Long Term Investing

[robusta]

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.

.

Guess it is a bit like anything in life, if you are motivated and enjoy what you are doing the chances of success are that much better. From my personal experience while I have not been investing long enough for any results to be meaningful, I think investing is the best game I have ever played. So much to learn, so many permutations, part science part art and the chance of earning a decent reward for your efforts... What else would I want to do with my spare time?

 

[robusta]

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.

Hi odds-on, to me it seems more at odds to be contrarian and not patient. I thought patience and the ability to back your judgement for the long term would be a prerequisite.

 

[galumay]

its just that i think its mostly of little use...like pretty much all in depth analysis.

Now you have really lost me! Firstly you seem oblivious to the irrelevance of % of winners picked without reference to the quantum of wins and losses, now you appear to be suggesting that any sort of in depth analysis of a stock is useless!

I am struggling to get an understanding of just what your personal long term investing strategy is, and whether you have actually had any measurable success with it!

 

[brty]

Before we all get into a bun fight about who's ego is biggest, I thought a bit of a return to the topic may be relevant.

After thinking a little more about the topic, I feel that the best long term investment is education in investing, discovery of what works and what does not. For myself this was a long process with many errors, I had to learn the hard way.
It has been stated in threads before about 10,000 hours to gain expertise in anything, and I tend to agree, especially in investment.

With over 30 years in this game, I am still learning. What works for me longer term, may not work for anyone else for a variety of reasons, whether it be Technical or Fundamental, whether it be a buy and hold of "Buffet" style stocks or penny dreadfuls. Only I will know how to react on what I have learned.

It is only my education in this game over many years that allows for successful employment of funds and anyone who thinks that just following what others do and expects immediate results is deluding themselves. The strategies that work, usually have their days in the sun and get accepted by many, then night comes where prior successful strategies have a period of failure. Each of these periods can be months or years.

What has education taught me?? The easy answer is to look for opportunities. A series of short term trades becomes a long term strategy when working. A good purchase that continues to pay handsomely (cap and/or divs) over a long period equally good. I try to do both.

A recent example... though I don't know how to do this without boasting, sorry..

CAB. I only looked up cabcharge because of a post here by SKC, it stated the following...

Something isn't right with these guys from 3:45pm. It was bouncing nicely today and then lost 8% in the last 15 minutes.

My research, which to some would be way to premature, indicated the following to me on the morning of the 23rd November.....

Couldn't help myself. I bought a few thousand shares at 3.64. What is not to like about a 9.6% fully franked dividend of a company with good financials. Looking at the technicals, breaking the $4 looks bad, yet I wont be surprised to see a large reversal sometime soon.

As the company release basically stated nothing materially wrong, it would be a very bad look for directors to announce something bad next week, hence downside should be limited.

Later that night I posted the following...

In 2007, The company had a cashflow of 28c/share and dividend of 30c/share. The share price was between $9.50 at the low point and $14 for the high. Interest rates were higher than today.
In 2012 the company had a cashflow of 58c/share and a dividend of 35c/share. If they were to lose 30% of cashflow it would still be nearly 50% above the 2007 level. A share price of 1/3 the 2007 level seems a little ridiculous.

All share trading and ownership is about risk. There is little reward where there is no risk. However there are few occasions when opportunity stares you in the face and most freeze. I believe today offered one of those rare opportunities.

Those posts were made on the day of the lowest price since 2004 and has so far proven to be a reasonable investment. I bought just under 8000 shares that day, it is a small proportion of my portfolio.

I only bought those because of my education in investment over the long term, plus my acceptance that I could be wrong. If the share price had continued to go down I would have got out of the position because it would clearly indicate that there was something I didn't know about. How long will I keep them for? No idea, perhaps long term if they continue to meet expectations, ie be a good cow as I like high fully franked dividends, or short term if they were to show an unacceptable decline in either FA or TA, OR have a rise out of proportion to what is warranted.

Sorry about the long post and again apologies about CAB, yet I hope what I can offer as the lesson is that only the long term investment in education is what allows for the following...
1. To spot opportunity that others miss.
2. To understand that I could easily be wrong, and be prepared to accept this.

brty

 

[galumay]

Before we all get into a bun fight about who's ego is biggest,

Yup, re-reading my previous post it comes across as a bit smart ****, I dont seem to be able to edit it, so my apologies.

 

[Julia]

Yup, re-reading my previous post it comes across as a bit smart ****, I dont seem to be able to edit it, so my apologies.

FWIW, I don't think it needs any editing. Not smart**** at all.

 

[So_Cynical]

Now you have really lost me! Firstly you seem oblivious to the irrelevance of % of winners picked without reference to the quantum of wins and losses, now you appear to be suggesting that any sort of in depth analysis of a stock is useless!

oblivious? or in contempt? sorry but im a simple kind of guy, i prefer simple strategies that result in small predictable profits...while im well aware of many different strategies and systems i prefer my high % winners with open time frame strategy that im comfortable with.

