Personal Investment Strategy

[galumay]

Re: Personal Investment Strategy Help

I really enjoyed Unholy Grails by Nick Radge.
Though not particuarly eloquent, the details of trading signals and the interviews with some successful investors at the rear of the book were quite fascinating. I recommend you read it.

Thanks Knobby, I will add it to my reading list! I remember seeing Radge's name mentioned a few times.

(One of the reasons i love my iPad, I now have Unholy Grails ready to read!)

 

[slooi1]

Re: Personal Investment Strategy Help

Galumay,
I've been in the markets for 17 years or so and found the following helped me:
- Read the books. Value investing, technical trading, economics. They all help in providing a context on the markets and companies. A few I found useful include:
1) Richard Farleigh's 'Taming the Lion'
2) Peter Lynch 'One up on Wall Street'
3) Philip Fisher 'Common Stocks and Uncommon Profits'
- Don't put all your eggs in one basket (unless you're Warren Buffett ) - but fully know that diversification will lead to average results.
- Don't be too dogmatic about one approach over another (eg. Fundamental Investing vs Technical Trading). They both have their usefulness in helping us make money
- Read the press and news regularly - not just about stocks, but about the economic conditions around the world
- Don't rely on leverage.
- Be aware of the best 3 words in investing, "Margin of Safety"
- Most of all - have fun doing it!

slooi1

 

[Julia]

Re: Personal Investment Strategy Help

- Don't put all your eggs in one basket (unless you're Warren Buffett ) - but fully know that diversification will lead to average results.
- Don't be too dogmatic about one approach over another (eg. Fundamental Investing vs Technical Trading). They both have their usefulness in helping us make money
- Read the press and news regularly - not just about stocks, but about the economic conditions around the world
- Don't rely on leverage.
- Be aware of the best 3 words in investing, "Margin of Safety"
- Most of all - have fun doing it!

slooi1

Good points. I especially like your suggestion about not being dogmatic about any single approach.

 

[Garpal Gumnut]

Re: Personal Investment Strategy Help

Good points. I especially like your suggestion about not being dogmatic about any single approach.

I wouldn't necessarily agree with that statement.

One needs to have a singular approach to the markets.

It may be a composite of many other approaches, but once attained, it needs to be followed objectively.

Mates of mine who have done their super, in the majority, adopted too many strategies.

Except of course those who went with the likes of Storm Financial. aka The Simple Way to Lose Millions

gg

 

[McLovin]

Re: Personal Investment Strategy Help

I wouldn't necessarily agree with that statement.

One needs to have a singular approach to the markets.

It may be a composite of many other approaches, but once attained, it needs to be followed objectively.

Mates of mine who have done their super, in the majority, adopted too many strategies.

Except of course those who went with the likes of Storm Financial. aka The Simple Way to Lose Millions

gg

I agree.

It's better to be very good at one thing than mediocre at lots of things.

 

[slooi1]

Re: Personal Investment Strategy Help

I agree.

It's better to be very good at one thing than mediocre at lots of things.

I believe that each investor has to find a style (or mixture of styles) that suits their level of experience / involvement / time frame / personality, AND be fully open to changing their style if it is clearly not working. That's what I meant by not being too dogmatic. There is no "right" approach.

Through trial and error, mine is more fundamental based, with awareness of some of the technical aspects for entry and exit points. This is mainly because I haven't enough time to monitor on a daily or hourly basis, and that numbers suit my personality better.

Galumay will need to work out what suits him better, and allows him to sleep at night.

slooi

 

[galumay]

Re: Personal Investment Strategy Help

Well its certainly turning out to be an interesting journey! As I learn my views are modifying and changing in fact.
I read Nick Radge's book and his arguments for momentum trading seemed compelling, the more links and articles I read about it the more I came to believe that this sort of system or strategy may well be more suited to my temperament.

So I appear to have come full circle from FA to TA! I wont be surprised if my journey takes me somewhere else before I finally commit but I am in no rush and the markets will still be there when I am ready to go!

