Most who want to get rich or retire wealthy... have got it wrong

Value Collector · 7 February 2015

I do I know a few actually, they bought CBA shares when it float NEVER sell a single share even today
at $90,

We might know the same people, lol.

I know a couple who have held CBA shares on a dividend reinvestment plan since 1995 / 96 (whenever the second float was)

$12 to $92 in 20years, plus all those dividends bought extra shares every 6months along the way.

Did the GFC worry them? well it worked in their favour, the dividends during the down turn bought a lot more shares than they would have otherwise.

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

The long term investor shouldn't be phased by market down cycles, unless it's during a period you were planning on selling you won't be affected, and it will likely work in your favour if your reinvesting dividends or if the company regularly buys it's own shares.

Take Disney for example, I am holding them as a long term investment, the shares have recently skyrocketed, to over $100, which makes me feel good, however due to their share buyback program, I would actually be better off long term if the shares trended down for a while, the lower the price during the years they operate buybacks the more my stake in the company increases.

pavilion103 · 7 February 2015

Even having some sort of filter on the index on the monthly chart would increase profitability substantially.

I know people who did this pre GFC when a top became clearer. Reinvested after prices fell and held and began to rise. I'm not suggesting picking absolute tops and bottoms.

But even with a little basic knowledge and knowing when to be in and out on a large timeframe will improve returns.

waimate01 · 7 February 2015

tech/a said:
How do you figure that.
20% on $10K is $2000 x 52 Weeks.= $104,000

Get Kris to explain compound interest - $10k compounding at 20% per week for a year is $18.2 million.

So if I'm understanding your performance correctly, by choosing to spend the $2k per week, you've done yourself out of $18.1 million.

You should stop spending the weekly 'two large', and six months from now buy yourself a jet. I'd be impressed.

Value Collector · 7 February 2015

pavilion103 said:
Even having some sort of filter on the index on the monthly chart would increase profitability substantially.

I know people who did this pre GFC when a top became clearer. Reinvested after prices fell and held and began to rise. I'm not suggesting picking absolute tops and bottoms.

But even with a little basic knowledge and knowing when to be in and out on a large timeframe will improve returns.

Take the example of CBA above, the couple have never had to pay CGT on their earnings because they haven't sold the stock. yet they have had a fantastic return just by holding.

If they tried to increase that return by timing in and out, when they sold, they would have lost a chunk of capital to tax, so when they put it back in they have less to work with. they may have to see a 10% - 15% fall before they rebuy. just to offset the tax loss.

Sometimes it would work out ok because they would take that smaller amount of money and be able to buy a larger chunk because the shares went down, other times the market wouldn't fall as much as they expected, and they would just end up buying back in at a higher price, with less capital due to the tax loss.

tech/a · 7 February 2015

Before I continue this thread on topic.

I too over the years have had people who have me question what I do

Top of the tree is this guy and this thread.

https://www.aussiestockforums.com/forums/showthread.php?t=12683

In this thread was this chart

He went on to say that he had helped out friends by knocking up a quick $50k
when they were in times of need.

I called the guy a trader who was " Like a Punch Drunk Boxer on Ice' .--hes never forgotten that and neither have I!

My reaction initially was ---this guy's full of his own ego. A Gordon Gekko wannabe.

He kept popping up!

And I kept going back to that chart

At some point this ---err Guy/Gal came along

https://www.aussiestockforums.com/forums/showthread.php?t=22820

The regular monotony of 5 tick wins was UN deniable.

Back to T/H's chart.

Then he started speaking about increasing size.---more ego!!

NAH

The penny dropped.

If I could pick up 5 ticks on the SPI with regular monotony and has size--(To me thats 5-10 Contracts to him its 100s and 1000s) Id have a pretty damned good money making machine.

I had the tools I just didn't know how to APPLY MY TOOLS

I'm pretty busy through the day so I chose the FTSE.
Refined and applied---then consistency and realization of the task at hand.---success.
The refining was cutting down of screen time---this occurred with the realization that most action is at the open and closing Hr or so.

