Investment track world

my worst trait is boredom of holding stocks that flatline.  i sold 6k morrisons a week before a takeover came in, same with HL.

As Warren Buffet says – The stock market is a mechanism for transferring wealth from the impatient to the patient.

@thisisaspoon yes I’d definitely diversify :0)

think I found them first google hit has berenburg just downgraded 150 to 60p

I don’t disagree with their assessment, but I think it’s very much VERY shorttermist. If it stays this low then we’ll be bought (again).  The outcomes I see are either a quick bounce back to ~85p next year or hold it for a few years and we’ll get bought for 200p+.

I’d say it can’t get any worse, but look at Petrofac ?

@Jamz it seems I touched a bit of a nerve there. Do calm down, dear. <handbags>

I’m sure there are some very successful people who time the market but I’m also sure that there are also an equal number of  unsuccessful ones.

As per Buffet quote above.

All I’m saying is that i would rather put my reliance on long term historical trends that my money will grow, than on my personal ability and capacity to day trade,  and risk turning my fortune into a smaller fortune.

Both our timers are correct to an extent….For a general portfolio, history suggests the longer you remain invested in equities the more money you will make.  Trying to dodge in and out of equities as an asset class has tended to be detrimental to returns; time in the market wins.  At the individual stock level, getting your timing right – both buying and selling – can make a significant difference to your outcome.  For the average man in the street, not able/willing to dedicate time, effort and emotional capital to swings and roundabouts of share prices, buying the tracker on a buy, hold and (almost) forget basis is best; time in the market.  And if you have the time and inclination to be a stock picker, then go for it, but just remember it is a zero sum game where even the pros who are right 55% of the time look pretty smart.

“All I’m saying is that i would rather put my reliance on long term historical trends that my money will grow, than on my personal ability and capacity to day trade,  and risk turning my fortune into a smaller fortune.”

A friend of mine lost the majority of his savings through dodgy mining shares and the like over the last 15 years. Had he invested it in a pension or ISA tracker his current lifestyle would be comfortable rather than juggling whether to fix the car or the central heating.

If anyone has interest in stockpicking I guess you need discipline to keep the risky part of your saving to a very small proportion and not chase losses.

Of course there is risk and risk. Choosing a dozen big UK or USA companies rather than using funds may have a it of the fun without the massive risks of other things.

“All I’m saying is that i would rather put my reliance on long term historical trends that my money will grow, than on my personal ability and capacity to day trade,  and risk turning my fortune into a smaller fortune.”

A friend of mine lost the majority of his savings through dodgy mining shares and the like over the last 15 years. Had he invested it in a pension or ISA tracker his current lifestyle would be comfortable rather than juggling whether to fix the car or the central heating.

If anyone has interest in stockpicking I guess you need discipline to keep the risky part of your saving to a very small proportion and not chase losses.

Of course there is risk and risk. Choosing a dozen big UK or USA companies rather than using funds may have a it of the fun without the massive risks of other things.

This video kind of touches on that…n the last 15 mins…worth a watch – in fact his channel is really good for general investment advice..

Of course there is risk and risk. Choosing a dozen big UK or USA companies rather than using funds may have a it of the fun without the massive risks of other things.

That’s a reasonable strategy, buy 10 large stocks and put a 25% stop loss which means you lose a maximum of 2.5% of your portfolio if you are forced to sell. A guy I follow usually only buys stocks which are >$100/share as they tend to be less volatile.

Rules like a stop loss are pointless, they just ensure you sell up in a crash and miss the recovery.

All attempts at timing and picking are completely pointless if you subscribe to even the weakest version of the efficient market hypothesis. Basically, are there any reasons to believe that Joe blogs sitting in his sofa is going to know more about a particular company’s prospects than a team of talented analysts spending all their time poring over data? Trading is a negative sum game so you’ve got to be better than average simply to break even and just sitting tight will beat most of these highly paid analysts…

I guess it depends how hands on you want to be and if you think you can time the markets to buy and sell certain stocks with perfect timing..