Thanks to everyone in this thread, elsewhere on the forums and in PM's that has helped me with my quest, its one of the greatest things about living now - the internet makes it so easy to research and learn. I remember my Dad, who made a living out of trading, learnt what he knew from a couple of books and trial and error plus a notebook & pencil. Traded in a different era but there was no way of accessing the library of knowledge that the net offers.

 

[CanOz]

Re: Personal Investment Strategy Help

I am in no rush and the markets will still be there when I am ready to go!

This is key, and something we all may have been guilty of...not being patient. Its an unfortunate part of being human. Even today, my biggest weakness is the fear of missing out...Even though i keep telling myself that the markets will always be there, the opportunities will always be there.

Take your time and learn, observe, test.

Cheers,


CanOz

 

[WilkensOne]

Re: Personal Investment Strategy Help

Hey all,

I am really enjoying these types of threads on the forums, it is really interesting and beneficial seeing everyones different thoughts and opinions.

I just wanted to ask, when backtesting a system especially something that is mechanical, are there thresholds for stats such as Win/Loss ratio, CAGR, MaxDD that people feel they must be within for it to be a successful system? I am about to start looking at some back testing and wanted some opinions of what is/isn't good enough.

Thanks,
Wilkens

 

[craft]

Re: Personal Investment Strategy Help

Thanks to everyone in this thread, elsewhere on the forums and in PM's that has helped me with my quest, its one of the greatest things about living now - the internet makes it so easy to research and learn. I remember my Dad, who made a living out of trading, learnt what he knew from a couple of books and trial and error plus a notebook & pencil. Traded in a different era but there was no way of accessing the library of knowledge that the net offers.

The bolded bits are all you need. A couple of good books or good posters can speed the trial and error process a bit but it's a catch 22 that you need experience under your belt before you can discern the trash from the treasure - especially on the internet. If your dad is still around I would be picking his brain.

Happy journey

 

[odds-on]

Re: Personal Investment Strategy Help

I recommend this book to an investor trying work out a strategy that suits them. 12 pen portraits of successful retail investors. I lend my copy to anybody who is interested in the stock market.

http://www.amazon.co.uk/Free-Capital-private-investors-millions/dp/1906659745

Read the reviews. Here are some extracts as posted by an Amazon reviewer.

(p15) "Investment skill consists not in knowing everything, but in judicious neglect: making wise choices about what to overlook."

(p35) "At this stage he was the archetypal part-time trader: the supposedly mercenary activity of trading was really about entertainment, or perhaps a sense of identity."

(p82) "Authorisation for investment advisers is more like a fishing licence than a driving licence. A fishing licence confirms that you have paid a fee, and will not be fined if you are caught fishing. It says nothing about competence."

(p109) "Investment is like swimming or riding a bicycle: difficult to learn without some practical experience."

(p141) "Learning modern portfolio theory to pick investments is like learning physics to play snooker."

(p181) "One wry definition of a value investor: a person who places a high premium on having the last laugh."

(p228) "To the fundamental analyst, technical analysis can seem a sort of cheat sheet, preventing development of proper understanding - and yet often giving infuriatingly good answers."

I wait for the day that somebody interviews a dozen Australian retail investors.

Cheers

 

[GG999]

Re: Personal Investment Strategy Help.

Keep in mind that this guy did it as a paid professional for 20 years, and has probably been investing for himself for much longer. It's just experience, and doing something for so long that you become an expert at it.

Work hard mate - it's possible. Aim for 12-15% a year and you will have a tidy sum by the time you are 65.

Anyone know who he is?

 

[notting]

Re: Personal Investment Strategy Help.

I guess one confirmation of it is that I am still in a cash position as I learn.

That may have cost you quite a bit in lost opportunity.
How long have you been sitting on that?
Have you seen no opportunities in the market that made sense during the time of doing nothing?
Fear is a position.
When you enter the market it can magnify fear dramatically and you cans see things you never saw before entering especially if it moves against you.
That in itself is something you need to get used to or learn just not to look until your programmed SMS tells you to sell or conditional order is filled etc. Plan what you are going to do once the position is taken not just with the trade.