Then along came this guy

https://www.aussiestockforums.com/forums/showthread.php?t=26509&page=212

Lived in Adelaide Knew people I knew in his work--sounded like a nice guy who was interested in my interest.
So we met.
Spent a few months on the FTSE and nights on the phone and the rest is history.
He sees what I see. So I/We know it is transferable---but while we are similar we are in some part--some application---different.

And We see what THEY see (T/H---Trader Girl and the like).

Thanks to T/H I not only see my mothers face in the Crowd but many faces that I know I will be able to anticipate their movement more often than not.

So I'm sure Jason is not aware of the influence he has had on me and perhaps many others.
I thought it appropriate to mention it here.

Thanks Mate.

johenmo · 7 February 2015

tech/a said:
I had the tools I just didn't know how to APPLY MY TOOLS

This is what affects a lot of people, including me. Some things coe naturally to me, others don't. Parts of trading don't. Thans to PAV for the MTM link - now to read it and think about it.
AS I said in another thread today, I have started travelling more for work so will have empty time to do the reading.
Expect some (dumb?) questions.
Thanks

pavilion103 · 7 February 2015

Value Collector said:
Take the example of CBA above, the couple have never had to pay CGT on their earnings because they haven't sold the stock. yet they have had a fantastic return just by holding.

If they tried to increase that return by timing in and out, when they sold, they would have lost a chunk of capital to tax, so when they put it back in they have less to work with. they may have to see a 10% - 15% fall before they rebuy. just to offset the tax loss.

Sometimes it would work out ok because they would take that smaller amount of money and be able to buy a larger chunk because the shares went down, other times the market wouldn't fall as much as they expected, and they would just end up buying back in at a higher price, with less capital due to the tax loss.

Agree there can be a lot of stuffing around.

For the average person who doesn't want a headache or any additional risk, holding is simply the best choice.

And like you said, things like tax implications to consider too.

Trembling Hand · 7 February 2015

waimate01 said:
Get Kris to explain compound interest - $10k compounding at 20% per week for a year is $18.2 million.

So if I'm understanding your performance correctly, by choosing to spend the $2k per week, you've done yourself out of $18.1 million.

You should stop spending the weekly 'two large', and six months from now buy yourself a jet. I'd be impressed.

Dude you should put the year 10 high school formula away and admit that you are passing comment on something you have no understanding about. The mechanics, liquidity, margin requirements and possibilities of the method. You cannot compound to infinity. In trading short term you are lucky if you can double your size more than 2 to 4 times a year, very lucky and very good. The markets are thick enough to when you are starting out small but the bigger road block is dealing with the large $ swings. Its hard enough to stay on the rails getting the odd outlier when aiming for 2k a week. Bump that up to 20 k and you have a recipe for PTSD. (Like a Punch Drunk Boxer on Ice )

Can we be sensible?

Trembling Hand · 7 February 2015

tech/a said:
Thanks Mate.

tech/a · 7 February 2015

waimate01 said:
Get Kris to explain compound interest - $10k compounding at 20% per week for a year is $18.2 million.

So if I'm understanding your performance correctly, by choosing to spend the $2k per week, you've done yourself out of $18.1 million.

You should stop spending the weekly 'two large', and six months from now buy yourself a jet. I'd be impressed.

I wasn't talking about compounding still not.
But hey
When you can pull $300 to $2k regularly
Compound your brains out.

Pick me up in your Jet.

Then I'll be impressed.

tech/a · 7 February 2015

Oh
And why do you think I'm trying to impress anyone?

Fundamental Analysis and Compounding is the ONLY
Way to be profitable?

Prefer I don't post?

Nortorious · 7 February 2015

Value Collector said:
We might know the same people, lol.

