> 
> ...



I did purchase some at $9 but the bulk of my holding is 200,000 shares purchased less than $3, and with the last 2 dividends they have more than returned the $3 to me.

I know you are more a a trader, and as such the daily swings up and down in the market make you feel richer or poorer by the hour, but that’s not how I view it at all.

I really measure my personal wealth by how I feel about the underlying assets I own, not the market price they are trading for at any minute.

I think of it more like buying a farm, and making the investment based on how much corn will be produced on average per acre, sure the price of corn will fluctuate and some times their will be a drought, but the daily price per acre of farmland doesn’t really affect you unless you are planning on buying or selling that day.

if you business is based around trading acres of farmland regularly you care, but if your business is growing corn you don’t care.


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## tech/a (29 September 2021)

Value Collector said:


> I did purchase some at $9 but the bulk of my holding is 200,000 shares purchased less than $3, and with the last 2 dividends they have more than returned the $3 to me.
> 
> I know you are more a a trader, and as such the daily swings up and down in the market make you feel richer or poorer by the hour, but that’s not how I view it at all.
> 
> ...




yes I do hear you 
But we are definitely wired differently 
Giving back 2 million in 3 mths isn’t in my DNA


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## Value Collector (29 September 2021)

tech/a said:


> yes I do hear you
> But we are definitely wired differently
> Giving back 2 million in 3 mths isn’t in my DNA



You see I don’t feel I have given anything back, I still own the same mining assets in the Pilbara, and I believe they are worth more than the price I could have sold them for 3 months ago, and am happy to continue holding banking the income they generate, while I wait for their true value to be recognised, I don’t feel poorer just because the market disagrees with me temporarily. 

if I had of had a trading mentality, I am sure I would have sold out multiple times between $3 and $25, I might have even “cut my losses when they dropped to $1.70 after I bought them for $3.

I doubt I would have timed all the trades between $3 and $25 perfectly, I would have missed some of the run ups, missed some dividends, paid extra trading fees and taxes etc, that all affects the compounded return I could have achieved, and wiped out the $2million you say I have handed back, those missed returns get hidden because the don’t show up on a balance sheet, but are very real, and could easily out weigh the recent drop in market price of my holding.

My strategy works for me, if what you do works for you good, if anything the wild fluctuations caused by traders and short term thinkers is what has allowed me build my fortune, I think if I allowed my self to fall into short term thinking it would not only decrease my over all return over time, but it would force me into a more hyper active management style which I would enjoy, and it would have a negative affect on my stress levels and life style.


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## notting (29 September 2021)

You took in a lot of tax free dividends over that time too


Value Collector said:


> You see I don’t feel I have given anything back, I still own the same mining assets in the Pilbara, and I believe they are worth more than the price I could have sold them for 3 months ago, and am happy to continue holding banking the income they generate, while I wait for their true value to be recognised, I don’t feel poorer just because the market disagrees with me temporarily.
> 
> if I had of had a trading mentality, I am sure I would have sold out multiple times between $3 and $25, I might have even “cut my losses when they dropped to $1.70 after I bought them for $3.
> 
> ...



You took in a LOT of tax free dividends over that time too.  On a stock like FMG that's a big deal.  The last one was about the size of what you originally paid!  Evens the ledger a bit especially when you take into account capital gains tax's that trend following this one would have cost you at various times.
People have forgotten that FMG was so cheap in the first place because of a debt issue which it now doesn't have.  It's gotta be worth $20 regardless.
Then this this.

"Macquarie researchers have an outperform rating on all three stocks BHP RIO FMG, saying in a note to clients that they remain positive on companies with iron ore exposure.
The equities team said systemic risks caused to the iron ore price by property developers in China are low, and that if you look at the shipping volumes of Australian iron ore miners during September, the numbers are actually increased."
I've been buying a bit of them all and will wait for the MACD cross to go harder.
I'm glad you never sold Value Collector I worried I might have put you off when we had our conversation that I remember fondly.!

Tech/a's input is fantastic as usual tho I find. Just remember tho you would have to have made far more than the 2 million to have it to give back!  Which according to technical alone let alone it's necessary accompanying positions sizing for that strategy to work is highly unlikely.


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## tech/a (29 September 2021)

Value Collector said:


> I did purchase some at $9 but the bulk of my holding is 200,000 shares purchased less than $3, and with the last 2 dividends they have more than returned the $3 to me.
> 
> I know you are more a a trader, and as such the daily swings up and down in the market make you feel richer or poorer by the hour, but that’s not how I view it at all.
> 
> ...



 Some of the most dangerous financial thinking I’ve ever seen.

I trade,I invest,I run a company.In every endeavour the goal is profit.

If I had your farm had a bumper crop and watched it rot rather than reap it 
I’d be a crap farmer .I’d fail to farm. I’d still have the farm.I’d be negligent.

From day to day your liquidated value of all your assets is your net wealth.
if you see FGM fall $1 on your 200,000 shares you just watched $200,000 
wiped off your net wealth it’s YOUR money.

That 2 million you left un reaped could today buy another 200,000 FMG and have 
given you the opportunity of reaping 400,000 future dividends.

Sorry V/C but I fail to see any logic in your stance. It really does leave me speechless.
( not quite ).

Holding the view that you haven’t lost anything because you still own 200,000 share regardless of market value is the mantra of the failed trader who sticks trade after trade in the bottom draw.

If you or anyone else seriously thinks this way ya gotta fix it!


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## KevinBB (29 September 2021)

Hello @tech/a 

I think you're being a bit tough on @Value Collector . 

There are many investors who buy into a business as a long term investment. Some even use their own funds to start their own business. They could own a small percentage of that business, or be the sole proprietor. They are in it for the long term, to reap benefits down the track, which could be many years away.

Not everyone is a trader, as you seem to be. You have found your niche, and from the quality of your posts I see here on this forum, you seem successful at what you do. Congratulations.

However trading isn't for everyone, me included.

KH


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## notting (29 September 2021)

Hey tech/a Why don't you give template example of how you'd have played it from $3 using a designated technical buy signal and trailing stop loss. I suspect there would be at least 3 entries and stop losses from then for you. Be interesting to see how much you make compared to having held a pretty incredible stock with ff divs included.
Note there is 12 div payments since that time probably giviing back tax free more than 7% plus franking credits per annum.


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## tech/a (29 September 2021)

KevinBB said:


> Hello @tech/a
> 
> I think you're being a bit tough on @Value Collector .
> 
> ...



 Kevin 
It appears I have this new label of trader 

I too hold long term Share portfolios
Hold properly 
Own my own company and portions of 2 others 

So don’t pigeon hole this duck 
My statement above is not meant for those who don’t get it 
Those that do will see it clear as day 

V/C let a 2 million windfall pass by in the name of long term investment and dividends.
It may not ever happen again 
Hiinvestment will take years to re coup that 2 million and may never recoup it.
The opportunity of realising THAT windfall is long gone.

It just a very flawed strategy 
Fluctuations sure 
Watching as an investment halves 
That’s just not smart


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## tech/a (29 September 2021)

notting said:


> Hey tech/a Why don't you give template example of how you'd have played it from $3 using a designated technical buy signal and trailing stop loss. I suspect there would be at least 3 entries and stop losses from then for you. Be interesting to see how much you make compared to having held a pretty incredible stock with ff divs included.



 Notting 
I already have 
I saw this at $24 never looked at FMG.
I called the play then 
I’ve already shown the two things I’d have done if it was my 2 million in reply to V/C 

Anyone who lets 2 mill slide like that needs a reality on investment check 
Sorry!!


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## over9k (29 September 2021)

tech/a said:


> Notting
> I already have
> I saw this at $24 never looked at FMG.
> I called the play then
> ...



To play devil's advocate here duck, if you had 2 mil in FMG, would you have been confident enough in your analysis that you posted to have bailed when you said to/said you would have?

I wouldn't personally have had 2 mil in FMG alone but that's a different discussion.

I've been pretty confident of my own analyses in the past but confident and 2 million of my own money confident are two different things.

I've never made a single trade over 5 figures.


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## notting (29 September 2021)

over9k said:


> To play devil's advocate here duck, if you had 2 mil in FMG, would you have been confident enough in your analysis that you posted to have bailed when you said to/said you would have?
> 
> I wouldn't personally have had 2 mil in FMG alone but that's a different discussion.
> 
> ...



Tech/a knows how to manage risk.  He would definitely have gotten out.


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## notting (29 September 2021)

tech/a said:


> Notting
> I already have
> I saw this at $24 never looked at FMG.
> I called the play then
> ...



Sorry I missed that.
All I saw was a chart anticipating a bottom at around 15 with a bounce then a possible fall to 8-10.  No trades! No money made.


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## tech/a (29 September 2021)

notting said:


> Sorry I missed that.
> All I saw was a chart anticipating a bottom at around 15 with a bounce then a possible fall to 8-10.  No trades! No money made.



 So I called it in real time 
not good enough for you 
YET you want me to mark up a theoretical FMG trade chart 
in hindsite 
Strange.
Ive made my point on with the FMG saga.


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## Value Collector (29 September 2021)

tech/a said:


> Some of the most dangerous financial thinking I’ve ever seen.
> 
> I trade,I invest,I run a company.In every endeavour the goal is profit.
> 
> ...



As I said we are not likely to agree, you do what works for you, and I will do what works for me.

As I said if I had a thought process more like you, I don’t think I would have held from $3 to $25 in the first place, and I certainly wouldn’t have made the big value bets to begin with.

I have made my way by focusing on value, eg finding value and buying it, not through hyper active management.

In the farm example. FMG’s mines are the farm, the Iron Ore is the corn, and the share price is the farm price, I am not letting the crop rot in the field, we are shipping it to China and making decent cash flows doing it.


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## Value Collector (29 September 2021)

tech/a said:


> Kevin
> It appears I have this new label of trader
> 
> I too hold long term Share portfolios
> ...



I have actually watched plenty of my investments half in value, it’s no biggy, FMG has done it a few times in the last 8 or so years I have been investing in them.

As I said before I watched FMG drop from $3 to less than $1.5, the then recovered to $6 but later dropped to $3, the recovered back to $12.50 but later dropped to $8.50, etc etc all the why you to $25, this recent fall is just another cycle.

It’s not limited to FMG at all, I bought CBA at $12.50 watched them rise to $50 and then watched them fall to $23, watched them recover to $90 before watching them drop to $75 they are now $104, but owe me nothing because they have paid about $80 in dividends compared to my $12.50 entry price.

Even juggernauts like Berkshire Hathaway have routinely fallen by 50% in market value several times in their life, if you have the skills to identify great companies, and buy them cheaply, you don’t need to fret about market falls from time to time.


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## Value Collector (29 September 2021)

@tech/a I guess you are saying that Charlie Munger (and warren Buffet) are terrible investors to.

Listen to the first 1 min of this video to hear Charlie’s thoughts on long term share holding and market falls of 50%.

Berkshires share price has just fallen from about $100 to $50, today it’s $276, Charlie was right to stay calm, judge the stock by the companies they owned and not be phased.


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## tech/a (30 September 2021)

Value Collector said:


> @tech/a I guess you are saying that Charlie Munger (and warren Buffet) are terrible investors to.
> 
> Listen to the first 1 min of this video to hear Charlie’s thoughts on long term share holding and market falls of 50%.
> 
> Berkshires share price has just fallen from about $100 to $50, today it’s $276, Charlie was right to stay calm, judge the stock by the companies they owned and not be phased.





V/C I’ll take a look and no I’m not saying that but as for Buffett he BUYS the whole company then turns them into juggernauts. Vastly different to what you do. When I read your story I really do shake my head in dis belief! Munger and Buffett aren’t Passive they are pro active in their BUSINESS of investment.

Ill look at both FMG and CBA over the last 15 years and complete a simple exercise 
Thanks for your view.


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## Value Collector (30 September 2021)

tech/a said:


> V/C I’ll take a look and no I’m not saying that but as for Buffett he BUYS the whole company then turns them into juggernauts. Vastly different to what you do. When I read your story I really do shake my head in dis belief! Munger and Buffett aren’t Passive they are pro active in their BUSINESS of investment.
> 
> Ill look at both FMG and CBA over the last 15 years and complete a simple exercise
> Thanks for your view.



check out CBA since 1996, because that has been my holding period, as I said $12.50 buy in but nearly $80 in dividends and a $100 share price now, although there has been plenty of traders that have lost money on it over that time by jumping in and out.

Buffet passively invests in plenty of companies, for example they bought a 5% stake in Coca-Cola and  American Express in the 80’s and have never sold a single share, although looking at the chart both companies have had big fluctuations, they also now own 5% of Apple which dropped for a while after they bought in but which know they have a large gain on.


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## over9k (30 September 2021)

To throw another wrench into this particular works, buy opportunities are WAY easier to find than sells.


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## tech/a (30 September 2021)

V/C Ill spend some time on this.

I take note of your comment that you may never have re entered if you had sold on a down turn. Im looking into a rule based method that
could be used in conjunction. It may look as if I have Blinkers on but Im happy to be educated. Your making a solid attempt without making a solid attempt! I also agree that you/I or anyone will never get timing perfect so what ill be looking at wont be prefect but the aim is practicality.
There are other issues like tax to consider I also acknowledge.
Have you *EVER* been caught with an investment that has just not performed?

Thanks Again.



> To throw another wrench into this particular works, buy opportunities are WAY easier to find than sells.




I dont know about that--there are indications--what I* will be looking for are pre cursers to larger falls* which come early enough to take advantage of and the same with buy opportunities. For $2 million Id be employing Quants to sort this issue out. Just happens I have a few
that I may throw the question to.


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## Value Collector (30 September 2021)

tech/a said:


> Have you *EVER* been caught with an investment that has just not performed?
> Thanks Again.