Wisdom to be able to properly assess a business’s ............. it just exposes a hundred more layers to understand!

There's a bit of wisdom for you.

Why even assume the market is where the money is?
It may be, mostly it isn't, well not in the quantities that most are expecting - some vague dream of riches!
If it's not blatantly obvious and the odds are stacked against you why the hell would you play it?
As you have sensibly not done since lesson 1.

What is disturbing, is that you reappear now as global markets are recording highs during recession like environments.
Why wouldn't you have perked up when all hell was breaking lose.
People who were stuck in set and forget mode would have killed for cash at that time.
Your instincts seem way out, doesn’t matter just know that your instincts are f#(<ed up. So ignore them!

You can make an entire years profit on one trade if you let it come to you.

You can lose the lot as you know, if you try to make something out of nothing.
Nothing comes from nothing.

A conservative well tested momentum strategy can be a great safe way to make a modest return from a very risky pool.
What I feel would be good would be to use a well tested one that is not expensive like Nicks growth, but at the same time if ever the blindingly obvious is staring you in the face……..take it!

Example, I had a friend who hated the stock market and would not invest. I told her to put everything thing she had to spare in CBA when it was $28 during the GFC and forget about it and just take the dividends.
To me that was as risk free as keeping it in a CBA interest earning account, where it still is at half the price, with half the dividends and all taxed.
There are opportunities. You just have to allow them to present to you and know yourself well enough to know how you are going to manage them so you stick to them when CBA is punished down to 25.whatever for a day!
For her it would have been easy because she would never have known what was going on.
She would have just been getting lovely fat tax free dividend cheques. Whilst having smashed every trading strategy around!

Everyone says not to do that kind of thing.
Everyone can be wrong. But only if you can see the blindingly obvious!

There are consistent strategies that work.
There are also opportunities that present; you don't need to look for them.
But you do need to be open to them.
But it’s all useless unless you know what you can and can’t handle that’s a kind of art or practice.

It comes to some naturally, others learn over time others don’t have it in their nature.
Regardless, there is a way for all types.

 

[galumay]

Re: Personal Investment Strategy Help

Been a while since i revisited my thread, I have been continuing to read and learn and consider my options and try to develop a strategy and system that is consistent with my personality.

*Buy & hold strategy based on FA
*Initial entry with 10 or less stocks that I have selected to invest in
*Audit and potentially rebalance 6 monthly
*Only sell a stock where the money can work harder somewhere else
*I have a watch list of about another 10 stocks to consider when rebalancing or for dividend reinvestment
*Continue to research and build the watch list where possible
*Significant % in cash in case of entry opportunities due to market crash
*The strategy goal is to deliver overall yield on the portfolio that provides for growth in the medium term (via reinvestment) and post retirement delivers a healthy income stream.

I have come to suspect there is no 'tape measure' you can put over a business and assess its IV in absolute terms, and even if one measure works for a business, it wont apply to another business. So I have moved more to relying on my overall research, reading the Annual Reports, understanding the financials, discussing potential stocks on forums like this (a really powerful tool IMO), and by so doing getting an overall feel for the business and whether it has the potential to continue to generate growth. I am also working to improve my understanding of economics and the influence external factors have on a business.

I am also putting a portion of capital into a commercial investment property, we have no current property either IP or PPOR so i figure i need a finger in that pie.

I am still yet to actually put any money into the market, the reason being that the money is coming to me via an inheritance and I dont actually have it yet. (which has probably been an absolute blessing in disguise!!) I realise from Notting's comments that I had not made that point clear.

 

[Julia]

Re: Personal Investment Strategy Help

*Audit and potentially rebalance 6 monthly

What is the plan if there is a clear change in a stock inside that six months?
i.e. what is magic about six months as a time frame?

What will you do if there is a substantial overall market fall and all your stocks lose, say, more than 10% of their SP?