I know a couple who have held CBA shares on a dividend reinvestment plan since 1995 / 96 (whenever the second float was)

$12 to $92 in 20years, plus all those dividends bought extra shares every 6months along the way.

Did the GFC worry them? well it worked in their favour, the dividends during the down turn bought a lot more shares than they would have otherwise.

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

The long term investor shouldn't be phased by market down cycles, unless it's during a period you were planning on selling you won't be affected, and it will likely work in your favour if your reinvesting dividends or if the company regularly buys it's own shares.

Take Disney for example, I am holding them as a long term investment, the shares have recently skyrocketed, to over $100, which makes me feel good, however due to their share buyback program, I would actually be better off long term if the shares trended down for a while, the lower the price during the years they operate buybacks the more my stake in the company increases.

So what happens if the stocks that are buy and holds (and div reinvested) trend down and never recover? What's to say that when they do trend down they won't go into oblivion?

You wouldn't be better getting out at near the high (never going to be able to pick the top) and avoiding potentially having your capital tied up for years maybe even decades? And even worse, the value you could have got out at, never being realised ever again?

I don't understand the logic of increasing your stake in a company that is going down in share price. Yes your quantity of stock is greater but if you are seeing the share price drop consistently, those extra 100 shares will have been evaporated by the overall value of the position declining....

Makes me think of how much people love negative gearing properties..... Doesn't make sense to me unless it is a perfect world.... scenario changes, people are in serious trouble.

Value Collector · 7 February 2015

Nortorious said:
So what happens if the stocks that are buy and holds (and div reinvested) trend down and never recover? What's to say that when they do trend down they won't go into oblivion?

You wouldn't be better getting out at near the high (never going to be able to pick the top) and avoiding potentially having your capital tied up for years maybe even decades? And even worse, the value you could have got out at, never being realised ever again?
.

As I said, I would recommend a novice by the index, however some one with business and accounting skills, will be able to identify companies that are building value, who's underlying businesses are strong and growing. These sorts of companies will see longterm share price growth.

I don't understand the logic of increasing your stake in a company that is going down in share price

Ok, Cba dropped from $60 to $26 during the GFC, it's now $92, what don't you understand? Obviously having it drop to $26 when your dividend reinvestment plan kicks in is better than having it stay at $60.

Obviously some companies drop for goods reasons, I am not suggesting holding onto rubbish, or buying more rubbish. But when there are accross the board market down trends, the good companies go down with the bad, and if you analysis shows the company is still going well, then selling just because the market has dropped is a silly idea.

VSntchr · 7 February 2015

Trembling Hand said:
In trading short term you are lucky if you can double your size more than 2 to 4 times a year, very lucky and very good. The markets are thick enough to when you are starting out small

Started trading seriously at the end of 2013 and have been focused on sizing up. Have gone from x to 5x in 14 months over 3 increments. So that's the first year and I only managed to double my size a bit over twice....that's the noob gains due to starting from a modest base so will probably be the easiest doubles... What I am trying to say is that yes, doubling more than 2 times a year seems very difficult from here.

Trembling Hand said:
but the bigger road block is dealing with the large $ swings

Ain't that the truth. Have been contemplating removing the $ column from my spreadsheet tracking open trades.

Top thread gents (and ladies?), an all star ASF cast of Fundies and Techies. opcorn:

PinguPingu · 7 February 2015

VSntchr said:
Ain't that the truth. Have been contemplating removing the $ column from my spreadsheet tracking open trades.

Blerghhh this so much. Currently trading a mild momentum strategy with low backtested max dd yet since I've allocated more savings/capital to it and the day to day swings are larger in $$ terms I start second guessing :crap:

Nortorious · 7 February 2015

Value Collector said:
As I said, I would recommend a novice by the index, however some one with business and accounting skills, will be able to identify companies that are building value, who's underlying businesses are strong and growing. These sorts of companies will see longterm share price growth.

Ok, Cba dropped from $60 to $26 during the GFC, it's now $92, what don't you understand? Obviously having it drop to $26 when your dividend reinvestment plan kicks in is better than having it stay at $60.

