Long Term Investing

[tech/a]

No, please provide examples.

Again i would love to see examples of how making wrong choices and bad bets the majority of the time can give you positive expectancy.

And what has any of this to do with Long Term Investing?

Your not thinking are you So C?

(1) Wrong 7 out of 10 trades losing 20% each time.
Right 3 out of 10 trades gaining 70 % each time.
So profitable.

(2) Right 7 out of 10 trades winning 20% each time
Wrong 3 out of 10 trades losing 70 % each time
So your not profitable.

What's this got to do with long term investing.
I'd have thought it was/is obvious. But perhaps
I'm in the wrong 50% of idiots.

 

[So_Cynical]

Your not thinking are you So C?

(1) Wrong 7 out of 10 trades losing 20% each time.
Right 3 out of 10 trades gaining 70 % each time.
So profitable.

(2) Right 7 out of 10 trades winning 20% each time
Wrong 3 out of 10 trades losing 70 % each time
So your not profitable.

What's this got to do with long term investing.
I'd have thought it was/is obvious. But perhaps
I'm in the wrong 50% of idiots.

tech i know the math, what i want to see is how its done in the context of "easy money" i don't consider the discipline of a strict trend following system to be easy, accepting that 65% + of your trades are losers cannot be easy.

 

[craft]

Hi Craft,

Thank you for the response. Food for thought.

-How long should the average equity investor persevere attempting to achieve excess returns before admitting defeat and using an index tracker or a simple value portfolio? Not everybody is going to "beat the market" and in the long term the aim is to achieve the highest returns for the least risk. I think this is a worthy discussion point in a thread about long term investing.

Cheers

Oddson

Hi Oddson - my answer to your question is along simillar lines to smurfs very good post just before yours.

These days, I'm not looking for capital growth as such and yet I find it ends up being relatively easier to achieve than it was when I was actively chasing it.

If the journey is more important to you then the result - then you are much more likely to get the result.

Personally there was never any question for me, participation was more important then the scorecard - except to the extent that the scorecard could stop me from playing. As it turns out process is what really matters in investing so concentrating there defaulted in the right result and all was sweat with the world. If it hadn't I would have kept trying so long as I could rub a few bucks together to pay the entry fee.




edit - not sure I really answered the question clearly - try this.

If you are doing it for the result – give up straight away you probably don’t have the right motivation to do what it takes to learn how to outperform.

If you are doing it because there is nothing in the world you would rather do regardless of the outcome then perceiver because your motivation will let you find a way.

 

[tech/a]

tech i know the math, what i want to see is how its done in the context of "easy money" i don't consider the discipline of a strict trend following system to be easy, accepting that 65% + of your trades are losers cannot be easy.

It's easier than you can imagine.
When trading T/T for 5 years the win rate was
Around 32% but with losers often being stopped in groups
Dropping 1% at a time or around $1000
The OPEN PROFIT often 10s of 1000s remained sitting there
In the winners which remained open often for over a year.

So as you can see it's not that hard when you've been involved in it!

If you've got a few hrs to spend you can look back on the posts on
" The Chartist " where its still available for all to learn from.

 

[So_Cynical]

So C

You seem to have stirred the pot with your big picture. If your stock selection was random then I would tend to agree with most of the comments - however your stock selections are not random and I think that needs to be considered.

Yes that's true.

Firstly you mention low price – This low price aspect is a major difference over technical entry which takes whatever market price that may prevail following an entry signal. This aspect needs to be considered when thinking about how long you may be underwater. Hopefully your low cost entry calculations would keep you from starting to accumulate Mirabela at $7 or Billabong at $14 etc

Yep true again...from memory the first time BBG made a stock selection short list was at about $5...never came even close to getting selected though.

Secondly – although you are not explicit about it in the above paragraph I expect from other things you write that you have a quality aspect to the stocks you pick – This aspect should have a big impact into your results as well, ensuring you don’t average into something terminal like ABC Learning or Babcock and Brown etc.

Statistically this has proven to be about 90% correct.