---

As for analysis, hang around this forum for 5 years and you will see some really good and bad analysis often from the same people...mostly its irrelevant to the share price or in fact to what's actually happening, occasionally its spot on.

I am struggling to get an understanding of just what your personal long term investing strategy is, and whether you have actually had any measurable success with it!

measurable success? i post all my buys and sells, have done for 4 years.

 

[craft]

brty

thanks for getting things back on the track and great post.

Cheers

 

[burglar]

A generic named thread for wide ranging discussion.

I hope people who are on a personal investing journey, find this thread and find it a good place to share their thoughts and experience.

My investment ideology is based on a pyramid.

The base is the PPOR which was a struggle for decades. Best described as forced savings.

In the middle my various Super accounts, all but one are small and useless. Not worth consolidating.

At the top of this pyramid is my passion, my hobby, my pastime. Trading equities.

I thought to seek multibaggers and swing the profit into bluechips.
No early luck in 1980 with the "Big Australian" BHP
Meanwhile, I became hooked on pennydreads and gambling.

I am determined to build a core portfolio
Recently I bought into NAB but it "sprinted" !
After six weeks I decided to take a capital gain.

So it goes on, a search for a long term investment!

 

[brty]

Burglar,

I also managed to lose money in BHP around the same time! I also lost on pennydreadfuls like ACap development and bluechips like Kemtron limited, I wonder if you can remember those.

Unfortunately I made money trading futures with Dalgety Futures in wool, cattle and $Aus in that period.

 

[CanOz]

brty

thanks for getting things back on the track and great post.

Cheers

DUI DUI DUI, I echo that too Brty.

CanOz

 

[McLovin]

After thinking a little more about the topic, I feel that the best long term investment is education in investing, discovery of what works and what does not. For myself this was a long process with many errors, I had to learn the hard way.
It has been stated in threads before about 10,000 hours to gain expertise in anything, and I tend to agree, especially in investment.

With over 30 years in this game, I am still learning. What works for me longer term, may not work for anyone else for a variety of reasons, whether it be Technical or Fundamental, whether it be a buy and hold of "Buffet" style stocks or penny dreadfuls. Only I will know how to react on what I have learned.

It is only my education in this game over many years that allows for successful employment of funds and anyone who thinks that just following what others do and expects immediate results is deluding themselves. The strategies that work, usually have their days in the sun and get accepted by many, then night comes where prior successful strategies have a period of failure. Each of these periods can be months or years.

What has education taught me?? The easy answer is to look for opportunities. A series of short term trades becomes a long term strategy when working. A good purchase that continues to pay handsomely (cap and/or divs) over a long period equally good. I try to do both.

brty

I'd be interested in hearing how much your strategy/thinking has changed over the past 30 years. Does what you do today bare any resemblance to what you did when you were starting out? Have you slowly built on your knowledge or have you had complete changes of direction through your investing life?

 

[odds-on]

Basically my big picture of investing is swapping surplus capital for an ongoing income stream.

If you like, a chicken for its eggs, a cow for its milk, a sheep for its wool, sort of approach. What the approach does is get away from reliance on what the animal could be sold for down the track. The return stems from what the animal produces in relation to what I initially paid. The potential to sell becomes purely opportunity not a necessity

What’s the big picture behind your approach?

Craft,

How are the pigs?

http://csinvesting.org/2011/09/17/t...ul-investing-or-a-pig-farmer-makes-a-killing/

Cheers

 

[Ves]

Craft,

How are the pigs?

http://csinvesting.org/2011/09/17/t...ul-investing-or-a-pig-farmer-makes-a-killing/

Cheers

The bit about "there being no secret" in the article that you linked Oddson, is one of the moments of realisation that took me onto the next rung (of many - and I'm still near the bottom) of investment knowledge. It's simple and very sobering.

 

[brty]

McLovin,
In 30+ years a lot has changed, especially the availability of information. This of course influences how one perceives stockmarket actions. To get copies of annual reports was not easy nor timely, in fact I mostly went on what was written in newspapers as my source of information, for stocks. There was not even many investment books available and what was out there was very expensive.

As you can imagine what I did often did not work, I lost money on safe bluechip stocks, that went bust, like Kemtron that I mentioned to Burglar. I made the rooky error of buying more on the way down as it was a "good company". I did not fully understand fundamental analysis at the time, nor were all the financial statistics released by the company legitimate, which makes investment harder when such things occur. It still happens, which in my opinion makes theoretical fundamental analysis a more inexact science.
I also bought pennydreadfuls, on the way up, with the intention of selling for short term profits, using basic charting, ie patterns from books. Ican remember one occassion when I had loaded up, always in profit, then when I went to sell at a goodly profit, there were no bidders. I couldn't get out of the stock. Within days there was a report in the newspaper about the company going into administration, it never came out.
What I have really learnt over many years is that there are many ways to lose your money in investments, even in "safe" places.

