Long Term Stock Ideas

[skc]

Nah I reckon The ASX would still be fine as an investor.

I have funds now beyond what I need to generate my desired income – so some pure risk capital that is free to do nothing but snowball. Taking that amount, my life expectance and using my hurdle rate as a projected return figure (which is less than half my actual return from the last 12 years) whack it into a FV equation and Billionaire Bobs your uncle.

Just for the regular viewers... here's the maths (I think).

Life expectancy of male in Australia ~82 yrs
Current age ~46
Years of compounding remaining ~36
Assumed hurdle rate ~15%
FV multiplier = 1.15 ^ 36 = 153
FV of a Billionaire = $1B (duh)
PV of portfolio = $6.5m (i.e. not unimaginably large)

BTW, if inflation is 2.5% for the next 36 years, the actual purchasing power of $1B in 36 years time is ~$410m in today's dollar.

If you are only 30 years old with $100k to invest, you can potentially turn that into $1B (@15% return) by age 80.

Disclaimer: Past returns do not guarantee future returns. Individual results may vary.

I think in some ways it would be easier to lose the risk capital then blow the lights out. Both Scenarios need a lot of pre - thought. It’s easy to stay roughly within what you know but big Paradigm shift take (me at least) some getting used to.

I agree. There's an old Chinese saying... something along the lines of "The higher you climb the further you can see". Which also implies that it's not easy to see that far when you are not high enough. Dream big but take little steps. Then the dream will turn more vivid as the numbers start to grow and compound.

So dream big guys (girls) and start preparing early – especially if you have the intellect, persistence and youth of people like VES, VSntchr, SKC etc. You just never know.

I will start preparing early by spending like a billionaire... is that what you meant?

 

[Miner]

Just for the regular viewers... here's the maths (I think).

Life expectancy of male in Australia ~82 yrs
Current age ~46
Years of compounding remaining ~36
Assumed hurdle rate ~15%
FV multiplier = 1.15 ^ 36 = 153
FV of a Billionaire = $1B (duh)
PV of portfolio = $6.5m (i.e. not unimaginably large)

BTW, if inflation is 2.5% for the next 36 years, the actual purchasing power of $1B in 36 years time is ~$410m in today's dollar.

If you are only 30 years old with $100k to invest, you can potentially turn that into $1B (@15% return) by age 80.

Disclaimer: Past returns do not guarantee future returns. Individual results may vary.



I agree. There's an old Chinese saying... something along the lines of "The higher you climb the further you can see". Which also implies that it's not easy to see that far when you are not high enough. Dream big but take little steps. Then the dream will turn more vivid as the numbers start to grow and compound.



I will start preparing early by spending like a billionaire... is that what you meant?

Good discussions folks. But did we started discussing stepping over the focus line ? Topic is Long Term Stock Ideas I thought !!

 

[tech/a]

Good discussions folks. But did we started discussing stepping over the focus line ? Topic is Long Term Stock Ideas I thought !!

Probably but I think there are some really important snippets in there.
In particularly this sobering thought.

BTW, if inflation is 2.5% for the next 36 years, the actual purchasing power of $1B in 36 years time is ~$410m in today's dollar.

Even for those who never attain Billionaire status.

A modest $5 million will be worth in todays terms $2 million with the associated costs of living at that time.
And to most a $5 million figure is but a dream.

So to the topic.

To maintain that compounding investment I really think it will or could be done by the few who can develop a method which can be profitable and can be monitored for its health.
This would be in my view a robust mechanical method that is designed for simplicity and adaptability.
Capable of trading through Bull Bear and Flat
Being In, Out ,All in OR All out.

 

[Value Collector]

A modest $5 million will be worth in todays terms $2 million with the associated costs of living at that time.
And to most a $5 million figure is but a dream.

.

If the assets are chosen correctly, the inflation side of things takes care of itself.

If you spoke to the average 20 year old guy in 1960 and asked him if he could ever afford to own a $500k house, he would have said no way that figure is but a dream, but today his family home is probably worth $500k to $1000k, by owning a real (non cash) asset his capital has been protected from inflation.

