The Lemon Fool

Hats off to Mr+Mrs Bagria who are profiled in The Telegraph today.

http://www.telegraph.co.uk/investing/is ... come-life/

An annualised 27.8% I think over 23 years is very very impressive.

Impressive indeed.

I note he holds a concentrated portfolio, giving each holding the potential to contribute very positively to performance (and of course the reverse is true).

I assume his returns are not calculated in the same way as the Beardstown Ladies.

Best wishes

Mark.

He has now read more than 100 books on investing, but credits the late Jim Slater, author of The Zulu Principle and until his death in 2015 a columnist for Telegraph Money, for initially getting him into “growth investing”. He is also an admirer of Mr Buffett.

He obviously took onboard Buffett’s advice to read, read and then read some more in an effort to benefit from the experiences of those who have gone before.

He has only ever invested in UK stocks, saying that to look abroad to the US or Europe would “increase his workload”.
He added: “It’s easier to see the companies around you. I can get a better feel for them, although the US market would be more exciting.”

I see very much the influences of Peter Lynch and again, Warren Buffett at work.

That of the Buffett Circle of Competence template suggested by only ever investing in UK stocks that he is comfortable with and understands. Investing in the US may well be a more exciting prospect but that would mean a considerable widening of his current competence circle.

“It’s easier to see the companies around you. I can get a better feel for them …” is straight out of the Peter Lynch playbook. He’s clearly read Lynch's ‘One Up On Wall Street: How to Use What You Already Know to Make Money in the Market’ and more than likely read it back-to-front.

“I sold all the biotech stocks first thing in the morning, and shortly after that I sold my internet stocks too – and that was the start of the crash."

Doing that in 2000 would have put him well ahead of the game, and even allowing for a few bumps along the way, would have set their husband & wife portfolios up nicely for what was to come.

forrado wrote:

“I sold all the biotech stocks first thing in the morning, and shortly after that I sold my internet stocks too – and that was the start of the crash."

Doing that in 2000 would have put him well ahead of the game, and even allowing for a few bumps along the way, would have set their husband & wife portfolios up nicely for what was to come.

Yes, the first rule of making money is not losing money. Selling out in 2000, presumably just before the dotcom debacle hammered stocks was a good move, in hindsight, just like selling in the summer of 2007 would have been. But he could just have been lucky, especially considering his rather quirky reason for doing so.

More generally, his strategy of holding a small number of high-growth shares paid off but, again, how much of that was luck? If 1,000 investors had started out with that strategy, the odds are good that one of them would do spectacularly well. Another would have lost everything and everyone else would be distributed somewhere between those two extreme. Overall that strategy may not have out-performed, but outcomes would be very scattered and polarised. Imagine a thousand investors betting the farm on a single share 30 years ago - one of them would have picked Apple. The rest?

So is his success really due to him being so much better and smarter than the rest of us? Or so much luckier?

Now maybe I shouldn't talk, since the ISAs my wife and I hold limp slowly towards a million (between us), whereas he got there and stopped contributing in 2000. So he wins hands down, but he also took a lot more risk, both in terms of concentration and in terms of the types of share chosen.

He won the jackpot but that doesn't mean that such an approach can work for most investors. In fact, by definition, it cannot.

Despite starting in 1990, missing only two more ISAs in the 90s OH is just shy of £550k, mainly in G&I ITs, but also some bonds. Her target to get to the ISA £1M? About 5 or six years time, neatly coinciding with drawing my state pension. My Portfolio lags at £450k, as I was dragged into the dot com euphoria and got slaughtered!

toofast2live wrote:Despite starting in 1990, missing only two more ISAs in the 90s OH is just shy of £550k, mainly in G&I ITs, but also some bonds. Her target to get to the ISA £1M? About 5 or six years time, neatly coinciding with drawing my state pension.

That could be a bit of a tall order for your OH. Would take a CAGR of 10.5% to turn £550K into £1M over 6 years. Nevertheless, achievable with the added kicker of additional chunks of cash being fed in each tax year. Though it only took me 5.5 years (October 2011 to March 2017) to pull off the 'Rule of 72' doubling' trick (see image) - albeit via a SIPP and the use of no annual cash kickers - I had to go quiet a way up the investment trust risk scale to do it …



I’m just keeping my fingers, toes and other appendages crossed I can double up again inside 6 years. I’ll be over the moon if I can, but won't be all that disappointed if it takes me longer the second time round as I will be adopting a rather less adventurous approach.

forrado wrote:[Would take a CAGR of 10.5% to turn £550K into £1M over 6 years. Nevertheless, achievable with the added kicker of additional chunks of cash being fed in each tax year. .

I assumed that he meant contributing 20K a year for those 6 years. Moreover a 550K portfolio is probably going to generate about 20K a year in dividends, so the contribution level is really 40K a year, assuming reinvestment.

So even if there were no uplift in values, he's looking at 790K in 6 years. He does need favourable markets or superior skills or luck to achieve the rest.

Lootman wrote:

forrado wrote:[Would take a CAGR of 10.5% to turn £550K into £1M over 6 years. Nevertheless, achievable with the added kicker of additional chunks of cash being fed in each tax year. .

I assumed that he meant contributing 20K a year for those 6 years. Moreover a 550K portfolio is probably going to generate about 20K a year in dividends, so the contribution level is really 40K a year, assuming reinvestment.

So even if there were no uplift in values, he's looking at 790K in 6 years. He does need favourable markets or superior skills or luck to achieve the rest.

She, not he.

Mel

Yes my assumptions about her ISA did include contributions and re-invested dividends, ready for withdrawals to commence at that time. Even if she doesn't make it that's a hell of a lot of tax free income.

Unless the rules change

toofast2live wrote:Yes my assumptions about her ISA did include contributions and re-invested dividends, ready for withdrawals to commence at that time. Even if she doesn't make it that's a hell of a lot of tax free income.

Regarding when to stop contributions to an ISA or when to start to withdraw from them, I would have thought that is something to defer as long as possible. So if you have taxable assets that you can withdraw from or liquidate, it would be better to run those down first, whilst continuing to contribute to ISAs from the proceeds of those sales for as long as possible.

My wife and I have ISAs worth a similar amount but we are lucky enough to have more in taxable accounts. So the plan is to live off taxable income and pensions first, then start to run down the taxable accounts whilst continuing to subscribe to iSAs to the max as long as possible.

At some further point we would then stop contributing to new ISAs, then later start to withdraw the income from those ISAs, and finally start selling off the ISAs themselves. All assuming current rules, of course, and that we live that long, and that IHT strategies don't compel a different approach.