My Investment Journey

craft · 8 May 2015

skc said:
I think you should re-evaluate what you've done first. Why are you ditching your old strategy? Are you losing patience, losing confidence, admitting failure or really think you can do better with a different approach?

Tech/a often mentions the "beginners loop" (or something to that effect), where a new student in technical analysis change his methods every so often because the previous one didn't work out. They do back test and find new kickass indicators and re-write their trading plans and improve the expected expectancy on paper... yet in the end the new approach would fail again, and the trader goes back to square one and start all over with new plan, indicator, signals etc etc.

I am not saying that is what you are doing... but I can see the parallel. So it's up to you to ask yourself the honest and hard questions. Your portfolio underperformed XJOAI by 30%... that is not good. I bet you if you are up 30% you won't be looking to change strategy.

If you are admitting failure... then sure, sell up and move on. But you should also lookback on why the strategy failed.

If you are losing patience... then I'd say stick with it. If your initial plan is indeed a 5-year (or however long) one and you are only 2-years into it... then you are doing yourself a dis-service by ending it prematurely. May be trim a thing or two that no longer fits your criteria today. But you are not allowing the strategy to work itself out in the fullness of time.

If you are just losing confidence... then stick with it and change nothing. We all lose confidence in our ability at one stage or another. It's no reason to change an otherwise correct course of action.

If you really think you can make better returns using a different approach... I'd test that assumption again. Will you have the patience and committment to stick with it over the intended timeframe? I'd also check and make sure that the return from your new approach is going to be better than the current starting point (namely, start of year 3 of a 5 year plan).

Only you can answer these questions.

Gee its nice to see this post. Some important considerations well put. I wrote basically the same thing and then deleted it because I don't have faith I can communicate well enough on these types of hard questions even though they should be asked.

Only other point I had in my deleted post was that if moving on is the right answer - then I think you probably should sell all immediately. I think being a strong hand in the market is very important if you are not going to get shaken out at the worst of times - you can't be a strong hand on something you are unwinding to move on to something you believe in more. Don't need to be a strong hand if the price is moving in your favour so maybe consider some T/A to time the exits of of any stronger stocks at the moment, but consider your reaction to possible gap breakdowns of a trend if you go that way.

tech/a · 8 May 2015

galumay said:
Well thats dependent on strategy and timescale. From a trader's point of view, no doubt thats true....

Regardless of timeframe
Exactly the same for an investor.
Regardless of strategy

In the end the strategy is to make a profit
I think your missing the simplicity in the complexity

Other than that which I just mentioned
More wins than losses
Or
Bigger wins than losses
How else can investor or trader make a profit?

galumay · 8 May 2015

tech/a said:
Regardless of timeframe
Exactly the same for an investor.
Regardless of strategy

In the end the strategy is to make a profit
I think your missing the simplicity in the complexity

Other than that which I just mentioned
More wins than losses
Or
Bigger wins than losses
How else can investor or trader make a profit?

Not sure how much clearer I can make it, the timeframe being considered may not be appropriate. If the strategy is long term and contrarian then it will likely underperform any relative measure in the short term.

Portfolio in the short term may have more losses than wins, may have bigger losses than wins, none of that matters if the timescale for the strategy is long term and the outcome ends up being more wins than losses or bigger wins than losses.

As I said, you seem only able to look at it from a short term trading perspective.

qldfrog · 8 May 2015

tech/a said:
More wins than losses
Or
Bigger wins than losses
How else can investor or trader make a profit?

To be more precise,[ I can not teach T/A anything he has not been already practising for years];
you can have more wins than losses and still loose $, and you can have Bigger wins than losses and still bleed by many cuts;
how much $ do you loose per loss, make per win and then what is your overall results;
I have had bad learning experiences doing all the wrong things..
your winning ratio should be linked to your exit strategy (win or loss) to be able to make a profit at the end of the year

galumay · 8 May 2015

qldfrog said:
......to be able to make a profit at the end of the year

...and we are back talking about trading. (Hint, this thread is in the Medium/Long Term Investing Sub Forum.)

Anyway, thats it from me. Sorry ktp for once again causing your thread to be dragged off topic!

Wysiwyg · 8 May 2015

galumay said:
Not sure how much clearer I can make it, the timeframe being considered may not be appropriate. If the strategy is long term and contrarian then it will likely underperform any relative measure in the short term.

Timeframe??? If you never sell for profit or loss in the long term what do you achieve?

galumay · 8 May 2015

Wysiwyg said:
Timeframe??? If you never sell for profit or loss in the long term what do you achieve?

Where did I say a valid strategy was to never sell??!!

pinkboy · 8 May 2015

Wysiwyg said:
Timeframe??? If you never sell for profit or loss in the long term what do you achieve?

DCA over time, some portfolios achieve a never ending stream of dividends, that regardless of price, continue to generate income.

pinkboy

tech/a · 8 May 2015

The word aggregate should be added to losses in my context
To generate a serious cashflow from dividends would need an
Investment of 100s ok k with a strategy which at worst keeps
Your equity neutral

Even a 5 % decrease in equity and you've wasted a year

Finally you can invest in a losing strategy as long as you like
Won't change the out come just delay it
I often hear this mantra from those in long term drawdown

Question to KTP
how do you know your strategy has a positive out come
Either from past results or from what your doing to help
Give you the biggest chance to profit?
If you don't know then your just forward testing an idea
You have to make a decision based on what you know

Not on what could be!

galumay · 8 May 2015

pinkboy said:
DCA over time, some portfolios achieve a never ending stream of dividends, that regardless of price, continue to generate income.

pinkboy

Actually I hadnt even thought of it that way, (probably because its not relevant to ktp's holdings), a friend who is a fund manager with very strong above market performance for a number of years, mentioned how his grandmother, who held only shares in two, unpopular companies, had significantly out performed his fund! The dividends each year were now greater than her initial investments in the companies! (she had reinvested the divvys.).