For me it’s difficult to look past an index fund or two.. Like maybe a global one weighted the way you want it and maybe an S&P500 one aswell, and split the money between the two?

Then just let it run on ‘auto pilot’ aside from adding new money to each,  split depending on your mood… for 5-10 years and see where you are?

I work with analysts in Biopharma. Let me tell you that the level of detail is more than impressive. Who else could knock $12bn off a company with just an analyse of published data https://www.fiercebiotech.com/biotech/hidden-data-obesity-prospect-wipe-12b-amgen-market-cap . There is a huge information imbalance and unless you are an insider and act (which is illegal), you are on the wrong side of the information. Seriously, tracker with some international component (S&P500) and 10% of your funds in risk for some fun if you do want to play (lose). Or hold forever as per Buffet. Me, I spend more time doing what I care about whilst the trackers track.

Yes an annuity dies with you, you can take a slightly lower amount with partner benefits.

I have a pension pot which i have to make a decision on, my options are straight annuity till death, a 10 year product which mirrors early retirement spending profile, ditto 15 year.

You really cant beat diversification, as said above lots of unknowns could happen, so i m spreading my options.

sod day trading. I tried it in practice mode and very quickly lost most of it

if you think you are going to be any different to everyone else out there then give trading121 practice more a go.
start with 5k and see where you get in 1 month.

Seriously, tracker with some international component (S&P500) and 10% of your funds in risk for some fun if you do want to play (lose). Or hold forever as per Buffet. Me, I spend more time doing what I care about whilst the trackers track

That’s roughly my advice even though I’m a noob.

S&P500 is pretty much pure US tech funds though.. Performs well but not very diverse, so if you want to spread your bets maybe look at putting a bit into that and a bit into a more diverse global fund?

Trying to micro manage a diverse portfolio of individual stocks seems like a full time job and the chances are you will lose out compared to an eft global fund or whatever?

But I am new to investing so I dunno if that’s the best long term strategy…

…to my mind it’s safer… You might not make as bigger gains, but you won’t make as big short term losses either, panick and sell at the wrong time etc.?

If you are in it for the long run (as in 5yrs plus) you can just keep investing and ride out the turbulence…

@thecaptain

Amen to that <thumbs up emoji>

To the day traders: Why do you think you’re special exactly?

Many people have had a good run of luck but that’s a cigarette paper away from massive fail if your luck runs out and your bets are too big (e.g. Woodford)

I’ve not seen these points explicitly mentioned elsewhere in the thread so I’ll just leave a bunch of ramblings here…

A diversified index will be volatile.  It will have drawdowns from time to time, some of which may take years to recover.

Individual stocks (when they exit their time in the sun) don’t tend to recover in the same way.  Especially when you have stocks trading on over-priced p/e, the correction when it comes tends to lock in “normal” pricing and the hype moves onto the next big thing.  Those individual stocks don’t bounce back.  The companies can still carry on very successfully but the artificial, on-paper capitalisation that was transient and dependent on whimsy goes away forever.  If you miss the exit, you have to stomach locking in your loss to try and reallocate your reduced capital onto a buoyant stock.  How well you manage to achieve this is where the critique of luck vs voodoo is usually levelled at “trading”.

A typical capitalisation-proportioned ETF is not much different.  It trades you out of losers and into winners only when the losers transition out of the index, not as they rise and fall within the index.  This is a very crude mechanism but it seems to have built a track record of being hard to beat by anything more sophisticated (recency-bias, beware!).  If Apple shares go down, the number of Apple holdings held by the ETF doesn’t change; no trading takes place (“within” the index) because Apple’s price dropping is Apple’s capitalisation dropping.  If Apple dropped a doozy and completely fell from grace, in due course the S&P 500 committee would drop Apple from the index and consider new candidates to take its place.  At this point in time, the Apple holdings in the ETF would be sold.  i.e. not much different to trading.