Yes, But it’s important to remember my strategy is not to buy and hold forever at all cost ignoring the facts, I have no problem selling.

I watch my investment portfolio very closely and would not hesitate to sell if my opinion of the company’s long term performance changed or if I realised I was wrong about my calculations. But the difference between me and you is that I am looking at the company from a long term fundamental business perspective, I am not making decisions based on share price movements, I am strictly judging the company fundamentals.


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## tech/a (30 September 2021)

Yes I certainly understand that.
You have your own exit and risk strategy based
on your fundamental view. While there is no interest on your
side of the ledger I have an interest in my Super Investing and I guess
you'd call it trading.  I have some which I've held for years but as you
know am now Flat. Its a question of mine really prompted by your
approach that Id like to answer more for me.


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## tech/a (2 October 2021)

Option 2 
Still in market with a liquidated value of 2.9 million

I don’t know but I see option 1 as more appealing if I bought now I’d have 670,000
Share v opinion 1 200,000

mill be collecting 3  x. Dividends 
Just from managing my investment 
Nothing difficult or complicated!

But hey I am wired differently


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## Value Collector (2 October 2021)

tech/a said:


> Option 2
> Still in market with a liquidated value of 2.9 million
> 
> I don’t know but I see option 1 as more appealing if I bought now I’d have 670,000
> ...




but you didn’t actually buy the 200,000 shares to begin with and didn’t actually carry out those trades, I did actually buy the 200,000 shares sub $3 and have actually collected about $8 in dividends, while also holding the shares which are still worth $14.50, which gives me a compounded annual return of 27% on the at initial $600,000 investment, that’s trumps most professional investment managers, not to mention that if I am correct and FMG share price recovers in the next 18 months or so, plus dividends, that average return will be closer to 50% for the 8 years.

I think anybody could work out profitable entry and exit points based on historical data, real time it’s a little different.

we are both wired differently, what has been your actual compounded return over the last 7 years? It’s easy to say I could have tweaked my strategy to improve my return, but unless you have achieved greater average results, over the long haul, then it’s just talk.

for comparison sakes, that 27% return I have achieved beats Berkshire Hathaway historical return on investment since inception of 21%, but hey maybe you are right and I am just clueless with a flawed strategy.


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## tech/a (2 October 2021)

Hang on 
I was asked to manage FMG trade from around 3$
I’ve set some simple rules that have been applied to the chart and can be applied to any chart 
It’s not pie in the sky it’s a well known method which is featured in Radge’s book . 

I didn’t trade this one but used it a lot over 20 years 
I’m not being a smart arse 
Bur making a point about proactive trade management

You can apply this management to any blue chip  trade
Sorry if it offends but it’s a legitimate trade management method 

Someone may benefit


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## Value Collector (2 October 2021)

tech/a said:


> Hang on
> I was asked to manage FMG trade from around 3$
> I’ve set some simple rules that have been applied to the chart and can be applied to any chart
> It’s not pie in the sky it’s a well known method which is featured in Radge’s book .
> ...





tech/a said:


> Hang on
> I was asked to manage FMG trade from around 3$
> I’ve set some simple rules that have been applied to the chart and can be applied to any chart
> It’s not pie in the sky it’s a well known method which is featured in Radge’s book .
> ...




You have made some pretty critical comments in regards to my style, I am just pointing out that even with what you see as being a big mistake, I have still averaged 27% per year compounded for 7 years on the trade, which is a fantastic result, which I don’t think many people regardless of style regularly achieve.

So even though you didn’t actually make the FMG trade and are just playing with the chart with the benefit of hindsight, you mentioned that you have done the same strategy on other stocks, I am interested to know whether there are other stocks over the last 7 years you have actually generated a return close to 27% compounded? Eg have you ever pulled off anything like what you say you could have done with FMG in the real world.


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## againsthegrain (3 October 2021)

The only way from here would be to put both styles head2head, say 1 year time frame.  VC holds, collects divs and rides the waves.
Tech trades or paper trades documenting his positions in and out as he does them. After 1 year we compare who has a bigger di... portfolio


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## Value Hunter (3 October 2021)

I just want to clarify everybody I have never owned shares in Fortescue metals. I believe that when Tech/a mentioned my name on the previous page he meant Value Collector but he wrote my name by mistake. 

And I agree with Value Collector about the argument of hindsight vs real world. When it happened in real time Tech/a did not buy at $3 and if he saw the chart when it was actually $3 he would have likely said its a weak chart, etc.

By the way Value Collector any thoughts on what the long-term earnings per share and dividends per share of FMG would be under a U.S. $75 per tonne average long-term iron ore price?


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## tech/a (3 October 2021)

Sorry VH my mistake.

@Value Collector Im not having a go at your investment style 
It’s very similar to just about every buy and hold long term investor.
your return is way over any fund management I’ve seen.

The hindsite argument is mute. Any simple rules based method such as 
the one I’ve shown can be shown on any chart. There is no subjectivity 
it’s just a single 20%  retracement or 20% increase. It’s not new—I didn’t invent it.
I have used it. In fact when your out your cheering for a plummet in price
your going to cream it on re entry!

It can be implemented immediately on any long term purchase.Many use 
it as a method. Radge wrote a whole chapter on it in his book 
“Un holy Grails” It’s worth reading.

In this case and a great number of others, over the same 8 year period 
you’ll end up with 
(1) A lot more shares
(2) A lot more dividend payments
(3) A lot more Capital growth on your investment 
(4) A lot more Control 
(5) A lot less risk.

All for around 12 trades ( in this case ) over around 8 years

The few that end up a total disaster will be limited to 20% off it’s high 
the 20% increase from a low will stop you buying a falling knife.
it won’t eliminate ALL risk but it will help in all aspects of a long term 
investment.

I’m not trying to change you @Value Collector —- you’ll invest as you do.
BUT someone may look at the simplicity and find merit in their investing.

If I get a chance I’ll do similar on CBA. For interest.


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## over9k (3 October 2021)

How is this even an argument? The very purpose of active management is to end up with more than you would have by doing nothing. Jesus christ... 

The only possible argument against it is if you'd cocked it up, been done in by something unforeseeable etc etc in your active management. Considering that @tech/a has quite accurately pointed out how to go about this one and been right, then that's end of discussion. 



We are literally arguing about whether you should sell if you see a sell signal, I mean FFS...


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## tech/a (3 October 2021)

over9k said:


> We are literally arguing about whether you should sell if you see a sell signal, I mean FFS...




To manage or not to manage FFS.


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## Knobby22 (3 October 2021)

(Face losing expression.)
You have to know when to hold em, know when to fold em, know when to walk away, know when to run.

(Not easy though)


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## tech/a (3 October 2021)

Knobby

How hard is it to follow 2 Rules?
Red light Green light.Sit in Amber 
Or cross the road 

You know very clearly all of your questions.



Knobby22 said:


> You have to know when to hold em, know when to fold em, know when to walk away, know when to run




You do!!


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## Austwide (3 October 2021)

Active management would appear to be a hands down winner.
Tax taking almost half the profits would reduce the re-entry amounts, and divs would not cover that.
But I still think one would be in much better of.

The method is quite simple,  the big threat to the system would be following the rules. 
I think, most investors, me included would start wondering about reinvesting a few million into a single stock and break the rules.


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## tech/a (3 October 2021)

Austwide said:


> Active management would appear to be a hands down winner.
> Tax taking almost half the profits would reduce the re-entry amounts, and divs would not cover that.
> But I still think one would be in much better of.
> 
> ...



You could do that and follow the same rules on that investment.


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## Value Collector (3 October 2021)

over9k said:


> How is this even an argument? The very purpose of active management is to end up with more than you would have by doing nothing. Jesus christ...
> 
> The only possible argument against it is if you'd cocked it up, been done in by something unforeseeable etc etc in your active management. Considering that @tech/a has quite accurately pointed out how to go about this one and been right, then that's end of discussion.
> 
> ...




As Tech/A pointed out My return is way over any fund manger he has seen, so obviously it’s not as simple.

As I pointed out, it’s quite easy to look at a historical chart and choose a mechanical method that works on it, but it must be harder in practice to choose which mechanical method will work when you don’t know what the chart will look like other wise my simple “buy value and hold” strategy would be easily beaten, and Tech/A would be able to give a laundry list of professial managers that compound money at rates dwarfing mine.

You haven’t been round here long, but I have made even bigger returns in the past than this FMG one, for example my 5 year buy and hold of capilano from $2.25 to $21 plus dividends, which was a 48% compounded return for 5 years.

If the argument is that mechanical trading approaches beat, buy and hold approaches based on solid fundamental analysis then I should be easily beaten.

I am willing to admit that “know nothing” trading would beat “know nothing” buy and hold in some cases, but the evidence isn’t there to show that in practice simple trading strategies are guaranteed to beat solid fundamental value investing.


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## over9k (3 October 2021)

Value Collector said:


> As Tech/A pointed out My return is way over any fund manger he has seen, so obviously it’s not as simple.
> 
> As I pointed out, it’s quite easy to look at a historical chart and choose a mechanical method that works on it, but it must be harder in practice to choose which mechanical method will work when you don’t know what the chart will look like other wise my simple “buy value and hold” strategy would be easily beaten, and Tech/A would be able to give a laundry list of professial managers that compound money at rates dwarfing mine.
> 
> ...



Congratulations on creating a complete strawman. 

It's not an either-or proposition and nobody ever said it was. 

There's a hell of a difference between full time day trading and selling and/or buying on very big/obvious buy and sell signals that might only come about every few months or years, which was tech's point right from the beginning. 

Are you deliberately being obtuse or are you just not getting that?


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## tech/a (3 October 2021)

I look at it like debt insurance I have in business. Costs a lot and I could self insure at $50K a year 
But if I need it with contracts of 1-3 million it COULD be life changing!


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## systematic (3 October 2021)

Interesting discussion.
Don't derail it please (anyone) because there are some interesting points of view.

tech/a - you have longer term investments, like houses and business(es). But you don't value them every day/week/whatever by what someone else would buy them for, do you? You have a plan to grow their value at a good rate, over time, right? If some psycho came in and offered you half of what you thought a house / business was worth...you wouldn't say, 'oh no! The market has fallen, I better sell' - I know you wouldn't. You'd think, 'what an idiot, low ball offer...this is worth way more than that'. Similarly, if someone came in and offered you 4x what you think it's worth, you might say, 'screw it' to your original plans, and just sell to the idiot. 

I just think _that's_ more how VC is talking about investing (but using your own analogies)...does that clear it up a little? VC is looking at what he thinks the house or business is worth, but is also willing (I assume) to sell if the psycho is willing to pay way over what he thinks that business is worth. Similarly, he ignores the idiot who makes the half-price, low ball offer.

I'm sorry if any of that is unhelpful, as I have enjoyed this thread.

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Now, to a thought that has been raised re: 'mechanical' vs. fundamental business analysis / valuation style of investing. My opinion only (and I've shared this before):

As a systematic trader / investor (I don't care for the terms at all)...why do I actually trade this way? I've said it before, because I don't believe I'm good enough.  Good enough for what? Good enough to be the person who will beat the model (note, I said the model, not the market).

I _do believe_ (and I said this back in the 'craft' days)...that the person who can _really, really_ pull it off...(business valuation)...that person will cream not just the market, but any systematic model I have to offer. _But, I can't risk my retirement fund, betting on ME being THAT person_.

I don't believe many can. I don't believe hardly anyone can. Heck, despite what impression newbies on forums get...most investors, traders or whatever...are not beating the market at all. _Let alone _being good enough to do it on business evaluation.

The real opportunity, in my opinion, is someone who can spot a business that should be worth $600M one day, and is currently being sold off by the idiot at $200M or whatever. The person who can do that as a thing, and not just a one off, is a very rare gem. 

A (systematic) competitor to that idea might be someone who can run quant models but way out of the ordinary. Think, Medallion fund, with 39%pa over 3 decades. If you can do that, you're a rare gem. Those models are not, 'buy a 50 day breakout on a low P/E stock'(!)

I class someone who is successfully doing Buffett style valuation (or Lynch style - who seemed to show true, unexplainable alpha...or Simons statistical genius...or whatever) as better.

People using systematic models (whatever the data inputs...price, news, financial data...)...are doing so PRECISELY because they want to achieve the results that a (well developed) model is pointing towards. Which leans them towards beating the market, but at the same time are ruling themselves out of the far, far right tail.


Anyone using a discretionary approach (whether charts, hyper-quant, or business valuation)...*AND*...is world-class at doing that...will (and should, as a reward for effort) beat the model traders / investors.
BUT.  *BUT*. Not one in a (hundred? thousand?) who attempt any of the above...will do so.
My message to the newer ones, searching for their own style is always...'do you want to bet that you'll be that person? Go for it'

Heck, it's hard enough for the average investor to even be a systematic model investor, let alone be a world class discretionary trader, business analyst or statistical genius.


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## Value Hunter (4 October 2021)

Tech/a that chart you posted of Credit Corp Group (ASX Code: CCP) is actually my largest holding and has been for years. I held it without selling a single share for many years and I have done well from it long-term despite the big drop and subsequent recovery. I added to my position at the $12.50 capital raising price, (but didn't manage to buy shares at the bottom below $7 due to lack of available funds). What you are saying sounds good in theory but did you actually trade it that way?


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## So_Cynical (7 October 2021)

My thinking on buy and hold has gone through many changes over the years, looking at an old portfolio snapshot from 5 years ago i noticed that i had sold out of a few stocks that had done really really well and only a few that had gone to zero, most like 80% or so had gone sideways and up a little.

Going over my portfolio history after 15 years in the market, if i had simply bought and held everything i would be massively ahead, as you can only lose 100% of anything but the upside is unlimited, buy - hold - forget, seems to be the go.

The breakdown, 95 stocks in total.