These days I study relentlessly to find out what can go wrong, plus never make large bets. The CAB trade that I mentioned before, even with full confidence, is only a very small proportion of my investments. By understanding that you can be wrong keeps the bet size small.

I cut out the losers, as my biggest mistake in the past was keeping them, not just the monetary loss, but the psychological impact of being wrong. In this game learning that you can easily be wrong is the most important lesson, yet it is extremely hard to do. Just because one spends 3 weeks studying every detail of an investment and comes to the conclusion that all the stars line up, is no excuse to bet the farm. This is where I believe many of the fundamental analysts here go wrong. Just because the evidence you can obtain states one case, ie good value, does not mean that you have the full story, especially if the price action is doing the opposite. Have a good long look at the MCE thread from the beginning, with all the value investors hopping on board. I note that the starter of this thread was a word of caution in that one from early on.

That is a long enough rant for now.

brty

 

[burglar]

McLovin,
In 30+ years a lot has changed, especially the availability of information. ...

Hi brty,
You have brought back fond memories.

I remember many a Saturday arvo with my mentor.
We unrolled miles (kilometres+) of butchers paper to add
weekly data points to home made graphs.
And organising newspaper articles in a scrap book.
Keeping Journals and General Ledgers.
Checking prices on teletext!
(they scrolled as you worked, sometimes we went through them twice)
Did that once at lunch time and once again after close.

 

[tech/a]

brty

I don't know that your reply will be
Expected by the masses.
Not why they'd want to hear.

Nice post.
One of the few that is loaded
With experience not theory.

 

[explod]

That is a long enough rant for now.

brty

Look forward to more of your take.

Blue chips falling off the tree is an interesting area. In my view this is where an investor needs to focus on the fundamentals, the economics and the sentiment of the sector in which a company is dealing.

 

[Bill M]

A generic named thread for wide ranging discussion.

I hope people who are on a personal investing journey, find this thread and find it a good place to share their thoughts and experience.

I am a long term investor and now I am retired, living solely from passive income. I personally believe that clearing the family mortgage should be the first step, reason being it is the one barrier that holds back people investing serious money. The number 1 priority for my wife and I was clearing that, once done it cleared the deck for serious investing.

All of a suddenly all the surplus (ex mortgage money) money became full on investment money. Investing became a serious business for me.

It doesn't really matter where your income comes from, be it a rental property, shares, fixed interest or cash. All that matters is that your investment keeps on paying you dividends. I do not buy any investment without thinking through the consequences. It has to have a clear return and then you have to weigh up the risks that you can handle or competently manage.

I work along similar lines to ROE and brty, I try to look for miss-priced investments that are going to me long term income. For example if I find a convertible preference share that would pay me 9% gross income and the parent company is sound and has never missed a dividend payment I would consider that a good bet with some minor reservations. I would buy that parcel with the intention of getting that income for a long period of time. Same goes for stocks and real estate, I do not gamble on would be or could be's. It has to be a proven winner.

Currently everything I hold pays me some kind of returns, be it rent, dividends or interest. Anything that doesn't won't get into my investment portfolio in the first place. Capital growth is of secondary value to me, it is the income I look for first. Occasionally capital growth kicks in and I become a very happy camper. The growth is the cream on the cake and something I do not expect (but hope to achieve), the income is the bread and butter.

Now I am in a position where the growth and income is out stripping what my wife and I need to live well on in retirement. I am waiting for further growth (the cream on the cake) to liquidate some of my riskier positions in order to buy less riskier ones so when the time comes that we may have another crash I won't lose very much money. The end result I am looking for is having a low risk portfolio producing income beyond what my wife and I need to live comfortably. And as long as that income keeps pace with inflation then we will have nothing to worry about. Until we get to that point it's business as usual, looking for those opportunities.

Good luck with your investments no matter what they are, cheers.

 

[odds-on]

Hi Brty,

Thank you for your posts. It raises some questions and I would greatly appreciate it if you could take the time to respond.

1. Do you think the increased availability of information has made the stock market more efficient over the years? Are there less opportunities? I appreciate that the market is made up of humans so there will always be fear and greed providing some opportunities.
2. Do you think the increased availability of information has required a change of strategy from 30 years ago? (e.g. from my limited experience it is as if the stock market “overreacts” to bad news in a short timeframe so there is actually only a small window of days to act)
3. Do you think the increased availability of information has impaired the decision making ability of investors? If I recall correctly there was a study done on sports punters and the more information they received the worse their bets got! There seems to an optimum information processing level for the human brain.
4. If you were to start again where would you go fishing?

Cheers