My Long Term Investment Plan

Well made my first Trailing loss so far, came out with about 7.5% profit so reasonably happy.. hoping to get back into the same share though. All your advice has been top notch protect and build your capital is the plan.

nizar said:

MS.
You said you use 4*ATR as your trailing stop. Is that on a daily timeframe?

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Hi Nizar,

Sorry, I missed your post last read through.

I just gave 4*atr as an example. However, I haven't traded my trend system since Dec 07 so I had a look at it today and I use the 4*ATR(21) days for position sizing but the actual trailing stop is based on volatility in the median price, calculated on a daily timeframe. I have two versions, one for very long trends, and a tighter one for catching short trends of 30-60 days.

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Enigmatic,

Great to hear. Get your risk management working in this environment and the next bull market will reward you well.

As usual the weekend is a boring time (market is closed)

I have been diving further into investing both short term and long term.
It is obvious to me that my strategy will consist of both long and short term trades with possibly 25% of my capital used for short term trading and the rest used for long positions mainly during a Bull market..

I have still been looking at Options to increase my possible exposure in the long term as I do remain Bullish on the future 3-5 years.

However one thing i have been looking into is trading into shares which are going Ex-dividend, if i was to trade into shares which will be going Ex-dividend in a few days and then get out once Ex-dividend will it not be possible for me to pickup the reward of the dividend yield without holding the share for a long period of time.
As long as i dont earn more then 5000 from dividends in a year i won't need to hold the shares for the required 45 days..

my next question relates to the options possibly will hold, if I exercise the option and it has a dividend I believe from what i have read that i will get all the dividend from that share over the period I have held the Call option, if this is infact I assume the dividend will go on the exercised date tax year statement.

enigmatic said:

As usual the weekend is a boring time (market is closed)

I have been diving further into investing both short term and long term.
It is obvious to me that my strategy will consist of both long and short term trades with possibly 25% of my capital used for short term trading and the rest used for long positions mainly during a Bull market..

I have still been looking at Options to increase my possible exposure in the long term as I do remain Bullish on the future 3-5 years.

However one thing i have been looking into is trading into shares which are going Ex-dividend, if i was to trade into shares which will be going Ex-dividend in a few days and then get out once Ex-dividend will it not be possible for me to pickup the reward of the dividend yield without holding the share for a long period of time.
As long as i dont earn more then 5000 from dividends in a year i won't need to hold the shares for the required 45 days..

my next question relates to the options possibly will hold, if I exercise the option and it has a dividend I believe from what i have read that i will get all the dividend from that share over the period I have held the Call option, if this is infact I assume the dividend will go on the exercised date tax year statement.

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Normally the share price will gap down by the dividend amount

Enigmatic, do a search for Rozella's thread about dividends.

I couldnt actually find a thread started by Rozella however I would have to assume you ment this one

https://www.aussiestockforums.com/forums/showthread.php?t=454

Have taken some of your advice about my exposure to the resources sector sold half my BHP position and move it to WOW.

Think this will help diversify my portifolio a little.
Currently i have no desire to increase my capital with in the market just reducing my risk to my heavy exposure to the resource sector.

Well it Has been about 1 year since i Started actually Planning my investments rather then just throwing cash arround
I have basically gone from -60% to +15% which isn't to bad however I believe I have failed to maintain my initial plan.

Currently my diversification is far greater within my portfolio which is something i have been focusing.
BHP - 14% ,
WDC - 10%,
CFE - 7%, AQA - 7%, BRM - 7%, CBA -7%
FMG -5%, WOW -5%
GMG - 4%, WPL - 4%, WOR - 4%
SGP - 3%, CSL - 3%
Others - 20%

I have a few queries and all responses will not be taken as financial advice.
My current Plan has developed into the following..

1. Have no more then 10% Holdings in any 1 Blue Chip Share
2. Allow for at most 1% loss of total capital on any one share.
3. Re-invest dividends High Paying Dividend Share Holdings with greatest believed potential for growth.
4. Maintain between 65-75% Blue Chip Companies (this is A personal decision as to what i believe is a blue chip.
5. Have no more then 5% Holdings in any 1 Non BlueChip Sha

As you can see currently my BHP holdings exceeds my Rule 1 and BRM CFE both exceed my Rule 5, has anyone else had similar rules with there risk-management Rules and if so how have they dealt with them. Are my rules to strict should the be more flexible to allow for growth of Speculative stocks.

And having issues with 2 as currently Majority of shares share I have sold due to loss of capital has soon recovered well, do you just learn to take it in your stride and move on do you suggest re-visiting the share you sold.

I'm Not sure what I'm after from anyone however any suggestions or comments would be appreciated.

enigmatic said:

As you can see currently my BHP holdings exceeds my Rule 1 and BRM CFE both exceed my Rule 5, has anyone else had similar rules with there risk-management Rules and if so how have they dealt with them. Are my rules to strict should the be more flexible to allow for growth of Speculative stocks.

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Enigmatic, you're taking a thoughtful and considered approach so good on you for that.
We all have different approaches but your last sentence above is one I'd be giving more thought to. You have a couple there which are pretty flat and some which are rising well. Maybe consider moving the funds from the not so profitable to the more profitable? (This is not advice yada yada.)
This will throw your carefully calculated percentages out. Only you can decide if that really matters. I'm happy to be overweight something that is doing really well, but people who are into strict rules won't do this.

And having issues with 2 as currently Majority of shares share I have sold due to loss of capital has soon recovered well, do you just learn to take it in your stride and move on do you suggest re-visiting the share you sold.

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Hah, I've had a couple of good examples of this recently. Sell to protect profits when a downturn occurs and a few weeks later that stock goes on to make a new high.
You simply won't get it right all the time. Just move on.

Revisiting : if you sold for a good reason, i.e. significant profit downgrade, and then later the company fortunes improve, imo there's nothing wrong with buying back in.

Hey Julia,

Cheers for your comments, I'm always trying to re-evaluate how I buy,sell and Hold shares so I'm sure I will develop my plan further.

Majority of the time the shares I have done well in are the one's I'm Overweight in which will just put me even further overweight.
As much as I agree with the policy of let your good ones ride and cut your losses sooner rather then later.

I also don't like the Idea of betting on the number 5 every spin because it was a winner before, Its likely to lose at one point and the more I have in it the more I will likely lose.

Maybe I am trying to protect my capital to much now.

enigmatic said:

Bushman what would you rate BHP and for what reason, just so i can get a better picture on how others rate risk.

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If u are looking for long term, u can determine ur level of risk not by share by share basis but portfolio risk, i think is easier. level of diversification, and ur portfolio beta, since u are looking at like 10-15 years, the share market has generally performed well based on past data, even with a recession, the market over a longer period of time will do well.

Long standing Blue chip companies that has good track record (ie constant EPS growth) and low debt to equity ratio, high interest cover, high liquidity can be indication of lower risk.

PS: me still a newbie

Julia said:

Enigmatic, do a search for Rozella's thread about dividends.

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Rozella, where are they now?

Like me I suppose.

My long term investment plan is:

1. Have a short term investment plan.
2. Review it each day.
3. Research each stock and look each day for verification that the conclusions made yesterday are still valid today.
4. As time goes by the short term becomes long term and any stock held for a period becomes a long term investment.

Research also includes an assessment of what a stock may do in the longer term. Concentrating on the long term will see one miss out on great short term buys.