5 x 100% loss
6 x more than 50% down
9 x more than 1 but less than 50% down
11 x taken over at profit
35 x less than 50% in profit
24 x more than 50% in profit
3 x up over 100%
4  x up over 400%
1 x up over 1000%
1 x up over 5000%
1 x up over 7000%


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## tech/a (7 October 2021)

Home with a huge dose of the flu!



systematic said:


> tech/a - you have longer term investments, like houses and business(es). But you don't value them every day/week/whatever by what someone else would buy them for, do you? You have a plan to grow their value at a good rate, over time, right? If some psycho came in and offered you half of what you thought a house / business was worth...you wouldn't say, 'oh no! The market has fallen, I better sell' - I know you wouldn't. You'd think, 'what an idiot, low ball offer...this is worth way more than that'. Similarly, if someone came in and offered you 4x what you think it's worth, you might say, 'screw it' to your original plans, and just sell to the idiot.




With property it was more to do with luck than anything else. Right time right place. Gone are the days of 300% gains and more
and gone are my portfolio of rentals. The only property left is freehold Business and a few in Super. Property is very different it takes 6 mths to move from sale to settlement. Stock a click of the mouse. I cant understand why you wouldn't take massive advantage of that. Your right on both counts with your analogies in a property context. In a Share context I wouldn't let it get to 50% off its highs.



Value Hunter said:


> Tech/a that chart you posted of Credit Corp Group (ASX Code: CCP) is actually my largest holding and has been for years. I held it without selling a single share for many years and I have done well from it long-term despite the big drop and subsequent recovery. I added to my position at the $12.50 capital raising price, (but didn't manage to buy shares at the bottom below $7 due to lack of available funds). What you are saying sounds good in theory but did you actually trade it that way?




@Value Hunter no I didn't trade it its an example as are many many others out there. @notting asked me to show how Id have traded it and I presume done better. As for not having enough funds had the holding been sold at -20% from the highs you'd have had massive funds and massive increase in holdings and eventually capital growth AND a heap more dividends. Page 109 in Radges book the 20% flipper to page 117. Doubt Radge trades it either but is it less useful? Should read it its eye opening.

By the way @Value Collector lost $54,000 today (FMG). Now that might not bother him but as a business owner it sure alarms me!



So_Cynical said:


> The breakdown, 95 stocks in total.
> 
> 5 x 100% loss
> 6 x more than 50% down
> ...




@So_Cynical
Well that depends on a lot of things. Amount of capital in each winning and losing trade.
I agree most would be better off holding infinitum but there is no guarantee that ending capital will be higher than the total capital invested overtime either. Just have a look at Managed funds that have long-term negative results  over a great number of years.
AND they have 30 story buildings full of analysts!
But I certainly agree with managing your own portfolio ---I wouldn't leave it to anyone else. If I stuff up a decision I can handle that but I cant handle mismanagement from others (With my money)


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## Value Collector (7 October 2021)

tech/a said:


> Home with a huge dose of the flu!
> 
> 
> 
> ...



You are a business owner aren’t you? The value you could sell your business for would fluctuate day to day just as FMG does, your just don’t see it because your business isn’t listed on the market.

If you owned a business worth millions of $$$ and checked what price it would sell for in a fire sale on a daily basis I am sure you would find fluctuations of more than $50,000 per day quite routine.

just as you aren’t probably alarmed by the daily change in the market price of your business interests that are unlisted, I am equally unphased by changes in the market price of my listed businesses.

I don’t cheer when my portfolio is up $100k on a Monday and I don’t cry when it’s down $100k the next day, I base whether I am doing well on whether my valuation is growing or shrinking.

My dividends in the last 12 months from FMG and Others are double what the Prime minister earns, and probably more than you earn from all you business interests combined, when you have that cashflow coming in, daily market price fluctuations can be largely ignored.

I am in the business of investing, not trading if you have ideas about how I should be doing things better, maybe apply them to your own situation, because believe me I am pretty happy with the situation I have built for myself, and am not at all interested in becoming a trader.


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## So_Cynical (7 October 2021)

The massive upside for my 95 stock portfolio came from 5 stocks that were purchased as micro or small caps mostly after bad news or months of share price decline, CHN a massive turn around story, anyway all 5 stocks that a real manager would not of touched until they had become mid caps at least, thus missing most or maybe half the % increase.

Buy and hold for the stocks that i bought, at the time i bought them would of worked wonderfully well, the whole portfolio would of been up maybe 10x over 15 years and equal weight on entry, the best thing i could of done was nothing, hypothetically.


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## Value Collector (7 October 2021)

So_Cynical said:


> Buy and hold for the stocks that i bought, at the time i bought them would of worked wonderfully well, the whole portfolio would of been up maybe 10x over 15 years and equal weight on entry, the best thing i could of done was nothing, hypothetically.



The way I operate is that I spend my time trying to figure out which stocks to populate my list with that will provide above average returns over time, rather than micro manage trading in and out of them.

You are correct that once you populate that stock list with a bunch of high quality businesses, the best thing you can do is nothing.

I find one of the Best examples in my portfolio is CBA, as I said above, I bought it 25 years ago for $12.50 and it’s now $100, but it’s also paid nearly $80 in dividends.

Thats $180 of value for something that cost $12.50, you would think that must be impossible to lose money on, but plenty of people that jumped in and out of the market over the last 25 years have lost money on CBA.


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## frugal.rock (7 October 2021)

tech/a said:


> Home with a huge dose of the flu!



So, is that a buy and hold, or are you going to activly manage it? 😅
A "huge dose" might need some good trade management 😬

Had thought "flu" was non existant these days, unless it's the "new" flu... am guessing you've had a Corona test to be calling it flu?.
Good to see some sanity (imo) returning to NSW...

Back to topic, have been trying to do both...
LPD for example is one I have held and traded from 0.013, I don't mind jumping off on the bigger gains, then jumping back on 1 to 3 (or more) ticks lower, whilst still trying to hold at all times.
Using this technique, I have learnt that you may miss out on a decent good news gap, due to being temporarily out.
Frustrating, thus presenting a good argument to just bloody holding...very boring...😴


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## Miner (8 October 2021)

tech/a said:


> Home with a huge dose of the flu!
> 
> 
> 
> ...



@tech/a - get well mate from flu. Thankfully you are not in mining otherwise, there would have been a panic with flu, quarantine, nurse comes to check your PCR until you are cleared. Once again get well and thanks for very lovely interaction between you, @Value Collector , @So_Cynical , @Value Hunter , @9k and others on this thread, I am visiting for the first time . Very educative indeed and inspiring thread.


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## tech/a (8 October 2021)

So finally you long term holders are advocates for 
Averaging Down even if below your buy price?
Believe you haven’t made a loss until you sell an 
investment at a price lower than you bought it.

How as a business do you value your net worth?

So Cynicals win rate is the highest I’ve ever seen 
80% long term winning trades is world class.
30% is common
50% is unheard of!


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## Value Collector (8 October 2021)

tech/a said:


> 1. So finally you long term holders are advocates for
> Averaging Down even if below your buy price?




Yes, of course if think something is good value at $10 and later I can buy it for $8, then yes it make sense to buy more, my original buy price is irrelevant, what is relevant is what I believe the asset is worth.

for example if you want to own a bunch of gold in your portfolio and you buy some at $2000, if later you can buy some more at $1000, why wouldn’t you?



tech/a said:


> 2, Believe you haven’t made a loss until you sell an
> investment at a price lower than you bought it.




Not quite, I do believe I have made a loss before I sell if I believe the fundamental valuation of my investment has changed, not just the market price.

think of that bar or gold example, whether it is $2000 or $1000 you are buying/owning the same gold bar, just because it’s price changes doesn’t mean you suddenly own less gold, if you reasons based on facts to believe the drop in market price of gold is caused by temporary panic, and not sound fundamental reasons, you probably won’t feel like you have lost anything yet.




tech/a said:


> How as a business do you value your net worth?



You can come up with a range of valuations, just as you value any business.

for example you can value you business from the low range of its liquation value eg just the price of the assets, through to what those assets are worth to you as a going concern.

if it’s liquidation value is higher than what those assets are worth to you are a going concern, you should sell them even if it’s at a loss, if the assets are worth more to you than their market price, you should buy more even if the market price has dropped.


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## Austwide (8 October 2021)

Cynical is not claiming a high win rate but revealing an observation, if he had held all stocks for up to 15 years his win rate would be very high.

Some people hold onto stocks for long periods until they do go positive or close to it. That's why we have breakouts in T/A.
The win rate may be high but overall profit is low.

Opportunities are lost as their stock sink lower tying up their capital.

Not knowing Clinicals numbers, I'm guessing if he left his money in, his number of trades would be much much lower, so the outcome profit would be much less. He may easily have missed some or all of the 5 big winners he mentioned.


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## tech/a (8 October 2021)

@Value Collector we will always differ.
I understand where you coming from as I understand those who become “free traders” 
Ill never understand why selling high and buying low which can double or treble your net wealth 
Isnt preferable to just holding and at times never to old highs even 20% off of those highs.

I like to be proactive standing at the door of my business continually working in and on it.
Not opening the door and letting others do the work.

You have done very well way better than most.
your happy and it’s working for you.

Me too.


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## wayneL (8 October 2021)

If I may, can I add in two factors here, one of which cannot be avoided, but should certainly be accounted for in calculations when comparing methodologies.The other can be used to smooth out volatility and perhaps even juice returns.

1. TAX

2. Options

FWIW


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## divs4ever (8 October 2021)

tech/a said:


> @Value Collector we will always differ.
> I understand where you coming from as I understand those who become “free traders”
> Ill never understand why selling high and buying low which can double or treble your net wealth
> Isnt preferable to just holding and at times never to old highs even 20% off of those highs.
> ...



 well i can only expand on what i do  , but when i reduce a holding ( as opposed to exit completely)

 as an example the MQG holding  in 2014  was getting rather large ( as a proportion to the portfolio )  and BHP was in a downward trajectory  so i  swapped  a fair amount of MQG into BHP (  after the SYD  divestment  , but before the S32 spin-off , it wasn't actually planned like that , but it happened )

  now SOMETIMES  i will buy more of a stock i have sold down , but there is no guarantee i will  ever buy another extra share in that company again

 obviously  price movement  and management decisions have a big influence if whether i buy extra shares of a 'free-carried ' company 


 a different example would be WHC  i first bought in  November 2013 @ $1.56  , reduced in August 2017 @ $3.55 ,  bought some more in  August 2020 @ $1.29  . and reduced again in  October 2021 @ $3.55  ... i don't hate WHC , but don't want to be holding a big chunk of them   while these climate maniacs are trying to shape global policies  ( the investment cash  is in the bank waiting for a new home , and the profits are running  as best they can )

 you might note i change strategy if and when i see the best choices 

 had i kept all the MQG it would now be  around 20% of the portfolio ( because i participate in the DRP ) instead of around 6%  currently 

 if MQG comes back to $20 again , i would probably more , but i don't expect that to happen without some scary moments


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## tech/a (8 October 2021)

divs4ever said:


> well i can only expand on what i do  , but when i reduce a holding ( as opposed to exit completely)
> 
> as an example the MQG holding  in 2014  was getting rather large ( as a proportion to the portfolio )  and BHP was in a downward trajectory  so i  swapped  a fair amount of MQG into BHP (  after the SYD  divestment  , but before the S32 spin-off , it wasn't actually planned like that , but it happened )
> 
> ...




Your actively managing your portfolio.


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## divs4ever (8 October 2021)

another difference is  i ( normally ) look at it ,  as locking out   the possibility of a capital loss ( on that share ) as opposed to 'taking some profit off the  table '

 so if a company takes an unpleasant turn  ,  i can decide  how much 'profit  i will crystallize ( sell quickly  or wait for a .. say . 5% bounce  before jumping )


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## Value Collector (8 October 2021)

tech/a said:


> @Value Collector You have done very well way better than most.
> your happy and it’s working for you.
> 
> Me too.




It really did all start from delivering News papers as a kid, those first CBA shares I purchased 25 years ago when I was 14 were bought for 1 reason only, which was to generate dividend income so that could one day give up delivering newspapers, hahaha. 

My mindset has never changed, for me it’s all about owning enough income generating assets so that I don’t have to spend my days folding and delivering papers, it took me 22 years, but I was able to give up all paid work and retire at 36, simply by working and saving hard, and ploughing my savings into buying great businesses for less than they were worth and holding them for as long as they remain great businesses.

I split my time between learning about business valuation rather than trading, and  working to earn the capital to invest.


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## divs4ever (8 October 2021)

tech/a said:


> Your actively managing your portfolio.



 yes i am ( but not  trading as a professional would ) , but that wasn't what i planned starting out in 2011

 i originally planned to buy and hold  ( and add  as i had spare cash ) but then sensible opportunities came along ( now and then )

 now obviously if you have a stable salary and surplus income  , standard  buy/hold  ( and add ) strategies  probably suit you better 

however here i am on a disability pension  and plenty of gaps between medical appointments , i can dabble and learn instead of Facebook or watching old movies ( i hadn't watched because i was working back then ) 

the DOWNSIDE is it is hard for me , now , to recover from capital losses , so i would rather not blow up the entire nest egg ... sure i am going to lose some  , but i also hope to save  a golden goose egg or two for my later years


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## systematic (8 October 2021)

tech/a said:


> Home with a huge dose of the flu!
> 
> 
> 
> ...




Firstly, hope you feel better!
Secondly, thank you for getting back. This is fun, and educational (for me, anyway)

Thirdly...
Running a stop (5%, 10%, 50%, volatility based, market regime based...name it)...it doesn't work with my systems. Maybe I'm missing something that others get.  I cannot get the data to justify a stop of any kind, based on the model I run.
So, why wouldn't I let an individual stock run 50% from it's high. History shows that I'm better off holding (as long as the system calls it a hold), because - on average (which is what systems trading is all about - it will rebound more as a genuine, original signal vs selling and buying a new signal.