Now, you might have been able to scare him by saying " you know if you want to retire you are going to have to own a $500k house" and he might have freaked out thinking he could never own one because he only earned $2000 per year, and if his stratergy was to save cash until retirement and then by the house he should freak out, but if his stratergy is to accumulate assets either directly or through the stock stock market that are inflation hedged, he shouldn't worry about inflation.

Picture a farmer with 2000 head of cattle, that earn him a decent wage in 1960 of $10,000 per year, if you said in the year 2016, you will need $100,000 to live, he might incorrectly think that between now and then he needs to increase his herd to by x10 to 20,000 head of cattle so he can earn the $100k, but he doesn't, because inflation will increase the value of his cattle, and he could continue living off the 2000 head of cattle, because now that same 2000 cattle would earn $100k instead of the $10k they used to.

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

Offcourse these are simplistic examples, but the underlying theory holds true, owning real assets with longterm inflation hedging built in, gives you protection.

 

[tech/a]

If the assets are chosen correctly, the inflation side of things takes care of itself.

If you spoke to the average 20 year old guy in 1960 and asked him if he could ever afford to own a $500k house, he would have said no way that figure is but a dream, but today his family home is probably worth $500k to $1000k, by owning a real (non cash) asset his capital has been protected from inflation.

Now, you might have been able to scare him by saying " you know if you want to retire you are going to have to own a $500k house" and he might have freaked out thinking he could never own one because he only earned $2000 per year, and if his stratergy was to save cash until retirement and then by the house he should freak out, but if his stratergy is to accumulate assets either directly or through the stock stock market that are inflation hedged, he shouldn't worry about inflation.

Picture a farmer with 2000 head of cattle, that earn him a decent wage in 1960 of $10,000 per year, if you said in the year 2016, you will need $100,000 to live, he might incorrectly think that between now and then he needs to increase his herd to by x10 to 20,000 head of cattle so he can earn the $100k, but he doesn't, because inflation will increase the value of his cattle, and he could continue living off the 2000 head of cattle, because now that same 2000 cattle would earn $100k instead of the $10k they used to.

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

Offcourse these are simplistic examples, but the underlying theory holds true, owning real assets with longterm inflation hedging built in, gives you protection.

Yes I agree.

Its when one stops working/earning that the problem hits.
EG living 30 yrs. beyond retirement.

 

[Value Collector]

Its when one stops working/earning that the problem hits.
EG living 30 yrs. beyond retirement.

Provided you are sourcing your income from assets that have inflation protection, you should be fine, because over time as the cost of living rises, so should the income from these inflation hedged assets.

Living to long only becomes a problem if you are relying on using a large portion of your principle each year, or you fall into the trap of believeing you need to hold lots of cash in retirement, so you get burned by the one two punch of low interest rates and inflation.

 

[luutzu]

If the assets are chosen correctly, the inflation side of things takes care of itself.

If you spoke to the average 20 year old guy in 1960 and asked him if he could ever afford to own a $500k house, he would have said no way that figure is but a dream, but today his family home is probably worth $500k to $1000k, by owning a real (non cash) asset his capital has been protected from inflation.

Now, you might have been able to scare him by saying " you know if you want to retire you are going to have to own a $500k house" and he might have freaked out thinking he could never own one because he only earned $2000 per year, and if his stratergy was to save cash until retirement and then by the house he should freak out, but if his stratergy is to accumulate assets either directly or through the stock stock market that are inflation hedged, he shouldn't worry about inflation.

Picture a farmer with 2000 head of cattle, that earn him a decent wage in 1960 of $10,000 per year, if you said in the year 2016, you will need $100,000 to live, he might incorrectly think that between now and then he needs to increase his herd to by x10 to 20,000 head of cattle so he can earn the $100k, but he doesn't, because inflation will increase the value of his cattle, and he could continue living off the 2000 head of cattle, because now that same 2000 cattle would earn $100k instead of the $10k they used to.

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

Offcourse these are simplistic examples, but the underlying theory holds true, owning real assets with longterm inflation hedging built in, gives you protection.