Obviously some companies drop for goods reasons, I am not suggesting holding onto rubbish, or buying more rubbish. But when there are accross the board market down trends, the good companies go down with the bad, and if you analysis shows the company is still going well, then selling just because the market has dropped is a silly idea.

What if you sold at say $58 and sat out the drop to buy back in at say $30 and ride it back to $92? Would you not have more capital overall than if you stayed in the whole ride?

We all have different objectives with our trading I guess but my main objective is to maximise gains (whether capital gains or passive income gains) and minimise opportunity cost (having capital tied up in positions going sideways or down).

One more scenario for fun, you sell at $58, short down to $28 and buy back in at $28 and ride up to $92... Hindsight makes this scenario seem easy and obviously it is not but is a different approach that is also valid. From the charts, trading this way is possible. From
Fundamentals, probably not.

DeepState · 7 February 2015

The pointy end of the Forbes 500. Did they get most of their riches:

a. Via salary
b. Via (near term) trading as a supplement to personal exertion income
c. Via compounding their equity
d. Other

As a check...the next 10:

burglar · 7 February 2015

DeepState said:
The pointy end of the Forbes 500. Did they get most of their riches:

a. Via salary
b. Via (near term) trading as a supplement to personal exertion income
c. Via compounding their equity
d. Other

Bill Gates had an opportunity!
Unlike most of the rest of the world, he recognised the significance of what he saw!
From what I can gather he became wealthy by taking IBM to lunch.

PS Had to research the Waltons, thought to share!

http://gawker.com/the-waltons-are-the-greediest-family-in-the-world-1300311273

luutzu · 8 February 2015

burglar said:
Bill Gates had an opportunity!
Unlike most of the rest of the world, he recognised the significance of what he saw!
From what I can gather he became wealthy by taking IBM to lunch.

Na, IBM invited him to lunch... bought and paid for his lunch; then he ate both his and their lunch, for lunch.

Value Collector · 8 February 2015

Nortorious said:
What if you sold at say $58 and sat out the drop to buy back in at say $30 and ride it back to $92? Would you not have more capital overall than if you stayed in the whole ride?

We all have different objectives with our trading I guess but my main objective is to maximise gains (whether capital gains or passive income gains) and minimise opportunity cost (having capital tied up in positions going sideways or down).

One more scenario for fun, you sell at $58, short down to $28 and buy back in at $28 and ride up to $92... Hindsight makes this scenario seem easy and obviously it is not but is a different approach that is also valid. From the charts, trading this way is possible. From
Fundamentals, probably not.

Yeah, offcourse if you knew ahead of time that it was going from $60 to $26. But you could just of easily sold out on a dip, lost $10 per share in Tax, only to find the big fall you expected never came, and you had to buy back in at a higher price.

We are all trying to maximise gains, but if I see a stock as undervalued and know eventually it will see a large gain, why would I avoid it just because it's gone down or has been heading side ways? Even if it heads side ways for 12 months, I am still probably better of holding it while I wait because the dividend may be better than a cash investment, and it gets the 12 month clock ticking on the 50% capital gains tax discount, also I have no idea when the run up in price will come, and holding it for 12 months is nothing if the payoff is going to be 50% or even several hundred %

Most who want to get rich or retire wealthy... have got it wrong

Value Collector

Have courage, and be kind.

pavilion103

waimate01

Value Collector

Have courage, and be kind.

tech/a

No Ordinary Duck

johenmo

pavilion103

Trembling Hand

Can be found on the bid

Trembling Hand

Can be found on the bid

tech/a

No Ordinary Duck

tech/a

No Ordinary Duck

Nortorious

Value Collector

Have courage, and be kind.

VSntchr

PinguPingu

Nortorious

DeepState

Multi-Strategy, Quant and Fundamental

burglar

luutzu

Value Collector

Have courage, and be kind.

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