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## systematic (8 October 2021)

tech/a said:


> So finally you long term holders are advocates for
> Averaging Down even if below your buy price?
> Believe you haven’t made a loss until you sell an
> investment at a price lower than you bought it.




I'm probably what you would call a long-term holder (and what some would call a short-term holder. 
I don't know...should we establish some definitions around this, for the benefit of the forum (lol - I jest...this has been tried on many a stock forum over the years; everyone has their own opinion)
But I never average down. My model (and it's only one model these days)...says, 'buy, hold or sell' and that's it. No averaging in or averaging out. I found that too complex, for no reward.


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## systematic (8 October 2021)

Value Collector said:


> It really did all start from delivering News papers as a kid, those first CBA shares I purchased 25 years ago when I was 14 were bought for 1 reason only, which was to generate dividend income so that could one day give up delivering newspapers, hahaha.
> 
> My mindset has never changed, for me it’s all about owning enough income generating assets so that I don’t have to spend my days folding and delivering papers, it took me 22 years, but I was able to give up all paid work and retire at 36, simply by working and saving hard, and ploughing my savings into buying great businesses for less than they were worth and holding them for as long as they remain great businesses.
> 
> I split my time between learning about business valuation rather than trading, and  working to earn the capital to invest.




The question I pose in this post...ought to be the start of another thread (Joe, feel free - depending on VC's reply)...

Value Collector:

I know you will appreciate the meaning behind what I'm asking here (especially in light of my lengthy post, several comments above)...

VC: '_Can what you did...be taught?' _

Philosophically (and this should be obvious from my earlier comment) I would expect (and appreciate) you saying, something like, 'no. It was a unique set of factors (your experience, discretionary nouse about certain industries...or whatever)...that put you on that path.

But, before I assumed that as your answer (as, I'm always willing to challenge myself and change my mind)...I wanted to ask what you think.

If someone wants to replicate my results (of modestly beating the market)...I just (a) give them this stack to read (a 'how markets work' framework) + (b) this amount of basic statistical mathematics + (c) this 'course' in behavioural finance psychology (the most important bit) and you can have my results...beat the market (and therefore, most investors out there - retail investors & fund managers)...but only modestly (in my opinion). 

I want / need you to say, 'no'...but I have to ask: can what you did, be taught...and replicated?

Finally...and more importantly - do you have the newspaper delivered, these days?


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## tech/a (8 October 2021)

Value Collector said:


> It really did all start from delivering News papers as a kid, those first CBA shares I purchased 25 years ago when I was 14 were bought for 1 reason only, which was to generate dividend income so that could one day give up delivering newspapers, hahaha.
> 
> My mindset has never changed, for me it’s all about owning enough income generating assets so that I don’t have to spend my days folding and delivering papers, it took me 22 years, but I was able to give up all paid work and retire at 36, simply by working and saving hard, and ploughing my savings into buying great businesses for less than they were worth and holding them for as long as they remain great businesses.
> 
> I split my time between learning about business valuation rather than trading, and  working to earn the capital to invest.




What a great insight.I remember CBA floating for $2.50 I had enough for 5000 but never bought them!
I was a lawnie failed Leaving and now own a serious company. Could have retired at 50 but enjoy the challenge of business far too much.I get bored very easily.



divs4ever said:


> yes i am ( but not  trading as a professional would ) , but that wasn't what i planned starting out in 2011
> 
> i originally planned to buy and hold  ( and add  as i had spare cash ) but then sensible opportunities came along ( now and then )
> 
> ...



 Another great insight you‘re governed much by circumstance and necessity.



systematic said:


> Firstly, hope you feel better!
> Secondly, thank you for getting back. This is fun, and educational (for me, anyway)
> 
> Thirdly...
> ...



 Thanks for your best wishes. Feel terrible had COVID now isolating and have antibiotics.

The 20% isn’t a stop it’s both a buy and sell signal in a systematic method discussed in Radge’s book.


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## systematic (8 October 2021)

tech/a said:


> What a great insight.I remember CBA floating for $2.50 I had enough for 5000 but never bought them!
> I was a lawnie failed Leaving and now own a serious company. Could have retired at 50 but enjoy the challenge of business far too much.I get bored very easily.
> 
> 
> ...




1( I didn't know you had COVID. Wow; that's full on. I work in health and know waaay too many people that've been through the wars.
I pray that you recover: completely, and fully. Better than ever.

2) Yeah, but tech/a, you gotta know I'm familiar with that book. I've tested those old ideas each way and that (without writing a book). I actually think (in the topic we've discussing), even Radge's back testing (for his book; I'm sure he does more advanced stuff for his private membership) shows that a stop does anything?
I'm happy to revisit, though!! I really am, truly(!)  happy to learn!!!  Is there any other way?


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## tech/a (8 October 2021)

My bad meant Covid test!! If COVID is 20 x worse then I certainly don’t want it —- double backed but that hasn’t helped with this!

A stop is a risk mitigation tool 
Like you I don’t agree with a hard fast stop
I ratchet mine —- UP 
Lots of very small losses and more than a fair share of bigger wins 
Once moved to Break even it’s not needed


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## So_Cynical (8 October 2021)

tech/a said:


> So finally you long term holders are advocates for
> Averaging Down even if below your buy price?
> 
> So Cynicals win rate is the highest I’ve ever seen
> ...



I have always been a fan of averaging down - however analysing my results over 15 years (as posted above) the best hindsight result is achieved by NOT averaging into anything, fixed entry size, one entry, and never selling at all.

As for 80% long term winning trades, i put that down to time in the market, 15 years is a lot of time, plus my habit of buying low points in the price cycle and putting some effort into not buying rubbish, never ever bought hype or breakouts.

I remember the very first stock i bought was Santos after watching the evening news report that their plant blew up...looking over my trade history i was thinking that any idiot should be able to get similar results over the same time frame, its close to impossible not to.


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## divs4ever (8 October 2021)

*** My bad meant Covid test!! If COVID is 20 x worse then I certainly don’t want it —- double backed but that hasn’t helped with this!  ***

 first of all it will depend on your health  before catching it  , i think i caught it December 2019 ( but no tests available  then )

now i was already on a cocktail of dangerous drugs  but lucky for me some were the right ones  , an industrial strength blood thinner  , an inhaled steroid   and a ripper of a beta blocker ( lowers pressure )  now the time wasn't pleasant  , but i have had worse ( say  a really nasty flu  that hung on for more than a month , but not bad enough to visit the GP )

needless to say when i was finally tested ( 7 months later ) it was all clear 

 i certainly hope you you get better soon 

 ** Another great insight you‘re governed much by circumstance and necessity. **

 the art is realizing WHEN you need to change the plan , and that varies from investor to investor 


  *** The 20% isn’t a stop it’s both a buy and sell signal in a systematic method discussed in Radge’s book. ***

 wow  i didn't realize that was a formal tactic 

 when a share is down 20% on MY  average price i ask the question IF i should buy more ( i don't always  buy  , but i do research and calculate ) not so quick to take the cash off the table though   somewhere in the 120% to 150% before i ask that question


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## So_Cynical (8 October 2021)

systematic said:


> The real opportunity, in my opinion, is someone who can spot a business that should be worth $600M one day, and is currently being sold off by the idiot at $200M or whatever. The person who can do that as a thing, and not just a one off, is a very rare gem.



Exactly, this is what I'm always looking for, and one of the reasons I've had some success due to the fact that i tend to buy into stocks that later get taken over because someone else saw some value as well, something i like to ask myself when considering entry is - what's the chance i can sell this stock at x point in the future for more than i paid for it.


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## divs4ever (8 October 2021)

** I have always been a fan of averaging down - however analysing my results over 15 years (as posted above) the best hindsight result is achieved by NOT averaging into anything, fixed entry size, one entry, and never selling at all. **

 i still prefer averaging down ( but CAREFULLY ) one error i made in the early  days  was buying the same number of shares ( on the same stock )  every time   , when buying the same dollar amount each buy ( when possible )  would have been the better tactic  ( at least for me )

 now you might say that lacks conviction and you would be correct  ,  i need to be careful with those cash reserves  ,   and 'never selling'   not for me  i have made some BAD picks  ( SGH , and BLY come straight to mind ) but have also made some timely escapes ( ISX , IPL , AMP to name a few ) 

 i have a nasty habit of 'picking bottoms'  but ending up with a part-filled  order  .. $20 or $40 worth of shares  plus brokerage  does not make the buying cheap  , so prefer to buy on the downtrend ( let the trend catch me ) while there is still momentum


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## So_Cynical (8 October 2021)

Austwide said:


> Cynical is not claiming a high win rate but revealing an observation, if he had held all stocks for up to 15 years his win rate would be very high.
> 
> Not knowing Clinicals numbers, I'm guessing if he left his money in, his number of trades would be much much lower, so the outcome profit would be much less. He may easily have missed some or all of the 5 big winners he mentioned.



Yep just an observation and bit of a revelation for me. 95 stocks but maybe 200 trades and another 250 or so dividend reinvestments.

Hindsight, my conclusion was that in order to get the 5 big winners i also needed to buy the 6 total losers, with no averaging and fixed position sizes the 5 big 1000%+ winners easily cover the six 100% losers ~ interesting that the losers kind of become irrelevant, there could be 20 losers but the 5 winners are so big it doesn't matter.


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## sptrawler (8 October 2021)

So_Cynical said:


> I have always been a fan of averaging down - however analysing my results over 15 years (as posted above) the best hindsight result is achieved by NOT averaging into anything, fixed entry size, one entry, and never selling at all.
> 
> As for 80% long term winning trades, i put that down to time in the market, 15 years is a lot of time, plus my habit of buying low points in the price cycle and putting some effort into not buying rubbish, never ever bought hype or breakouts.
> 
> I remember the very first stock i bought was Santos after watching the evening news report that their plant blew up...looking over my trade history i was thinking that any idiot should be able to get similar results over the same time frame, its close to impossible not to.



That IMO opinion, is priceless Cynical, the problem I've found is the good stocks keep going up, getting out and trying to get back in, is like selling a great property overlooking Sydney Harbour on the hope prices will fall and a lower re entry price will present.
If you love watching the market every day and love charting and data collecting etc, well active management is probably for you.
If you have other things happening in your life and you can't follow the market every day, @ So_Cynical's advice is worth pondering.

I have a buy and hold and a managed portfolio mindset, the wife who commandeered my shares outside super, because they were in her name has a sit and hold mentality.

Hers are doing well ( better than mine), but mine (which is the SMSF), is still in front and we have been living off it for 10 years, hers have dividend re investment. 🤣
I've got to get back into the "think about why you bought it, before you sell it mentality", I've missed a lot of money this year.


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## Value Collector (8 October 2021)

tech/a said:


> What a great insight.I remember CBA floating for $2.50 I had enough for 5000 but never bought them!




CBA floated at $5.40, not $2.50 so you would have only got 2,314 shares for your $12,500.

But this is the shocking part, If you had of put that $12,500 into CBA when they floated, and done absolutely nothing except enabled the dividend reinvestment, your initial 2,314 shares worth $5.40 each ($12,500 in total),  would have compounded into 12,760 shares worth $104.45 each, totalling $1,332,782 and paying $51,040 in dividends per year.

*Think about that for a second, that initial $12,500 you had in 1992, would today be worth $1,332,782 and be paying you $51,040 per year in tax free income (30% franking), and all you had to do was sit there with the dividend reinvestment plan running, and never saving any further funds or worrying about trading etc, with that one investment and maybe owning your own home too you would have set your self up for a very comfortable retirement.

-------------------

Now imagine if instead of focusing on charting / trading  strategies, you just focussed on identifying quality businesses and putting together savings to invest, and each year you repeated the same $12,500 initial investment and dividend reinvestment strategy, so that you invested- 

1992 - $12,500 in CBA
1993 - $12,500 in Woolworths
1994- $12, 500 in BHP

etc etc etc over the years, the compounding effects would have been huge, and today you would have an enormous portfolio, sure you might have ended up investing in a couple of Dogs, but the compounded effects of the winners far out weigh the $12,500 you put on any dogs that went to zero.

Not to mention that, simply finding and holding quality businesses over the years would be a lot less work than trying to trade in and out all the time.*


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## So_Cynical (9 October 2021)

Value Collector said:


> *Now imagine if instead of focusing on charting / trading  strategies, you just focussed on identifying quality businesses and putting together savings to invest, and each year you repeated the same $12,500 initial investment and dividend reinvestment strategy, so that you invested-
> 
> 1992 - $12,500 in CBA
> 1993 - $12,500 in Woolworths
> ...




Now throw in HIH and Onetel as total losers and, instead of 999000 you would have 15K less 998958  the losers are irrelevant, double the losers adding ABC learning and AMP another 14K down and its nothing. 30 stocks over 30 years with 4 complete losers and you're laughing.


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## Value Collector (9 October 2021)

systematic said:


> VC: '_Can what you did...be taught?' _
> 
> Philosophically (and this should be obvious from my earlier comment) I would expect (and appreciate) you saying, something like, 'no. It was a unique set of factors (your experience, discretionary nouse about certain industries...or whatever)...that put you on that path.
> 
> ...




Great question, the short answer is yes I do believe a sound long term value investing approach can be taught, after all I believe it was taught to me through reading and listening to the greats such as Warren Buffett, Ben Graham, Phil fisher etc, but not just though superficial sound bites, I literally read every Annual letter Warren wrote since 1977 and his buffet partnership letters before that, and when he said he was influenced by Ben Graham and Phil fisher I purchased every book those two had written, and I watched every Berkshire annual meeting available online, and listened to every Buffet interview, I went hard at it for years.