Inflation don't take care of themselves. They're taken care of by gov't policies to first, protect the assets of those who own most of the country; and two, to encourage the rest of the plebs to better get into debt (borrow money from, guess who) to own that slice of the Australian dream before it's gone.

While people should definitely get into the owning of assets game, it serves them well to know the political and statecraft side of that game too.

That while big brother will protect asset owners in general - fighting evil inflation, for one - protection are also achieved when the price is high enough you then halved it, giving those late to the game a chance to get in at their level; and to give those who had enough assets to have sold at the peak and are now sitting on a lot of liquidity to take a second dip.

 

[Klogg]

Inflation don't take care of themselves. They're taken care of by gov't policies to first, protect the assets of those who own most of the country; and two, to encourage the rest of the plebs to better get into debt (borrow money from, guess who) to own that slice of the Australian dream before it's gone.

Not intending to speak for VC, as he's clearly more than capable of doing that himself. But, I think he means that you should look for assets where price sensitivities aren't great - e.g. businesses that have some form of pricing power so they can raise prices at least in line with inflation.

 

[luutzu]

Not intending to speak for VC, as he's clearly more than capable of doing that himself. But, I think he means that you should look for assets where price sensitivities aren't great - e.g. businesses that have some form of pricing power so they can raise prices at least in line with inflation.

Oh yea. We should invest/own assets that are able to at least keep up with inflation. Average wage raise and bank deposits aren't going to cover it.

Speak of pricing power, my electricity bill just gone up 35% since last quarter. woohoo! Not sure why or how we use more power in Sept. than during Jun/july/aug. Better get ourselves into AGL stock and share in the gouging.

 

[Ves]

Yep it sounds ridiculous, but math is math and its one potential possibility that needs to be prepared for. Failing to dream big enough and being mentally behind the eight ball as reality unfolds has presented me with some of my biggest challenges in the journey to date.

That is interesting, because I have always looked at it as a double-edged sword. You need to be prepared for both unexpected upside and downside. Thankfully, it looks like (at least with the current results), your biggest surprises have probably been well in excess of your dreams.

At the moment, I'm struggling with the opposite issue. Because of life circumstances (wife unable to work) I have been unable to save any additional investible capital for quite some time. I'm bloody impatient and feel rightly or wrongly that I am wasting prime (compounding) investing time (and actual time) going to work each day and not having much in the way of savings to show for it! Probably the wrong attitude because there is definitely more to life than investing and it really is a first world problem, but it is a significant mental challenge to refine thinking around the goal of wanting to retire way earlier than most people do when a big obstacle suddenly wedges itself in the way and makes it that much harder to achieve going on the maths. /rant over

 

[Klogg]

At the moment, I'm struggling with the opposite issue. Because of life circumstances (wife unable to work) I have been unable to save any additional investible capital for quite some time. I'm bloody impatient and feel rightly or wrongly that I am wasting prime (compounding) investing time (and actual time) going to work each day and not having much in the way of savings to show for it! Probably the wrong attitude because there is definitely more to life than investing and it really is a first world problem, but it is a significant mental challenge to refine thinking around the goal of wanting to retire way earlier than most people do when a big obstacle suddenly wedges itself in the way and makes it that much harder to achieve going on the maths. /rant over

FWIW, I had this same issue a while back. It's really frustrating when life gets in the way of investing, but only because I enjoy it so much. In my case, I chose to bail out a family member for a 6 digit sum - I was 26, it was a fair chunk of my capital. I got it back a few years later, but I did miss 2 years of a larger pool of capital...

Not quite the same situation as mine was a choice, but still annoying.

In any case, what helped me adjust my mindset was to remember the compounding effect of knowledge. You may not have the capital now, but you definitely have the capability to grow your knowledge base of companies you wish to purchase. That will likely be the biggest benefit to your future self (at least that's what I tell myself

 

[McLovin]

FWIW, I had this same issue a while back. It's really frustrating when life gets in the way of investing, but only because I enjoy it so much. In my case, I chose to bail out a family member for a 6 digit sum - I was 26, it was a fair chunk of my capital. I got it back a few years later, but I did miss 2 years of a larger pool of capital...