The dogma that broadly diversified ETFs always go up is because the stock market always (over the long term) has gone up (and beaten inflation).  That’s a hard track record to beat.  However the fixation on S&P 500 ETFs is a matter of recency bias.  As others have pointed out, the S&P 500 is not broadly-diversified.  On top of its geological concentration, the index is currently concentrated in a small number of stocks and some sort of correction will take place in due course.  The US equities market has had lost decades in the past and will have some in the future too (with all the doom-mongers predicting one imminently).

So then you have to think about all the money washing around in investment markets.  It all has to go somewhere.  Everybody’s pensions get invested and people invest every month.  It doesn’t all b*gger off to commodities and never come back.   Yes, the ultra-rich and the market makers are always there on the other side of any deal ready to accumulate your loss as their gain.  But they alway hunt for value in the market themselves and bulls are better than bears for the “system”.  This is where broad diversification comes in.  There is nothing sexy about it but Warren Buffet has it about right: “diversification is for the ignorant” (paraphrased).  Viewed in the light of the Peter principle, more people are ignorant than think they are ignorant.  For my own use I’ve put those two thoughts together.

Last few things in a post far longer than I intended, none of which is “advice”;  all just for entertainment.

UCITS ETFs have a special set of constraints:  “ No single asset can represent more than 10% of the fund’s assets; holdings of more than 5% cannot in aggregate exceed 40% of the fund’s assets.”. This partly protects you from mega-stocks crashing out because the ETF may trade out of its most successful stocks if they get big enough, capping their concentration in the fund.

Equal-weighted ETFs.  These don’t suffer from concentration, by design.  They trade regularly to maintain their holdings in equal weight; they tend to charge more.  Their performance doesn’t look attractive on recent history but nothing does compared to the last decade in US equities and particularly in US tech.

Greed and irrationality.  Retail investing doesn’t set out to make anybody rich.  It has the potential to prevent you from becoming poor (by outpacing inflation).  Everybody in retrospect who wasn’t in “tech” for the last 10 years may have a feeling of regret for having missed out on what’s happened but that is the 20/20 vision of hindsight.  It isn’t a strategy.  That’s very hard to grapple with when making today’s decisions.  Our monkey brains aren’t good at this.

All the talk of “compounding” in investment is an abuse of the term except when it refers to reinvestment of dividends.  The fact that the market tends to grow exponentially (alongside inflation eroding value exponentially) is just the way the system is built.  But there is nothing magic in a logarithmic curve that specifically means you have captured some benefit in the prior period and you get to carry it forward without risk into the coming period.  £1000 (or whatever) in the market on this day doesn’t know whether it has accumulated over multiple years or has been dumped in as a lump sum today.  The value of investments you hold has to be offset by the opportunity cost of what else you might have done with the money.  This is mostly me being a pedant and in my own past I frittered money away on nonsense.  However it does mean you are OK spending today for the things you want and need.

The profile of an ageing population and a reducing birth rate may change everything.  A few paragraphs back I said…” Everybody’s pensions get invested and people invest every month”.  There’s a fallacy in that.  People also drawdown their pensions in retirement.  If the working generation do not replenish the capital in the market in equal measure to the amount of capital exiting the market, how can the market grow?

I’ll stop on that happy thought.  Well done to anybody who got to the end of all my rubbish.

Much to agree with Peaslaker although I think I might take issue with one aspect of your problem with compounding.  I agree compounding of investment returns through re-investment of dividends overstates the return available to the average investor who may want to access dividend income to live off.  But the likes of Warren Buffet and Terry Smith are making use of the fact that a company is often better served by reinvesting profits in their own business to grow it the following year and yield further profits for re-investment etc rather than paying out surpluses to investors; the underlying value will compound over time, although it doesn’t guarantee the share price will follow.  The average investor might have to sell a portion of their shares to live off if needed, but the idea is the company does a better job with surpluses reinvested at (say) 15% pa than investors can is not without merit.

all my UK holdings seem to be spending £Bn’s on share buy backs at the moment, never been a fan, yes fewer shares on the market and in theory the business value split across fewer shares, share price goes up, dividend payouts in theory go up or stay the same (to save cash)    but then we have wars / cop meetings/ new governments

you can remove unsystematic risk but these systematic risks always hurt.

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