But it is a complicated question, I mean to do exactly as I did, the way I did it, from the young age that I started definitely involved some unique factors that influenced me, eg

1, it helped having parents that were "spend less than you earn" type people, that encouraged me to save and invest from a young age, and who as long as I was investing all the money I earned delivering papers and other jobs then they would give me cash here and there to go to the movies/ice skating/bowling etc with friends, So I got to invest 100% of my earnings and start the learning process young, while still enjoying my teenage years.

2, I was exposed to some Paul Clitheroe and Noel Whittaker books that explained investing and compound interest etc, the concepts made sense to me straight away and stuck in my head, it also got me interested in reading more and more about investing from other authors and helped me adopt the "delayed gratification" concept, and lead me down the path of saving a large portion of my wage, and I progressed in my career, I never really ramped up my consumption, I just ramped up savings to the point I got to saving 50% of my wage. 

3, Being invested through the 2000 internet bubble, and later the GFC definitely pointed me in the direction of value investing, and sticking to things I can understand.

If I had to summarise the factors that lead me to where I am it was the early adoption of a good savings ethic, a willingness to read and learn about investing and being exposed to the right authors/reading material that helped me figure out how it all works (if I had read different books based on different ideas I would be in a different place), meeting and having the support of a girl that jumped on board with my delayed gratification process from the start and was happy to live below our means, being fit and healthy enough to earn a decent wage from which to save.


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## tech/a (9 October 2021)

Value Collector said:


> CBA floated at $5.40, not $2.50 so you would have only got 2,314 shares for your $12,500.



 Yes it did but as a customer I remember being given the opportunity to buy pre-listing and I'm sure it was $2.50

I remember thinking it would be a wise decision but as I was no where near the position I am today re directed the funds into my at the time wage generating business. Which I've done for a great many years. Today that investment is paying off in spades.
The shocking part *would have been if I did nothing with the money at all.*



Value Collector said:


> Not to mention that, simply finding and holding quality businesses over the years would be a lot less work than trying to trade in and out all the time.




Yes that is true----but my *situation is one of liquidity* where I can take advantage of quick opportunities. EG Im fortunate enough to live on the Esplanade on a magnificent beach in SA. The house behind me came up for sale 3 days before I left for 10 weeks in Italy. I was able to arrange a cash contract before I left and join it street to street with a development demolishing the old and building the new to join street to street.
Another example is what I thought was over buying Hot Dipped galvanized steel beam in March---300 tonne I can double my investment now on current sales and demand is crazy---my price will move up with that demand. So Different strokes--my DNA.



Value Collector said:


> 1, it helped having parents that were "spend less than you earn" type people, that encouraged me to save and invest from a young age, and who as long as I was investing all the money I earned delivering papers and other jobs then they would give me cash here and there to go to the movies/ice skating/bowling etc with friends, So I got to invest 100% of my earnings and start the learning process young, while still enjoying my teenage years.




This really hit an accord with me. Dad Owned a chain of Butcher shops --- back before Coles and Woolies got into meat. Eventually pushed him to early retirement--and misery--but another story.
Dad was frugal but hated spending money --- I later learnt that was because he didn't have an over abundance of spare cash and in business needed liquidity. He only said one thing to me which made sense---"Son you have no respect for money"---Dead Right.



Value Collector said:


> If I had to summarise the factors that lead me to where I am it was the early adoption of a good savings ethic, a willingness to read and learn about investing and being exposed to the right authors/reading material that helped me figure out how it all works (if I had read different books based on different ideas I would be in a different place), meeting and having the support of a girl that jumped on board with my delayed gratification process from the start and was happy to live below our means, being fit and healthy enough to earn a decent wage from which to save.



 Its really interesting looking at others experience and mine couldn't be more at 180 degrees to yours.
My summary.
Recognizing opportunity and pacing myself in a position to be able to take advantage of it.--*Doing Just that!*

Missed a lot but got my fair share and still do. Was never really frugal only by necessity on rare times through life. I guess being close to bankruptcy twice in 1987 and 1991 is testimony to my at times and *THEN* caviler approach. *Mind you* Economics in both instances bought me to the brink ---holding Millions in Commercial Property and businesses going broke not helping my cash flow 18 % interest and 6% penalty interest lead to foreclosure.
Right Idea crapp timing. Met My Number 2---- 26 years ago. A kindred spirit with Collateral but not the cash flow.I had the cashflow. That combined and 10 years later =====The rest as they say is history.

Im not the sort of retirement guy. I particularly love the challenge of business and helping those around me reach their life goals.
Explains ASF to a degree for me.

So *BOTH* work and we are testimony to that.


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## tech/a (9 October 2021)

divs4ever said:


> when a share is down 20% on MY average price i ask the question IF i should buy more ( i don't always buy , but i do research and calculate ) not so quick to take the cash off the table though somewhere in the 120% to 150% before i ask that question




Its 20% down from the last highest high 
Then 20% up from the last lowest low. 
Not 20% of your average price. Big difference.



sptrawler said:


> That IMO opinion, is priceless Cynical, the problem I've found is the good stocks keep going up, getting out and trying to get back in, is like selling a great property overlooking Sydney Harbour on the hope prices will fall and a lower re entry price will present.




I really dont think you'd have property investment as we do if prices of Harbor waterfront properties could fall 80%
Its not a good analogy as you dont have the liquidity you have with stock.Your *NOT s*elling in the *HOPE* prices will fall your selling when its CLEAR they are falling and have PROVEN they have by falling 20%. I dont think Harbor property has EVER fallen 20% in a year let alone 2 weeks or even a week!---or even a day!



So_Cynical said:


> never ever bought hype or breakouts.



 If you look back *EVERY* share that continues to rise will *BREAKOUT* of an area----
Hype---- well there are opportunities all over the place.--BitCoin , CPH made me $80K in a few weeks with $20K 
Tech-Boom ,Trump elected ---on the opposite end COVID GFC. *Dont* underestimate the opportunities enveloped in Hype.

90% of the population are the Tortoise and 89% remain in their shell.
10% are the Hare and fortunately for the Tortoise enough succeed.


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## againsthegrain (9 October 2021)

Having good and influential parents is a common theme,  mine taught me nothing - 0.  I had no idea about money or investing at 17 lived in a bubble.  My net is close to 1m now should surpass it by the time im 40 but I don't own property in aus,  still feel act and look like the poorest man on the street. The fear of being a **** kicker and respect for money is something that stays with you for life. This is a line in the sand I need to draw for my kids so they don't start the game on extra hard difficulty


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## Value Collector (9 October 2021)

tech/a said:


> Its 20% down from the last highest high
> Then 20% up from the last lowest low.
> Not 20% of your average price. Big difference.
> 
> ...




There certainly is people that have lost 80% of their money (equity) investing in Sydney harbour water front property, just because the total value of the property doesn’t drop by 80% doesn’t mean the persons equity component doesn’t drop to $0 or perhaps even negative, if the the property market drops by say 10%.

When you buy shares, you are buying Equity in a business, hence why another name for shares is literally “equities”.

So when a share price drops by say 50%, it’s the equivalent of a person that has an 80% loan on a property having their property price drop by 10%, in both cases their equity position has halved.

————————
for example,  (made up numbers)

say you own Woolies shares @ $40 per share, and their market $100 Billion.

That $100 Billion market cap is just the equity position, the Total enterprise value might be $400 Billion when you include the parts of the Business owned by other stake holders such as debt holders (banks, bond holders, finance leasing, suppliers, land lords etc)

The just like Sydney harbour water front property the total value value of Woolworths enterprise is not likely to drop in value by 80% either, but it’s equity value/share price can, just as the water front property owners equity can.

if Woolworths had zero bank debt, zero bonds, zero leases, paid all suppliers upfront with cash, and owned all property, plant and trucks etc outright, their liquidation value would never drop by 80% either, it’s only because of all the other stake holders that have claims on the assets before equity owners that the equity value fluctuates so much compared to total enterprise value.

but return on equity would be lower if to much equity built up in Woolworths, hence why they are currently getting rid of equity by doing a share buy back.

share buybacks are a way company’s reduce equity in the capital structure, by handing back capital to share holders, paying off debt is a way to increase equity.


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## tech/a (9 October 2021)

I’ll go along with the semantics To support your view.
Your missing the ability to react in equities almost instantly 
your under valuing that uniqueness.

I have nothing against what your doing/did You have excelled others may not have.
Just as other Hares have failed or been more spectacular .

Just an alternate way of getting to a financial goal


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## tech/a (9 October 2021)

againsthegrain said:


> Having good and influential parents is a common theme,  mine taught me nothing - 0.  I had no idea about money or investing at 17 lived in a bubble.  My net is close to 1m now should surpass it by the time im 40 but I don't own property in aus,  still feel act and look like the poorest man on the street. The fear of being a **** kicker and respect for money is something that stays with you for life. This is a line in the sand I need to draw for my kids so they don't start the game on extra hard difficulty




I understand that for you V/H and others of similar view.

However the lesson of Money Makes Money is borne out really clearly in the way you
cant make a decision even if it’s clear as glass. You don’t want to get uncomfortable as you’ve
indoctrinated your thinking to hold forever true and to deviate would be impossible to think of.
I don’t think you grasp this important concept other than inside your scope of reference.

For people like me Monday is a vehicle for trade —- if your good at using Money you’ll get more.
Compounding other people’s money is the ultimate.
buying a $500k house for 20% down and selling for $800k 3 years later is astounding.
Or 5 DAX Contracts that move 100 ticks in my direction in 35 min for a $50k Margin
Turtles would NEVER dream of that! or even contemplate it.

Money to me is to be used not hoarded.


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## Value Collector (9 October 2021)

tech/a said:


> Your missing the ability to react in equities almost instantly
> your under valuing that uniqueness.




I’m not missing the “unique” liquidity of shares, I am just recognising it’s a double edged sword, where as I showed the “do nothing” approach to CBA netted you $1.3 Million over the period, the only reason to take the active approach would be to try and improve on that return and earn more than $1.3 million.

However, you do face some large automatic headwinds, as soon as you begin selling, you face trading costs and taxes, that immediately erode some of that gain, where as having the principle compound tax free until the end provides a tail wind, you can keep those tax dollars working for you for decades before you have to hand them over, and then you get a 50% tax discount.

You also open yourself up to mistakes, as I mentioned to So cynical, many people have lost money on CBA over the years, by trying to second guess the market, it would seem impossible to lose on something that went from $12,500 to $1,300,000, but lots of people have, for them liquidity definitely was a curse.

also, if we were all traders, who would buy from us when the chart indicates us to sell? If 90% of the market was trying to enter or leave the market regularly, it would just create more volatility, and make the brokers richer, the net gain of investors over time would be less, some would win and some would loss, but as a group the investing public would be poorer, and the middle men richer.


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## tech/a (9 October 2021)

Value Collector said:


> I’m not missing the “unique” liquidity of shares, I am just recognising it’s a double edged sword, where as I showed the “do nothing” approach to CBA netted you $1.3 Million over the period, the only reason to take the active approach would be to try and improve on that return and earn more than $1.3 million.



Which I did.



Value Collector said:


> you can keep those tax dollars working for you for decades before you have to hand them over, and then you get a 50% tax discount.




Tax has never been an issue for me.
While I do everything I can to minimise tax ( Well my CCA does )
If I have to pay tax I’ve put my $$s to productive use.I’ve liquidated 
and have it to use at the drop of a dime.


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## tech/a (9 October 2021)

Value Collector said:


> I am just recognising it’s a double edged sword, where as I showed the “do nothing” approach to CBA netted you $1.3 Million over the period




It occurred to m3 I’m doing exactly the same in your instance 
I can’t believe you let $1,2 million slip by in a few weeks!
We aren’t as far apart as some would think!


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## sptrawler (9 October 2021)

In my opinion a lot of the risk that investors take on, is a reflection of their situation, I risk what I'm prepared to loose because in retirement I also need a safety buffer.
When I was working my risk tolerance was much higher, as investment was really my second income, now my investments are our only income.
So as I said having a portfolio made up of buy and hold dividend payers, long term growth plays and short term specs is my comfort zone. Backed up by a good slice of cash in case of armageddon, to carry us through to the next upswing, which history shows can take a few years.


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## divs4ever (9 October 2021)

just  keep a careful watch on your cash reserves  , there has been a history of banks limiting withdrawals in stressful times 

 ( that could be really nasty if we ever switch  100% digital currency )


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## Value Collector (9 October 2021)

tech/a said:


> It occurred to m3 I’m doing exactly the same in your instance
> I can’t believe you let $1,2 million slip by in a few weeks!
> We aren’t as far apart as some would think!



Yep, but if you look at the CBA chart between 1992 and Now, there are multiple big down turns, the largest being a drop around 2008 from $60 per share to $26, another drop from $92 to $58, another drop from $36 to $22, of course all these drops didn’t stop the end result of turning $12,500 into $1,300,000.

share prices will be bumpy, but if you are invested in strong companies, that are growing in value, you don’t have to let yourself get wrapped up in the panic.

I believe that if we look back at FMG 2 years from now, the current drop will be just a blip on a longer road to a higher share price, with decent dividends in the mean time.


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## Value Collector (9 October 2021)

sptrawler said:


> In my opinion a lot of the risk that investors take on, is a reflection of their situation, I risk what I'm prepared to loose because in retirement I also need a safety buffer.
> When I was working my risk tolerance was much higher, as investment was really my second income, now my investments are our only income.
> So as I said having a portfolio made up of buy and hold dividend payers, long term growth plays and short term specs is my comfort zone. Backed up by a good slice of cash in case of armageddon, to carry us through to the next upswing, which history shows can take a few years.



In what I call my “spending money fund” I have about a years wages in cash, another 3 years in Plenti paying weekly principle and interest payments, and another year of wages in a property trust… this little fund is like aannuity paying money to me every Thursday like a wage.