Sort of blows any arguments about short term relative performance out the window!

(and yes, I know its like your great aunt who smoked a packet of winny reds every day and lived to 108 until a bus ran her over)

tech/a · 8 May 2015

galumay said:
Actually I hadnt even thought of it that way, (probably because its not relevant to ktp's holdings), a friend who is a fund manager with very strong above market performance for a number of years, mentioned how his grandmother, who held only shares in two, unpopular companies, had significantly out performed his fund! The dividends each year were now greater than her initial investments in the companies! (she had reinvested the divvys.).

Sort of blows any arguments about short term relative performance out the window!

(and yes, I know its like your great aunt who smoked a packet of winny reds every day and lived to 108 until a bus ran her over)

So if granny gets a 5% dividend this year and her
Equity drops 7% I guess you think she's doing brilliantly.

Let's presume she paid $3 for the stock
They are now $35
And dropped from approx $38 over the year.

Wysiwyg · 8 May 2015

pinkboy said:
DCA over time, some portfolios achieve a never ending stream of dividends, that regardless of price, continue to generate income.

pinkboy

To do this as Tech/A mentioned one would need a large capital investment to make this strategy work. $2k worth of shares won't do it. On the ASX there are some stocks that have increased dividends, didn't get taken over and stood the time test. Obviously the major banks are standouts but what others? With an increasing dividend y.o.y. the share price would rise accordingly and in the longterm your equity would be greater than when the process began. Stock selection is critical for the long term investor.

tech/a · 8 May 2015

Wysiwyg said:
To do this as Tech/A mentioned one would need a large capital investment to make this strategy work. $2k worth of shares won't do it. On the ASX there are some stocks that have increased dividends, didn't get taken over and stood the time test. Obviously the major banks are standouts but what others? With an increasing dividend y.o.y. the share price would rise accordingly and in the longterm your equity would be greater than when the process began. Stock selection is critical for the long term investor.

Boom Boom

galumay · 8 May 2015

tech/a said:
So if granny gets a 5% dividend this year and her
Equity drops 7% I guess you think she's doing brilliantly.

Let's presume she paid $3 for the stock
They are now $35
And dropped from approx $38 over the year.

As usual I have little idea what you are talking about, but her returns over many years are very good. The fund has returned over 16% annualised since inception and she has beaten that easily.

If you cant see that getting a dividend cheque every year that is larger than your initial investment is a good outcome then i give up!

tech/a · 8 May 2015

I'll type slowly

Regardless of open equity
If an investor suffers a loss greater
Than their return from dividends
They have had a bad year

That doesn't take a lot

You however are convinced that if your initial
Investment was $3 and it's now worth $30
Then every years a great year

Open equity is YOUR money so it should be managed

Blindly collecting dividends while equity gets eroded
Is crazy
So back to wysiwigs point.

craft · 8 May 2015

tech/a said:
So if granny gets a 5% dividend this year and her
Equity drops 7% I guess you think she's doing brilliantly.

Let's presume she paid $3 for the stock
They are now $35And dropped from approx $38 over the year.

Granny’s doing great I reckon. I suspect she wouldn’t give a rats about how the market is treating the price of her investment day to day or even year to year if she is comfortable with the business, probably more interested in which restaurant for Duck tonight.

tech/a · 8 May 2015

craft said:
Granny’s doing great I reckon. I suspect she wouldn’t give a rats about how the market is treating the price of her investment day to day or even year to year if she is comfortable with the business, probably more interested in which restaurant for Duck tonight.

So management of open equity drawdowns are of
No importance provided you are in nett profit!

tech/a · 8 May 2015

You guys seem to think time is the panacea for
All
So holders of long term investments in banks
WOW or BHP or WES
Should buy-- collect dividends and time will take care of
The rest

Back to WYSI's post

craft · 8 May 2015

tech/a said:
So management of open equity drawdowns are of
No importance provided you are in nett profit!

tech/a said:
You guys seem to think time is the panacea for
All
So holders of long term investments in banks
WOW or BHP or WES
Should buy-- collect dividends and time will take care of
The rest

Back to WYSI's post

I’m not sure what you are on about? Or why you're making assertions about what we think.

Is the WYSIWYG point that you are referring to

Stock selection is critical for the long term investor

If so I agree and ongoing monitoring of that selection decision is also critical.

But reacting solely to open profit excursion based on mark to market is not important to me (or granny in the example I would dare say) – it would destroy an otherwise successful investment approach.

tech/a · 8 May 2015

craft said:
I’m not sure what you are on about? Or why you're making assertions about what we think.

Is the WYSIWYG point that you are referring to If so I agree and ongoing monitoring of that selection decision is also critical.

But reacting solely to open profit excursion based on mark to market is not important to me (or granny in the example I would dare say) – it would destroy an otherwise successful investment approach.

Less important if open profit is 100 s of % of initial capital outlay.

But if your just starting to develop your long term portfolio and you suffer
An immediate drawdown are you suggesting then that this is not an issue
Or is it only open profit drawdowns

If so at what point if ever do you look at your portfolio if your
Suffering open profit drawdown

Are you saying a 20 or 30 % drawdown in a portfolio provided it's in
Profit and returning dividends is fine?

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