The freeing up of capital to redeploy just because you come into profit is probably the most different aspect to what I do but I can see the logic for it IF you have identified a better business at a lower price to invest in.

I must admit that the "better business" scenario is something i don't consider at all...more like just another good business, i don't rank stocks that interest me...i turn the money over because its a mechanism for portfolio growth and diversification and as a way to de-risk a trade and spread risk over my whole portfolio.

I think your system will only work with high quality and low price stocks. How do you ensure you get these two points right? Explain adequately how you manage these two points and you might (should) ease the concerns of constructive critics.

I cant adequately Explain how i do this, just look at the number of times i will post an entry or interest in a stock and how often other ASF'ers are queuing up to explain why an investment is XYZ is a bad idea...even the no brainers like QBE the other Month trading at below $11, UMike and myself were the only 2 buyers, everyone else (yourself included) wanted to talk about bond yields.

Have a look at the QBE chart that i posted in Nov, while the SP did fall another 1 dollar the general premise was correct with highs last week of above $12.50...it really was just to simple.
~

~

 

[tech/a]

Currently with QBE your right 5 from 5
any trading below the average buy price then your wrong.
And so are your 5 rights!

 

[craft]

UMike and myself were the only 2 buyers, [how do you know this?] everyone else (yourself included) wanted to talk about bond yields.

I would have thought talking about a company rather than personal transactions is probably much more relevant to a stock thread.

 

[So_Cynical]

I would have thought talking about a company rather than personal transactions is probably much more relevant to a stock thread.

From my re-read of the thread UMike and myself were the only buyers stating that we had bought and at what price, i think these sort of declarations add credibility....i mean just look at all the people now declaring that they have been in this rally for months.

Post it in real time or it didn't happen....burglar on page one of this thread said that no one ever calls a stock cheap, well i buy cheap stocks and i bought QBE for $11 and i posted about it.

 

[odds-on]

Hi Oddson - my answer to your question is along simillar lines to smurfs very good post just before yours.




If the journey is more important to you then the result - then you are much more likely to get the result.

Personally there was never any question for me, participation was more important then the scorecard - except to the extent that the scorecard could stop me from playing. As it turns out process is what really matters in investing so concentrating there defaulted in the right result and all was sweat with the world. If it hadn't I would have kept trying so long as I could rub a few bucks together to pay the entry fee.




edit - not sure I really answered the question clearly - try this.

If you are doing it for the result – give up straight away you probably don’t have the right motivation to do what it takes to learn how to outperform.

If you are doing it because there is nothing in the world you would rather do regardless of the outcome then perceiver because your motivation will let you find a way.

Craft,

I get your point but I think you are missing the point I am trying to make. Take sport for example, even if I practiced soccer every night for 10 years I would not get a place on professional soccer team - why? Because I am too old and do not have the necessary soccer skills. Investing is the same, it does not matter how much you practice you may not have the time or the skills to succeed.

"In the long run, we are all dead" - there must come a point where it is actually best not to attempt to achieve excess returns due to the effort required for the reward (Compounding obviously takes it time to really make that difference)

Please understand I am not being difficult, but you must admit there is a cut-off point where if "stock picking" investing is not working (profitable) it is best to try something else. In my case I have thoroughly enjoyed the journey, it has been an amazing learning experience - but if I can beat my returns using an index tracker/simple value portfolio I would be in error not to use these investment tools because in the long-term this will most likely bring me the greatest return. I do believe in value investing I just do not think everybody can apply it successfully in the long run - this is a risk.

What would be of interest to this thread is if investors would post some simple long term investing ideas that require minimum portfolio management (e.g. High Yield Portfolio from the Motley Fool UK website)

Has anybody attempted to run a random selection as a portfolio? Or just use a shotgun approach to buy resource stocks or stocks below NTA?

Cheers

Oddson

 

[galumay]

What would be of interest to this thread is if investors would post some simple long term investing ideas that require minimum portfolio management (e.g. High Yield Portfolio from the Motley Fool UK website)

Has anybody attempted to run a random selection as a portfolio? Or just use a shotgun approach to buy resource stocks or stocks below NTA?