Having six figures at 26 puts you well ahead of the curve anyway. Think about that.

The worst thing you can do is get impatient and start looking for quick gains. That'll blow a hole in your compounding.

 

[tech/a]

Yep it sounds ridiculous, but math is math and its one potential possibility that needs to be prepared for. Failing to dream big enough and being mentally behind the eight ball as reality unfolds has presented me with some of my biggest challenges in the journey to date.

Seriously Craft Buy this

 

[Klogg]

Having six figures at 26 puts you well ahead of the curve anyway. Think about that.

The worst thing you can do is get impatient and start looking for quick gains. That'll blow a hole in your compounding.

Haha, thanks. I was lucky early on with IT contracting work (skipped grad programs and went straight to contract work because of right place, right time) - helped me save a lot.

And I've made the mistake of looking for quick gains... it blew a hole in my performance that I've only just mended.
Funnily enough, it came around about the same time that I learnt (the hard way) that lower churn of holdings correlated with higher returns.
I guess that supports the theme of "Long Term Stock Ideas"

 

[Value Collector]

- e.g. businesses that have some form of pricing power so they can raise prices at least in line with inflation.

Basically yeah,

The symptom of inflation that people are worried about most is loss of purchasing power, eg it takes more dollars to buy the things we want and need now than it did 20 years ago, and in 20 years it will take more dollars than it does now.

But it only takes more dollars to buy things, because the prices have gone up, and companies that have been able to continue earning the same profit margin on their new higher level of revenue, can pass along bigger dividends.

By owning part of the system that produces the goods and services your share of the income and capital pie will stay the same, if not grow. Even if you just own an asx index through all the ups and downs, you are going to be far better off than holding cash

eg, In 20 years I probably still want to drink a scotch mist at the Cove Bar at the Disneyland resort, and it will probably cost twice as much as it does now, But on average Disney's profit margin is about 20% on every dollar collected by their parks and resorts division, So if inflation doubles the price of my scotch mist (and every other thing at the park), then Disney's profit would double, and dividends would be raised and my scotch mist will still be funded by my dividends, and I won't see a reduction in my standard of living.

But,

If Luutzu tries to fund his retirement by holding cash, he won't see a sustained growth in income of enough to offset the rising prices, and instead of a scotch mist at the cove bar, he may have to settle for a paper cup of tap water, dreamworld lol.

 

[Ves]

In any case, what helped me adjust my mindset was to remember the compounding effect of knowledge. You may not have the capital now, but you definitely have the capability to grow your knowledge base of companies you wish to purchase. That will likely be the biggest benefit to your future self (at least that's what I tell myself

And I've made the mistake of looking for quick gains... it blew a hole in my performance that I've only just mended.
Funnily enough, it came around about the same time that I learnt (the hard way) that lower churn of holdings correlated with higher returns.
I guess that supports the theme of "Long Term Stock Ideas"

Thanks! Really sage pieces of advice that any long term investor can benefit from.

 

[skc]

At the moment, I'm struggling with the opposite issue. Because of life circumstances (wife unable to work) I have been unable to save any additional investible capital for quite some time.

Hope she's fine and it all works out. While it's important to take care of the financial side of life... the only real reason to do that is so we can look after other more important things in life.

 

[craft]

Seriously Craft Buy this

View attachment 68357

Why?

 

[Ves]

Hope she's fine and it all works out. While it's important to take care of the financial side of life... the only real reason to do that is so we can look after other more important things in life.

Cheers mate, without going into much detail she developed mental health issues after being over-worked by one of the Big4 banks. Years ago now, but she has had trouble regularly working ever since, did the casual / part-time thing for some of that time in different companies, but not currently doing much (work-wise).

Whilst I'm obviously disappointed not being able to invest, it's my number 1 priority to support her as much as possible, whether it's financially or emotionally. Unfortunately there's only so much you can do, depression is a bitch, and there's no magic bullet.

 

[tech/a]

Why?

Its a great read

Explodes a lot of Myths.

Maybe not for everyone and you maybe
one of those.