 

[Klogg]

Re: Personal Investment Strategy Help

Given this is an overall 'personal investment strategy', I have to question this:

...we have no current property either IP or PPOR so i figure i need a finger in that pie.

Why do you "need a finger" in commercial property?

- Did you find a property that's particularly good value?
- Do you see growth in the commercial property space?
- Is there a great rental yield involved?

Much like stocks, unless you can see you're getting great value for your dollar, why buy the property?

 

[galumay]

Re: Personal Investment Strategy Help

What is the plan if there is a clear change in a stock inside that six months?
i.e. what is magic about six months as a time frame?

The 6 month idea is to stop me price watching, which is not relevant to a buy & hold strategy. But it recognises that there could be other better opportunities. Its not really a hard and fast '6 months' in my mind - more a 'dont fall into the trap of trading' type rule!

What will you do if there is a substantial overall market fall and all your stocks lose, say, more than 10% of their SP?

Buy a lot more shares I imagine! I certainly wouldnt be selling out of good businesses just because market sentiment changed. I might be annoyed that i had bought 6 months too early though!!

 

[galumay]

Re: Personal Investment Strategy Help

Given this is an overall 'personal investment strategy', I have to question this:



Why do you "need a finger" in commercial property?

- Did you find a property that's particularly good value?
- Do you see growth in the commercial property space?
- Is there a great rental yield involved?

Much like stocks, unless you can see you're getting great value for your dollar, why buy the property?

I feel I need to hold some property, and commercial makes best sense to me. I like property for the ease of gearing.

- Yes
- Yes (in my location)
- Oh yes! 10%+ net.

 

[ROE]

Re: Personal Investment Strategy Help

galumay: a lot of the time by filter out some business you never invest in you beat the market by default
because there are a lot of crap business on the market, so it is probably a worth while exercise work out what business you never want to get involve regardless of the temptation......

I don't invest in airlines, miners, commodity (soft or hard), complex business I cant understand, penny hopeful, explorer, probably 70% of the market I speculate in these area every so often but very small amount of my capital allocate to them......

only one that has +ve cash flow, decent balance sheet, pay ok dividend ..the rest discard with prejudiced.

with that filter out... this week market sold off would not affect you much .... NVT DMP RFG CCV CCP CPU CKF SIP etc...all chucking along happily ...and before you know it another dividend come in the mail box and next year the share may go a bit higher....

There are 2 business I want to buy this week, it frustrating that everything got sold off and the 2 I want price went up 4%
that just to show with the right business you don't need to worry too much...

and don't get too hang up with exact IV and all the exact calculation stuff...Keep it simple, invest in the right business when you think it reasonable to enter and don't mind paying that price for long term holding....

your timing may or may not be spot on but holding good business for long term 95% of the time it will pay off.... Good business require time to expand and prosper, it doesn't work like stock stickers where it change value every day ....true value will be recognised over a long period of time ....

 

[galumay]

Re: Personal Investment Strategy Help

galumay: a lot of the time by filter out some business you never invest in you beat the market by default
because there are a lot of crap business on the market, so it is probably a worth while exercise work out what business you never want to get involve regardless of the temptation......

I don't invest in airlines, miners, commodity (soft or hard), complex business I cant understand, penny hopeful, explorer, probably 70% of the market I speculate in these area every so often but very small amount of my capital allocate to them......

only one that has +ve cash flow, decent balance sheet, pay ok dividend ..the rest discard with prejudiced.

with that filter out... this week market sold off would not affect you much .... NVT DMP RFG CCV CCP CPU CKF SIP etc...all chucking along happily ...and before you know it another dividend come in the mail box and next year the share may go a bit higher....

ROE, thats basically what I am doing - filtering out the bad businesses rather than finding the small % of really good ones. I also exclude all the sectors you do, and apply similar filters. My watch list includes 5 of those shares you mention!

I guess its not so surprising given the people I have really learnt from here are yourself, McLovin, Kermit345, Robusta, McLovin, Oddshot, Ves, Craft, So-Cynical and others that i have forgotten to mention!