Cheers

Oddson

I agree, I am very interested in this too, I am torn about 3 ways at the moment! Try to learn to be a good value investor, use a service like Nick Radges and a momentum trading system, or as you say accept that the best risk/reward matrix for me may be some sort of index tracking, and long term invest and dribble feed with disposable income.

 

[sydboy007]

I agree, I am very interested in this too, I am torn about 3 ways at the moment! Try to learn to be a good value investor, use a service like Nick Radges and a momentum trading system, or as you say accept that the best risk/reward matrix for me may be some sort of index tracking, and long term invest and dribble feed with disposable income.

I was reading about investing for probably 2 years before I decided to take the plunge.

Over that time I decided to focus on investing in shares that have a decent dividend yield eg for my SMSF I use the avg of the best 3 and 5 yr TD rate and then add 2% on top of that as the higher return I expect for the risk.

What I like with dividend income is that it allows me to redeploy funds without selling current holdings.

I was lucky enough to pick SGN at $1.07 in December and they seem to be hitting a resistance at $1.30. I was thinking to sell out and take the 20% profit and hopefully buy back in when we get a pull back, but even at the new price I'm looking at a 9% grossed up yield. This is where I'm having trouble deciding on how actively to manage my portfolio.

I'm in a similar bind with NAB. The shares are up nearly 20% since I bought them last month, but grossed up yield is still a tad over 9%.

Part of me says the yield is still great so there wont be too much pressure to sell from current investors, but the other part of me thinks the market has sprinted a bit too hard and will need to have a breather shortly, so it's be nice to say sell now and buy in 5% cheaper.

I think it's easier for me to live with following my income target and using that as my primary guide than buying and selling to increase the capital growth return. I take the Motley Fool concept of intending to invest for the long term but actively monitoring my portfolio and moving allocations when there's better opportunities.

 

[burglar]

... I'm in a similar bind with NAB. The shares are up nearly 20% since I bought them last month, but grossed up yield is still a tad over 9%. ...

... the market has sprinted a bit too hard and will need to have a breather shortly, ...

I am reading your post with a great deal of head nodding!
Sold my NAB for a capital gain when they "sprinted a bit too hard".

It was to be my second long term investment since 1980.
Six weeks is not long, is it?

 

[craft]

Craft,

I get your point but I think you are missing the point I am trying to make. Take sport for example, even if I practiced soccer every night for 10 years I would not get a place on professional soccer team - why? Because I am too old and do not have the necessary soccer skills. Investing is the same, it does not matter how much you practice you may not have the time or the skills to succeed.

Hi Oddson

I don’t think you need special physical abilities to become a good investor I also don’t think you need anything more than average healthy mental faculties, motivation and determination is the key to me.

"In the long run, we are all dead" - there must come a point where it is actually best not to attempt to achieve excess returns due to the effort required for the reward (Compounding obviously takes it time to really make that difference)

The time point is a good one. Much better to be putting in the yards when you’re young and have the time for compounding to work on any excess return you can achieve.

Please understand I am not being difficult, but you must admit there is a cut-off point where if "stock picking" investing is not working (profitable) it is best to try something else. In my case I have thoroughly enjoyed the journey, it has been an amazing learning experience - but if I can beat my returns using an index tracker/simple value portfolio I would be in error not to use these investment tools because in the long-term this will most likely bring me the greatest return. I do believe in value investing I just do not think everybody can apply it successfully in the long run - this is a risk.

Don’t think you are being difficult – you make very good points.
I just think a person’s motivation for the process has a lot to do with whether or not they will eventually find a way. If you are not motivated by the process I would recommend assuring average returns straight away through indexing and averaging and get on with other aspects of life. If your motivated I would give much more rope whilst learning – you ask how much rope – I say it depends on the level of motivation, but I take your point that a motivated person still may be better off giving up – I wouldn’t dare attempt to say where that appropriate point is though.