I then have my main investment portfolio that pays dividends, 50% of the income is reinvested and 50% tops up my spending money fund.

I also own a little bit of realestate, that is just like a store of value, with all rental returns being used to pay down debt.

I then have an international share portfolio, it’s earnings are 100% reinvested, so it’s just another store of valuing growing if I ever need to draw on it.

My wife’s investment portfolio is just compounding, we reinvest 100% of her earnings, we live of my portfolio.


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## sptrawler (9 October 2021)

Value Collector said:


> In what I call my “spending money fund” I have about a years wages in cash, another 3 years in Plenti paying weekly principle and interest payments, and another year of wages in a property trust… this little fund is like aannuity paying money to me every Thursday like a wage.
> 
> I then have my main investment portfolio that pays dividends, 50% of the income is reinvested and 50% tops up my spending money fund.
> 
> ...



I don't think I'm in the same league as you, also with four older kids who between them have our 8 grandkids, the bank of mum and dad is alive and well. 🤣
My investments, just allow us to break even.


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## divs4ever (9 October 2021)

Value Collector said:


> I believe that if we look back at FMG 2 years from now, the current drop will be just a blip on a longer road to a higher share price, with decent dividends in the mean time.



 a very convenient  blip for  me  , but i do expect MORE blips  in the near term .

 the global economy  is a twisted mess  , and ideally  steel production needs a stable environment  and sensible growth  ( or God forbid .. a terrible war )

 history can be very educational  , but in investing  it is all about making  the best choices NOW ( for you ) ( and learning from your past errors can be very useful as well )

 ( but history rhymes more often than it repeats )


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## againsthegrain (9 October 2021)

divs4ever said:


> a very convenient  blip for  me  , but i do expect MORE blips  in the near term .
> 
> the global economy  is a twisted mess  , and ideally  steel production needs a stable environment  and sensible growth  ( or God forbid .. a terrible war )
> 
> ...




Probably should take it to fmg thread but since we on the topic... china back flipped on coal already they will eventually back flip on io too


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## divs4ever (9 October 2021)

i could flip it back  by suggesting Evergrande woes  are a timely warning  to  a very common practice in construction projects world wide 

 as ALL major lenders ( and mortgage  brokers )  should  quickly recheck their exposure to fragile companies  

 last i heard CBA is  still the biggest holder of  Australian mortgages  , and given recent virus-related  disruptions to the status quo  must be looking at a reduced safety buffer ( compared to earlier times )

 now sure the Commonwealth Government will save the CBA from  a complete collapse , but it has also  made commitments regarding the Basel III  'bail-in policies ' AND a the bank deposit guarantee ( if you don't know all about THAT .. READ ALL ABOUT IT this weekend )

 when does Canberra  throw the lifeline .. and who gets hurt  ( apart from obviously ,  the tax-payer )


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## Value Collector (9 October 2021)

divs4ever said:


> last i heard CBA is  still the biggest holder of  Australian mortgages  , and given recent virus-related  disruptions to the status quo  must be looking at a reduced safety buffer ( compared to earlier times )




I am actually not so sure about that, House hold finances on average appear to be quite strong, interest bearing credit card debt has dropped, and low interest rates have meant the average home loan is now ahead in payments. 

I think the biggest threat to CBA is disruption from new tech, but CBA seems to be getting ahead of the game and making their digital platform quite appealing.


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## tech/a (10 October 2021)

divs4ever said:


> could flip it back by suggesting Evergrande woes are a timely warning to a very common practice in construction projects world wide




Not in Australia.
Evergrande built without sale of product which is pretty common in the USA 

In Australia developers tend to sell 70-100% of a development before starting a project.
This can / does cause other issues but generally saves an Evergrande type scenario.


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## divs4ever (10 October 2021)

having done a little work for a property developer  , what OFTEN happens is yes the client pays up front BUT not the total price  , now depending on how it is setup  you pay  an upfront deposit   and some more as certain  milestones  are passed   , if the building is never completed to the buyers satisfaction  ( and yes the buyer sometimes  rightfully  refused to settle ) ... the buyer does lose some cash  but not the total  amount  ,  and that starts a cash-flow  cascade 

 so after the Evergrande reminder  the lender to  the developer gets nervous  , the lender to the contractors ( and sub-contractors ) gets nervous  ( and if the property is being bought with a mortgage  the mortgage lenders and insurers start to sweat as well 

 i used to  have several buddies that were in the building game ( they have retired now  , waited for a boom and cashed out )  and they often bear the first wave of pain  as the developer stops paying  .. so how long do you think the contractor will keep paying wages , buying supplies etc etc  once the income stops  sure the developer might get 3 months breathing space  but the LENDERS ( often closely intertwined with the banks ) soon get a whiff  that there are problems  .

now so far  maybe 5% of potential buyers  notice the problems  highlighted  by Evergrande  , but half of those still sign new contracts  , that 2.5% no longer buying , starts a trickle down ( the banks start to worry how easy it will be to sell that foreclosed property 

am not saying panic ( unless uncomfortably in debt )  but just keep watching  and reduce that risk when you sensibly can 

 ( i swapped out of corporate bonds/debt into extra REITs  , for that 'regular income ' component  of the portfolio  , so naturally i am cautious )


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## tech/a (10 October 2021)

Value Collector said:


> I watch my investment portfolio very closely and would not hesitate to sell if my opinion of the company’s long term performance changed or if I realised I was wrong about my calculations. But the difference between me and you is that I am looking at the company from a long term fundamental business perspective, I am not making decisions based on share price movements,* I am strictly judging the company fundamentals.*




@Value Collector 

This above statement is the essence of your mindset. I and everyone else here and those that really take note of it in the future can only nod in agreement.

Completely in line with the above if (and its likely to happen to *ALL* of your holdings at the one time) are sold down *CLEARLY* due to factors *NOT* related to the Companies Performance or Valuation 
*eg GFC,COVID,1987,*

From the discussion here I dont see anyone who thinks that buying into the lows of companies like those you have judged to be fundamentally sound is *NOT* a wise Idea.
You can clearly see that everyone is jumping off a perfectly safe and sound Ship.
The biggest issue I see discussed here are Investors who just dont have the funds available to Load up *MORE*

*So if its that clear and we have seen it play out countless times. Why **wouldn't** you sell at -20% off recent high in a day or two
(A very rare **occurrence blind Freddy cab see it!**) And buy back when the perfectly good ship is sailing again empty and very cheaply!

Over a lifetime of investment this simple **strategy** could Quadruple you and your families Net worth.

Its Not hard.*


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## Value Collector (10 October 2021)

tech/a said:


> @Value Collector
> 
> This above statement is the essence of your mindset. I and everyone else here and those that really take note of it in the future can only nod in agreement.
> 
> ...



I thought I had explained it before, what you are basically saying is that after FMG dropped from $25 to $20 that should have triggered me to sell, but obviously I had no way of knowing that the price would continue to fall, it certainly wasn’t clear to me at the time.

In fact six months earlier FMG had dropped from $25 to $20 and then quickly bounced back, if I had sold then I would have just probably had to buy back in at a higher price, while triggering a capital gains tax event where I would have had to pay about $7 a share in capital gains tax, and also potentially missed out on the $1.47 dividend.

The end result is that in Jan had I sold I would have ended up with less shares because of buying back in higher, along with the CGT and trading costs deducted, so then would have had a smaller dividend from the final dividend too.

But let’s say I didnt sell out in Jan but did this time round at $25, again I would have had to hand over $7 in CGT leaving me with $18 after tax to buy the shares back, but I would have also missed the $2.11 dividend, so my break even point would be about $15.90, but again I had no information to guarantee it would drop that far, and probably would have bought back in earlier than that anyway, because I doubt I would have timed it perfectly.

basically what I am saying is that I think it’s risky either way, and the company is going in the direction I want it to go, I think it’s safer for me, and less stress and work, to just stay put.


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## dyna (10 October 2021)

systematic said:


> Don't derail it please (anyone) because there are some interesting points of view.



( Still trying to conquer that terrible habit ,of going off at a tangent, myself. )
This would have to be one of the very best threads, I've found on this forum. I'm astonished by the various means people have taken to creating wealth, some paths quite similar to my own: starting from zero at an early age, getting my head around superannuation while still an apprentice just out of junior high school and getting lucky with R.E. ( Yes , it is mostly luck. Choosing up market locations when they were affordable, Plus adding value to the properties, along the way )
Thirty years ago, I had to give up on the Elliot Wave stuff, before I lost my mind, but
 Nick Radge's " Unholy Grails: a New Road To Wealth" ( Noosa Publications,2,012 )  is in a class of its own. One of my  favorite investment books, by far. Well worth a careful, slow read and definitely not for day traders.  Momentum investing  can apply for as little as a couple of trades a month. The concept really  only works in rising markets? True, but so does the whole notion of Buy and Hold . There are numerous share charts with simple moving average lines for CBA Bank, Fortescue etc, throughout the book. Whether you're a Fundamental or a Tech trying to find a workable system, this local author is a  gem for you.


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## divs4ever (10 October 2021)

** jump off   a perfectly sound ship  **

 not NORMALLY , reduce the cargo on that ship  ... quite often and often in good times ( which confounds many )

 however  i DO jump ship  on a ship i suspect is not fundamentally sound  or one that seems to be  rushing into dangerous waters  ( or is showing signs of management dysfunction ) .


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## tech/a (10 October 2021)

Thanks.
Ive put it out there 
Some may like it.


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## divs4ever (10 October 2021)

dyna said:


> ( Still trying to conquer that terrible habit ,of going off at a tangent, myself. )
> This would have to be one of the very best threads, I've found on this forum. I'm astonished by the various means people have taken to creating wealth, some paths quite similar to my own: starting from zero at an early age, getting my head around superannuation while still an apprentice just out of junior high school and getting lucky with R.E. ( Yes , it is mostly luck. Choosing up market locations when they were affordable, Plus adding value to the properties, along the way )
> Thirty years ago, I had to give up on the Elliot Wave stuff, before I lost my mind, but
> Nick Radge's " Unholy Grails: a New Road To Wealth" ( Noosa Publications,2,012 )  is in a class of its own. One of my  favorite investment books, by far. Well worth a careful, slow read and definitely not for day traders.  Momentum investing  can apply for as little as a couple of trades a month. The concept really  only works in rising markets? True, but so does the whole notion of Buy and Hold . There are numerous share charts with simple moving average lines for CBA Bank, Fortescue etc, throughout the book. Whether you're a Fundamental or a Tech trying to find a workable system, this local author is a  gem for you.



 try thinking of Elliot Waves as human psychology   , somebody notices  an item ( company ) is attractive and buys some  , now if that someone  has influence in  the greater social fabric  more and more will buy   , UNTIL it loses it's novelty value  ,  and some will lose interest and others will have unwisely over-extended  ... now depending on the depth of the price fall  some NEW buyers will come in (  those that would not 'buy in at any price '  , earlier , and some current owners that consider a larger holding ( at a fair price ) a good thing 

after all that. some will throw some maths at this phenomenon  ( and Fibonacci ratios ) to try to get a better outcome  , for trend traders  these math calculations can be important  , being a contrarian  the maths are less important than the movement direction ( i set up  my own 'fair value ' price  and WAIT , and yes sometimes i am disappointed )



PS   one parameter i try to use on every stock  .. is .. am i happy to hold ( SOME ) of this stock forever ( or until a major reason to bail ) ??

 to my mind another consideration in the ' buy and hold '  argument  , is how long you expect to hold 

 currently i am 65 ( ish ) so holding the portfolio ( intact ) for another 30 years  is NOT a safe assumption  , however i suspect  several members  still have another 30 years of investing decisions  ahead of them ( or have already been investing for 30 years ) and straight 'buy and hold ' puts up a much stronger argument there


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## Value Hunter (10 October 2021)

So_Cynical an analysis of my own buy, hold and sell decisions over the years comes to the same conclusion yours did, that I would be vastly wealthier had I never sold a single stock I owned. Yes sometimes selling turns out to be better in individual cases but on average buy and hold seems to win.

The problem I have with the analysis done by tech/a is that he has cherry picked individual examples using hindsight after the fact that fit his trading methodology perfectly and extrapolated that into the statement that his trading methodology is superior to buy and hold on average over the long run.

tech/a If you really want to prove your methodology is superior on average over the long run in real time (not just in cherry picked hindsight examples) start a new thread where in real time you go up against buy and hold fundamental/value guys for example Value Collector, Craft, Vesupria, Mclovin, ROE, (I know some of these guys stopped posting but I am just giving examples of the style of poster/investor I am referring to), etc. In 3 to 5 years time we can determine whose approach is more profitable.

p.s. I am not saying tech/a has a bad or useless methodology. It may indeed produce adequate returns for some.
I am just saying I doubt his approach beats a well implemented buy and hold approach.


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## tech/a (10 October 2021)

@Value Hunter
im happy to do 5hat
Ive currently sold all of my Super-holdings so timing is perfect.
I’ll post my buys again when they occur.
Supported with charts.
Will be a slow thread so will be easy to follow.I reckon I can last another 20 years 

Mind you my Super ( Longterm) is traded differently to my short term discretionary trading
But you’ll all pick it up.


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## sptrawler (10 October 2021)

Value Collector said:


> I thought I had explained it before, what you are basically saying is that after FMG dropped from $25 to $20 that should have triggered me to sell, but obviously I had no way of knowing that the price would continue to fall, it certainly wasn’t clear to me at the time.
> 
> In fact six months earlier FMG had dropped from $25 to $20 and then quickly bounced back, if I had sold then I would have just probably had to buy back in at a higher price, while triggering a capital gains tax event where I would have had to pay about $7 a share in capital gains tax, and also potentially missed out on the $1.47 dividend.
> 
> ...



