Buy and hold vs. active portfolio management

[over9k]

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

 

[tech/a]

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.

 

[Value Collector]

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.

 

[tech/a]

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.

 

[tech/a]

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

 

[Value Collector]

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

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.

 

[tech/a]

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

 

[Value Collector]

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

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

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.

 

[againsthegrain]

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

 

[Value Hunter]

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?

 

[tech/a]

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.

 

[over9k]

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...

 

[tech/a]

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.

 

[Knobby22]

(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)

 

[tech/a]

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.

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

You do!!

 

[Austwide]

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.

 

[tech/a]

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.

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

 

[Value Collector]

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...

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.

 

[over9k]

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.

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?

 

[tech/a]

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!