Cheers

 

[craft]

I agree, I am very interested in this too, I am torn about 3 ways at the moment! Try to learn to be a good value investor, use a service like Nick Radges and a momentum trading system, or as you say accept that the best risk/reward matrix for me may be some sort of index tracking, and long term invest and dribble feed with disposable income.

Hi galumay.

I would say you are only looking at two objectives. Trying to outperform average or accepting average with the benefits of low expense low input.

Momentum or stock selection is just two different methods for attempting to achieve outperformance. There are others methods and combinations – all will take time and effort to master. As per my response to Oddson – pick the one that motivates you the most and you have the greatest chance of succeeding.

Using services like Nick Radge or placing money with any active manager or referral service for that matter is a bet on that person’s ability to outperform. Some truly can – Some are just in it to rake in management fees before customers realise there is randomness in results but no long-term outperformance, Can you tell the difference and pick the right person to back 'before' the results have been made?

 

[craft]

From my re-read of the thread UMike and myself were the only buyers stating that we had bought and at what price, i think these sort of declarations add credibility....i mean just look at all the people now declaring that they have been in this rally for months.

Post it in real time or it didn't happen....burglar on page one of this thread said that no one ever calls a stock cheap, well i buy cheap stocks and i bought QBE for $11 and i posted about it.

Thanks for the lecture in credibility - but if it's all right with you I will just stick with thinking diligent research and thoughtful analysis gives rise to credibility. Feather weight opinions and small sample ‘look at my actions’ don’t do it for me.

 

[odds-on]

I agree, I am very interested in this too, I am torn about 3 ways at the moment! Try to learn to be a good value investor, use a service like Nick Radges and a momentum trading system, or as you say accept that the best risk/reward matrix for me may be some sort of index tracking, and long term invest and dribble feed with disposable income.

Hi Galumay,

Why not have a trial period with each of the ways and see how it goes? In the last couple of years I found out the following:

1. I cannot short term trade for toffee.
2. I am a contrarian.
3. I am not patient.

Cheers

Oddson

 

[galumay]

Hi Galumay,

Why not have a trial period with each of the ways and see how it goes? In the last couple of years I found out the following:

1. I cannot short term trade for toffee.
2. I am a contrarian.
3. I am not patient.

Cheers

Oddson

I guess the problem with a trial for long term investing is that i will be dead by the time i prove my strategy and then implement!!

Are your dot points 1 & 3 not at odds with each other and if so how do you reconcile!?

 

[McLovin]

I guess I'm in the same boat as most on here; capital for cashflow. I don't hunt around for multibaggers, I doubt it's really even possible while maintaining some modicum of conservativeness. I've been buying and selling shares for a pretty long time, but I'd say that it's only in the last 2-3 years that things started to "click". It's sort of like I'm wearing Polaroid glasses now and can see much better.

I still haven't gotten my head around when to sell a great business because the SP has run too hard. I guess that will come with time.

SC: I don't think posting your buys necessarily adds credibility. IMO,the process matters just as much, if not more, than the result.

 

[odds-on]

I guess the problem with a trial for long term investing is that i will be dead by the time i prove my strategy and then implement!!

Are your dot points 1 & 3 not at odds with each other and if so how do you reconcile!?

They are at odds! I do not short term trade and I do not hold for years. I would say my holding period is between 3 to 6 months with a portfolio of 1 to 2 stocks and cash. Happy to "to bet the farm" or stay 100% cash.

 

[So_Cynical]

Thanks for the lecture in credibility - but if it's all right with you I will just stick with thinking diligent research and thoughtful analysis gives rise to credibility. Feather weight opinions and small sample ‘look at my actions’ don’t do it for me.

Lecture in credibility - feather weigh opinions?

Dude seriously, its not rocket science and it was never a lecture.

You give good analysis craft, its just that i think its mostly of little use...like pretty much all in depth analysis.

SC: I don't think posting your buys necessarily adds credibility. IMO,the process matters just as much, if not more, than the result.

I like the certainty, the binaryness of it, im in at what ever price says that im backing my words and simple analysis with money...personally i like it when people post they're buys and sells, its open and honest and i like that.