A case in point, I bought VUK when they crashed to $1.10 in April 2020, when the U.K announced their second lockdown in Oct 2020 I sold at around $2.40 on the hope of an expected crash.
They never went down and now are at $3.76, so I'm still waiting and it looks like I've stuffed up yet again.
When I bought them I thought they are about a $4-$6 share, but as the Duck says, take the opportunities, so I did. 🤣
The problem is the share income, is my only income, I wish it was my second income then i could laugh it off.😭
Mine isn't play money, it is the difference between being self funded, or on the pension.
The thing is one size doesn't fit all, I think from my 30 years experience, I can't tell anyone what they should or shouldn't be doing.
At different stages of your life, the priorities and options change, when i was working on a very high salary losses were a part of life.
Now when i've been retired for 10 years and living on my investment decisions, they have become much more relevant.


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## againsthegrain (10 October 2021)

sptrawler said:


> A case in point, I bought VUK when they crashed to $1.10 in April 2020, when the U.K announced their second lockdown in Oct 2020 I sold at around $2.40 on the hope of an expected crash.
> They never went down and now are at $3.76, so I'm still waiting and it looks like I've stuffed up yet again.
> When I bought them I thought they are about a $4-$6 share, but as the Duck says, take the opportunities, so I did. 🤣
> The problem is the share income, is my only income, I wish it was my second income then i could laugh it off.😭
> ...




This used to happen to me all the time, almost like the market was doing it to troll me, so after I while I decided to sell half when selling "high" if it goes higher you can sell the other half or half of that later or keep it long. If you did get the high right then you are still winning just 50% less but winning.  Better to have 3rd party insurance then none


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## sptrawler (10 October 2021)

againsthegrain said:


> This used to happen to me all the time, almost like the market was doing it to troll me, so after I while I decided to sell half when selling "high" if it goes higher you can sell the other half or half of that later or keep it long. If you did get the high right then you are still winning just 50% less but winning.  Better to have 3rd party insurance then none



Spot on ATG, I just need to reign in the greed. 
Like I said a lot depends on circumstances, one size doesn't fit all, one persons life changing splurge is another persons ashtray money.


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## sptrawler (11 October 2021)

I should have added, these opportunities come around about every 7 years, this one seems to have gone with regard industrial/financial, but I think the opportunity is arising in Minerals.


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## Value Collector (11 October 2021)

tech/a said:


> @Value Hunter
> im happy to do 5hat
> Ive currently sold all of my Super-holdings so timing is perfect.
> I’ll post my buys again when they occur.
> ...



Since we have been discussing FMG, It might be an interesting experiment to compare putting $10,000 into FMG with a buy and hold strategy with dividend reinvestment plan switched on, and $10,000 actively traded in FMG shares.

Of course each FMG trade will have to trading costs and 30% capital capital gains tax deducted before rentry, and if you are holding on ex-dividend date you can add the dividend in.

where as the capital gain on The buy and hold will just be deducted at the end.

——————
(I understand this might be a lot of work, so understand if you don’t want to do it though)


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## tech/a (11 October 2021)

@Value Collector 

FMG isn’t something I’d trade as a trade type issue 
I’d place it if it met criteria into a longer “ Trade/Investment”
Portfolio. I have/ did have/will have again a SMSF Portfolio.
Using different metrics to anything discussed.

For trading I prefer Index Futures and small caps.


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## Value Collector (11 October 2021)

tech/a said:


> @Value Collector
> 
> FMG isn’t something I’d trade as a trade type issue
> I’d place it if it met criteria into a longer “ Trade/Investment”
> ...



What about if you did the same thing I suggest for FMG but used VAS instead?


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## tech/a (11 October 2021)

Value Collector said:


> What about if you did the same thing I suggest for FMG but used VAS instead?




I think you mean VSA.

V/C Somehow this has morphed into Trading V Long term holding.
The point Im making is that when price falls 20% really quickly as it has over the 30 years Ive been trading (around 6 times.)
and there is no direct link to the company in question from a fundamental view---then there is amazing opportunity
which in MY view should be taken. Times when all Blue chips take a dive because things like the GST/Tech Crash/COVID/Iron Ore Diving for no apparent reason.


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## tech/a (11 October 2021)

sptrawler said:


> A case in point, I bought VUK when they crashed to $1.10 in April 2020, when the U.K announced their second lockdown in Oct 2020 I sold at around $2.40 on the hope of an expected crash.
> They never went down and now are at $3.76, so I'm still waiting and it looks like I've stuffed up yet again.
> When I bought them I thought they are about a $4-$6 share, but as the Duck says, take the opportunities, so I did. 🤣
> The problem is the share income, is my only income, I wish it was my second income then i could laugh it off.😭
> ...




In reply to this tragedy.
(1) Wait for a shock move down for no apparent reason 20% is a suggestion dont sell on a whim.
(2) Have a plan "B' if things dont play out as planned. But Plan "B' if you expedite plan "A" properly wont likely be needed.


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## rnr (11 October 2021)

tech/a said:


> I think you mean VSA.
> 
> V/C Somehow this has morphed into Trading V Long term holding.
> The point Im making is that when price falls 20% really quickly as it has over the 30 years Ive been trading (around 6 times.)
> ...



I would suggest that VC is referring to the ticker VAS.


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## Value Collector (11 October 2021)

tech/a said:


> I think you mean VSA.
> 
> V/C Somehow this has morphed into Trading V Long term holding.
> The point Im making is that when price falls 20% really quickly as it has over the 30 years Ive been trading (around 6 times.)
> ...



No I meant VAS (vanguard asx 300 index etf)


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## tech/a (11 October 2021)

rnr said:


> I would suggest that VC is referring to the ticker VAS.





Value Collector said:


> No I meant VAS (vanguard asx 300 index etf)




To what end? Isn't the Long term Re entry and Management of my SMSF account going forward more in line with the discussion/Thread ?
Hopefully I'll be around with it for 20 years or so (68 next B/D).


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## Sir Burr (11 October 2021)

Value Hunter said:


> So_Cynical an analysis of my own buy, hold and sell decisions over the years comes to the same conclusion yours did, that I would be vastly wealthier had I never sold a single stock I owned.




I'm in the same camp these days.
Many years system testing every which way while paying data, software, tax man, accountant, subscriptions, logging trading data, receiving a crap load of ASX letters, storing it all and probably a bunch of things forgotten. Hey I'm still a good Excel coder at least 

I'm getting closer to shredding the lot after the 5 years tax records required to hold (not including company stuff).

Overall I think over the handful of systems I traded, I'm square (compared to market) after costs but with extra work.

That includes a system of a well known author (mentioned in this thread) I ran for a few years which was modified during that time due to poor performance. I believe has been modified since plus I see now being modified again. A professional trader with a system that needs repeated optimising due to poor performance against the market.

Well done Tech for doing it constantly. I read qlffrog's thread and feel happy (sorry qldfrog but human nature or is it just me?) that I'm now passive investing.


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## Value Collector (11 October 2021)

tech/a said:


> To what end? Isn't the Long term Re entry and Management of my SMSF account going forward more in line with the discussion/Thread ?
> Hopefully I'll be around with it for 20 years or so (68 next B/D).



I thought the best experiment to measure the performance difference between buy and hold vs active management would be to measure the difference between total shareholder return after CGT on by and hold over time vs Total return on the same asset the trader received after the additional trading costs and CGT along the way.

Because that’s the real point isn’t it, eg to find out whether some one jumping in and out of a stock actually ends up out performing some one that just stays put by enough to justify all the extra work they do.

After all if you think back to the CBA example, there is no doubt that a trader had a decent chance of making money on CBA over the last 30 years, because the share itself averaged a 15% compounded return, but the real test is whether the trader was able to beat that 15% compounded return,l.

Eg if after years of active management, trading costs and premature CGT the trader only also averaged 15% or less we could happily say he wasted his time and should have just held, if he was able to earn say 20% we could say that the active trading might have been worth the additional 5% return.

Basically what I am saying is that if we are going to conduct an experiment we need to compare apples with apples, eg buy and hold a stock or index vs trading that same stock or index.


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## Value Collector (11 October 2021)

For Those interested in such experiments.

Warren Buffet in 2007 made a $1 Million dollar bet that a group of 5 Hedge funds wouldn’t be able to provide their customers a return over a 10 year period that beat the S&P 500 index.

He allowed the other guy to pick any 5 Hedge funds he wanted, By 2017 it proved out that the Index beat the hedge funds and Warren won the $1 Million for his charity.

it’s hard to believe that 5 hedge funds full of super smart people, that are deeply incentivised to beat the market, and who’s full time jobs is to trade and invest still couldn’t beat the market average return, but as I explained before the headwinds of taxes and fees are significant.

the hedge funds did produce a decent return, it was just less than the market average.


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## peter2 (11 October 2021)

@Value Collector  makes a good point about the different tax regimes for active investors vs buy/hold investors. The benefit of the 50% reduction when positions are held longer than 12mths compounds over the years the investment is held. The active investor pays tax each year and starts the following year with less capital than the B&H investor. 

An active trader must earn more than the market to offset this disadvantage. A quick calc shows that an active trader must earn *30% more* *every year* to offset the extra taxes paid. 




If an active trading  system can't beat the market by 30% every year you're better off buying and holding. 

However this only addresses the reward side of the equation. Markets have and will go down significantly in the future. The draw down in the GFC was -50% and the Covid selloff was -30%. It took the ASX market ten years to get back to the pre-GFC highs. Not a concern to younger investors but it was a serious concern for retirees and newer retirees who depend on dividends. 

One of the significant advantages of active investing is reducing the size of significant draw downs. There is a cost for this benefit and it comes with a lower reward. An active investor may decide that lower DDs with occasional better years is preferable to the risk of trying to beat the market every year.


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## Value Collector (11 October 2021)

peter2 said:


> @Value Collector  makes a good point about the different tax regimes for active investors vs buy/hold investors. The benefit of the 50% reduction when positions are held longer than 12mths compounds over the years the investment is held. The active investor pays tax each year and starts the following year with less capital than the B&H investor.
> 
> An active trader must earn more than the market to offset this disadvantage. A quick calc shows that an active trader must earn *30% more* *every year* to offset the extra taxes paid.
> 
> ...



It didn’t actually take the market 10 years to get back to the pre GFC levels if you include the compounded effect of dividends, looking only at price is missing the income return, which is where over half of your return comes from.

Not to mention that the absolute peak of the market is kind of irrelevant, because it represents such a short period of time, eg if you look at the asx200 chart, the lowest point of the GFC was the market All time high just a couple of years before, if you were carrying out the plan I mentioned earlier of just adding in funds every year, before and even throughout the GFC you would have done very well.

you would have only suffer an inconvenience if you went 100% in with you life savings right near the peak, which would have to be pretty unlucky, but even then dividends and time quickly healed your wounds, unless you panic and sold out and never rebought.


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## tech/a (11 October 2021)

peter2 said:


> @Value Collector  makes a good point about the different tax regimes for active investors vs buy/hold investors. The benefit of the 50% reduction when positions are held longer than 12mths compounds over the years the investment is held. The active investor pays tax each year and starts the following year with less capital than the B&H investor.
> 
> An active trader must earn more than the market to offset this disadvantage. A quick calc shows that an active trader must earn *30% more* *every year* to offset the extra taxes paid.
> 
> ...




Back at the grind after a week of flu so pretty hectic.
Will answer when I can.

Peter what about the extra shares you would be able to purchase when re purchasing at the lower rate plus the extra dividends on the extra shares you would have.?


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## Value Collector (11 October 2021)

tech/a said:


> Back at the grind after a week of flu so pretty hectic.
> Will answer when I can.
> 
> Peter what about the extra shares you would be able to purchase when re purchasing at the lower rate plus the extra dividends on the extra shares you would have.?



I think what he means is that you might not be able to purchase more shares once you have deducted your Capital gains tax and trading costs.

Think back to that CBA example, the guy that bought in at $5.40 and held, had his capital compounding away at 15%, for 30 years and never had to divert any of his funds away from his portfolio to pay taxes.

where as the guy that traded in and out, would have regularly had to divert funds away from his portfolio to pay taxes, not only missing out on the 50% CGT discount, but also sometimes missing out of franking credits due to the 45 day rule and sometimes missing dividends completely.

of course it is possible to still beat the buy and hold guy by trading if you manage to time your buys and sells Well.

But what Peter is pointing out is that where the Buy and Hold guy earned 15% per year, the trader would have to be earning at least 20% (30% more) per year to break even after taxes and trading costs.

it’s a point often missed, by delaying the Capital gains tax by holding long term, can allow you to essentially have those “tax dollars” continue growing and earning you dividends for decades before you have to end up handing them over to the government.


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## tech/a (11 October 2021)

Yes I see what he is saying and getting at. But if you see the other part of the equation happening only a handful of times over a 20 years
then some if not all plus some will occur. The capital gains would be from buy to sell and often over a year.
My example was back of envelope which is now being drilled to death! 
It seems that back of envelope is fine if it supports a view if not lets drill the B jeeezzus out of it.


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## barney (11 October 2021)

Good Thread 

Buy and Hold vs. Trading??

Some are good at "evaluating"  longer term value. (Investing?)

Some are good at "evaluating" shorter term value (Trading?) 

Neither are better or worse in my view

Play to your strengths! 

ps  "Strength" is realized through experience


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## Greynomad99 (11 October 2021)

This sounds like an argument I had with a mate who is a sit and hold tragic - not that there is a lot wrong with sit and hold if that is your trading plan. He had held BHP for several years and had great dividends off it but no capital growth while an active trade over the same period would have returned him a great profit (I didn't take the exercise to the point of seeing if the hold period covered the shares exdividend date).

For what it is worth I did a quick active trade on FMG using simple rules (see below) which reminded me that it is a bugger to trade because it breaks stop losses only to immediately recover. Anyway, 5 of the 6 trades were positive and the one that was a loss only fell by 1.5%. Overall profit was 573% with active trades open for 38 weeks out of 64.


OpenGainClosemths in tradeApr 2016 - March 17$3.00​101%​$6.03​11​Jan 2019 - Aug 2019$6.03​62%​$9.77​7​Sept 2019 - March 2020$9.77​5.60%​$10.32​6​April 2020-Sept 2020$10.32​44%​$14.85​5​Oct 2020 - March 2021$14.85​17.40%​$17.44​5​Apr 2021 - Aug 2021$17.44​-1.50%​$17.18​4​Growth over period573%​38​

*Sell Rules:*
15% stop loss on buy in price or higher weekly trough
Two consecutive weekly closes below 12 week uptrend lines
*Buy rules*
2 consecutive weekly closes above a 12 week downtrend plus confirmation of new 12 week uptrend
If break of uptrend does not form a valid weekly downtrend then buy on break to high side.

This was done quickly - so no guarantees as to accuracy.


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## Value Collector (11 October 2021)

barney said:


> Good Thread
> 
> Buy and Hold vs. Trading??
> 
> ...



Agreed, definitely play to your strengths, that’s what I do, it is interesting to break it down to understand the pros and cons of both options though, because a lot of the time the truth of situations is counter intuitive.

I for one feel that this conversation has helped me, it was actually super interesting for me to sit down and break down the numbers on CBA, (I literally went through the historical dividends and DRP reinvestment prices one by one, took about an 1hour for 30 years of data) 

what was interesting to me is how good the buy and hold for 30 years really was, but also how many times through the period buying and holding would have seemed silly and caused a nervous belly a lot of stress, but still produced a fantastic 15% return.

I then looked over  Woolworths and BHP because they were pushed heavily to “mums and dads” in the 90’s and they were similar.

As I said it’s counterintuitive, you would think high amounts of activity should guarantee better results, but the headwinds you face by being active can be pretty strong, I think it’s something you have to understand before attempting it.


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## Greynomad99 (11 October 2021)

Greynomad99 said:


> This sounds like an argument I had with a mate who is a sit and hold tragic - not that there is a lot wrong with sit and hold if that is your trading plan. He had held BHP for several years and had great dividends off it but no capital growth while an active trade over the same period would have returned him a great profit (I didn't take the exercise to the point of seeing if the hold period covered the shares exdividend date).
> 
> For what it is worth I did a quick active trade on FMG using simple rules (see below) which reminded me that it is a bugger to trade because it breaks stop losses only to immediately recover. Anyway, 5 of the 6 trades were positive and the one that was a loss only fell by 1.5%. Overall profit was 573% with active trades open for 38 weeks out of 64.
> 
> ...



I meant to add this chart to my post re FMG back test trade.


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## divs4ever (11 October 2021)

Value Collector said:


> No I meant VAS (vanguard asx 300 index etf)



 that is an interesting twist (  although in theory  index ETFs were designed  for BIG players   to trade the trends )

 the big $$$ value would stop me from  that  style ( in VAS ) .. but 20% gain is a 20%  gain whether on penny-dreadfuls or CBA ( or VAS )

 the 'guaranteed liquidity ' ( aka market makers' ) gives you a safety net  nearly all of the time 


maybe i should test it in the comp ( with an index ETF ) in the comp.  ( for November or January )

 cheers 

 BTW  IMO  a proper active manager should have some reasonable trading  skills ( say swing-trading  , or trend-trading ) sadly my trading skills are very primitive , but i do own a trusty calculator to tell if a deal really is that good


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## tech/a (11 October 2021)

barney said:


> Buy and Hold vs. Trading??




Just by the way the thread title is Joe Blows
when he moved the discussion from the FMG thread


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## barney (11 October 2021)

tech/a said:


> Just b6 the way the thread title is Joe Blows
> when he moved the discussion from the FMG thread



Yeah Cheers Tech.   I'm late to the party here.  

Appreciate the input particularly yours and V/Collector however, regardless of the Thread name etc


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## Value Collector (11 October 2021)

Greynomad99 said:


> This sounds like an argument I had with a mate who is a sit and hold tragic - not that there is a lot wrong with sit and hold if that is your trading plan. He had held BHP for several years and had great dividends off it but no capital growth while an active trade over the same period would have returned him a great profit (I didn't take the exercise to the point of seeing if the hold period covered the shares exdividend date).
> 
> For what it is worth I did a quick active trade on FMG using simple rules (see below) which reminded me that it is a bugger to trade because it breaks stop losses only to immediately recover. Anyway, 5 of the 6 trades were positive and the one that was a loss only fell by 1.5%. Overall profit was 573% with active trades open for 38 weeks out of 64.
> 
> ...




I am just trying to understand your trades there, would you have actually out performed a buy and hold from $3 after the trading costs, CGT and the dividends missed?


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## Greynomad99 (11 October 2021)

Value Collector said:


> I am just trying to understand your trades there, would you have actually out performed a buy and hold from $3 after the trading costs, CGT and the dividends missed?



I wasn't trying to make a case for either method - although I  expected the active trade to have done better than it did. If you bought in at $3 and today's price is $15 the sit and hold plan made a profit of 400%. I haven't looked at dividends but they wouldn't have made another 173%. You also need to consider the time cost of money. The sit and hold investor had his capital tied up for the full 5 years while the active trader's capital was only invested in the stock for a bit more than half as long.
Also the trading plan I used was the simplest I could think of - so it was easy to apply. FMG had two big falls which made a range of sell signals a more sophisticated trading plan might have avoided.


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## sinic (11 October 2021)

Plenty of talk about the evils of CGT, however, within an SMSF these considertaions are of less or no concern, since taxation may be 15%  or 7.5% in accumulation mode and 0% in pension mode.


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## Value Collector (11 October 2021)

Greynomad99 said:


> I wasn't trying to make a case for either method - although I  expected the active trade to have done better than it did. If you bought in at $3 and today's price is $15 the sit and hold plan made a profit of 400%. I haven't looked at dividends but they wouldn't have made another 173%. You also need to consider the time cost of money. The sit and hold investor had his capital tied up for the full 5 years while the active trader's capital was only invested in the stock for a bit more than half as long.
> Also the trading plan I used was the simplest I could think of - so it was easy to apply. FMG had two big falls which made a range of sell signals a more sophisticated trading plan might have avoided.



I don’t want to go into the full explanation again because it’s been explained above multiple times, but you have to also take into account the multiple times the trader paid Capital gains tax at full price, where as the buy and hold guy hasn’t paid any tax yet, and when he does eventually pay he will get a 50% discount.

basically there total growth wouldn’t have been 573% because after each trade a certain amount of the capital would have been diverted to the government, and not been available for the next trade, and non of the trades qualify for the 12 month capital gains tax discount.


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## Value Collector (11 October 2021)

sinic said:


> Plenty of talk about the evils of CGT, however, within an SMSF these considertaions are of less or no concern, since taxation may be 15%  or 7.5% in accumulation mode and 0% in pension mode.



I retired at 36, so my daily bread is funded by investments outside super.

but even so, the point of taxation is still very relevant even at the lower tax rates of super.

for example let’s say you have $100 capital base, and earn 100% return each year as a trader paying 15% tax

Year 1 $100 > $200 - $15 tax = $185
Year 2 $185 > $375 - $28 tax = $347
Year 3 $375 > $750 - $56 tax = $694

now the buy and hold guy, that doesn’t get tax along the way but still gets the 100% return.

Year 1 $100 > $200 = $200
Year 2 $200 > $400 = $400
Year 3 $400 > $800 = $800

See how even though they are both earning the same return, but the tax man taking his cut along the way is putting a headwind in front of the trader, so his capital is not compounding at the same rate, trading costs add to this also.

that’s why I am saying these examples that ignore tax are not accurate, and that the trader will have to be earning a much higher rate just to break even.

Yes the buy hold guy will have to pay tax eventually, but perhaps only after years or decades of the compounding game, and only at half the tax rate.

for me personally I am in the highest tax bracket, so a difference between 45% and 22.5% is huge, especially if the 45% was being charged each year along the way.


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## tech/a (12 October 2021)

@Value Collector 
Why are you in the highest tax bracket if your retired.
where is your income coming from and why is it at the 
high end? Does your wife work?


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## Greynomad99 (12 October 2021)

Value Collector said:


> I retired at 36, so my daily bread is funded by investments outside super.
> 
> but even so, the point of taxation is still very relevant even at the lower tax rates of super.
> 
> ...



Ahh - the joys of mathematics. I guess I've always ignored tax because everyone's situation is different. I use a super fund with some carried forward losses from some long gone business dealings - and being a relatively small trader, for me the raw trading profit is all I'm looking at. I suspect for someone on a marginal rate of say 25% there probably isn't much real difference in the end result of a trader vs investor. However, one thing the analysis does overlook is how bloody good was an investment in FMG 5-6 years ago when you look at a 100% pa return and consider how many traders ever make a100% average return year in, year out.


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## tech/a (12 October 2021)

Greynomad99 said:


> Ahh - the joys of mathematics. I guess I've always ignored tax because everyone's situation is different. I use a super fund with some carried forward losses from some long gone business dealings - and being a relatively small trader, for me the raw trading profit is all I'm looking at. I suspect for someone on a marginal rate of say 25% there probably isn't much real difference in the end result of a trader vs investor. However, one thing the analysis does overlook is how bloody good was an investment in FMG 5-6 years ago when you look at a 100% pa return and consider how many traders ever make a100% average return year in, year out.



A great deal has to do with the Capital your trading with.

Making 100% on $50K is easier than making 100% on $500k or More.
or 100% on any single trade for that matter.
Trading a SMSF to 100% in any year would be stellar.(*Or very lucky more to the point)*
In my opinion.


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## Value Collector (12 October 2021)

tech/a said:


> @Value Collector
> Why are you in the highest tax bracket if your retired.
> where is your income coming from and why is it at the
> high end? Does your wife work?




The highest tax bracket kicks in at only $180,000. Last year the dividends from FMG by itself added over $750,000 to my tax return once the franking credit was included, add to that the dividends from all my other shares, some options profit, rental income from some real estate, interest from plenti and it was well over $1M last year from all sources.

My wife is retired too, she has her own Investments.

This year given that FMG just paid a $2.11 dividend ($3.00 including franking), and the next dividend is still likely to be about $1.40 at current Iron Ore price, it will probably be adding over $1 Million to my tax return.

So I am Sending huge amounts to the ATO every year, if I can delay CGT for a few years, and in the process pay 22.5% instead of 45%, then I will definitely prefer that.


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## tech/a (12 October 2021)

You have 350,000 FMG shares?

I find your situation nothing short of amazing.
You mentioned you retired at 36 so if you had a University 
education you would have worked for approx. 14 years.

Did you develop an app or something.
To amass what you have in 14 years given the early start you have mentioned in
all your long term share holdings plus real estate which would require equity 
to satisfy banks its one of the most remarkable 14 year or so stories I seen.

Think you'd have to admit its not normal.


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## againsthegrain (12 October 2021)

tech/a said:


> You have 350,000 FMG shares?
> 
> I find your situation nothing short of amazing.
> You mentioned you retired at 36 so if you had a University
> ...



He did say he bought his first shares at 14  so he had a head start, 22 years to build his empire.

Bought fmg at $3  prob bought first re in very late 90s which you could do with even MacDonalds job and/or parents help,  then the snowball kept rolling

right time right place and took advantage of it to the fullest,  def not normal but doable... back then


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## Value Collector (12 October 2021)

tech/a said:


> You have 350,000 FMG shares?
> 
> I find your situation nothing short of amazing.
> You mentioned you retired at 36 so if you had a University
> ...



I have a bit over 240,000 shares (plus some in wife’s account), the tax return numbers I mention include franking credits, because if you get paid a $1 franked dividend your taxable income rises by $1.43 (you then also get to deduct $0.43 from the tax owed)

(I have actually already discussed my situation with you in another thread back in 2019, but I will briefly mention it again here)

I didn’t go to Uni, I left high school and joined the Army, but as I said I have been investing since I started delivering papers as a kid, so had been investing for 22 years by the time I retired at 36, compound interest is a wonderful thing.

Bought my first property at 19 in 2001, for $218,000 right before the property boom, 100% finance My parents guaranteed $45,000 component of the loan so I didn’t require a deposit, I lived on the Army base and rented out the property, I never went hard into real estate, just a couple of properties.

Of course I don’t think my exact situation is normal, but as I have explained before my success is due to a few factors that I have been very open with on this forum over the years.

1, I started early, with a high savings rate and have had allowed compound interest to do its thing, and took the value investing approach early on)

2, I have made a bunch of quite sound investments with great compounded returns, like CBA, APA, WOW, BHP, SYD as well as some amazing ones like Capilano honey, FMG (as well as some big short term recovery ones back in the GFC like Macquarie country wide and Beppa which were both x10)

if you are compounding your returns it does’t take that many big wins to boost yourself up to my level, I put $120,000 into capilano and pulled out over $1M 5 years later when the take over happened, $600,000 into FMG is worth over $3 Million today, and already paid out over $1 Million in dividends.

If you look back over the Capilano and FMG threads you will see though that there was no shortage of people telling me how wrong I was to invest in them, but I have learned to back my own judgement, in both cases I laid out my reasoning based on valuation, and it worked out for me.


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## tech/a (12 October 2021)

That---Is an amazing story I love hearing stories of success particularly when they are planned and that planning works out better than expected. I've had very similar --- much older --but Property was my initial windfall at one time owning 10 , then business which is still growing at 20% a year and has done for 7 years. Share investing and trading while healthy only accounts for 20%.
On with the discussion.


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## Gunnerguy (12 October 2021)

Great discussion and stories !!

Gunnerguy.


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