Changing how one invests

[odysseus2000]

One of the great impacts on the private investor has been technology.

Not so long ago one had to telephone orders in, then slowly folk moved to on-line accounts, but in many cases folk have not changed their tactics & one still sees books written in the last century being recommended as good things to learn from.

Additionally derivatives have become far more common which require different approaches.
Folk interested in more advanced methods of operating in the market may find this video interesting:

https://twitter.com/smartertrader/statu ... 40163?s=21

I have no connection with it.

Regards,

[DiamondEcho]

Not so long ago one had to telephone orders in, then slowly folk moved to on-line accounts, but in many cases folk have not changed their tactics & one still sees books written in the last century being recommended as good things to learn from.

Depends on your time horizon. Online trading was available 20yrs ago, for those who wanted it.
re: 'Tactics'; there are still many books from well before then re: investment that arguably hold as true today as when they were written. There are still approaches followed that go back to the post-war era of popular investing [dividend investing being a popular one]. 'When did Buffett last change his approach?'

Additionally derivatives have become far more common which require different approaches

I don't know, but I can imagine it's true. I wish it wasn't though, it would seem to make it simpler for small and perhaps unexperienced investors to self-immolate.

[Alaric]

I don't know, but I can imagine it's true. I wish it wasn't though, it would seem to make it simpler for small and perhaps unexperienced investors to self-immolate.

I think it was 1987, the year of the "hurricane" and the subsequent "Black Monday" crash when it was revealed that Natwest had allowed an individual trader to run up a massive short position. Presumably by telephone dealing.

[DiamondEcho]

I think it was 1987, the year of the "hurricane" and the subsequent "Black Monday" crash when it was revealed that Natwest had allowed an individual trader to run up a massive short position. Presumably by telephone dealing.

I remember the hurricane as it happens. I/we were looking out from our 4th floor window in Moorgate, London as people were blasted over by the hurricane, on their backs , and were being blown down the street.

- No idea re: the anecdote, but even back then we had very strictly observed limits re: private client margin/risk/concentration etc etc.

[Pendrainllwyn]

This video may be great but I couldn't get past the first 5 minutes. I didn't like his presentation style at all.

Pendrainllwyn

[Pastcaring]

I never watched the video,and I was buying shares online in 1998 I think.As for more modern and better methods I think not.

WBC ASX was listed 201 years ago,at a price of £100 per share.That was around 4 years average waves then.Dividend yield was 15% and interest rates were 10%.

There were 200 shares issued thus a market cap of £20,000 and the same amount of capital to kick the bank off .

Holding on to that shareholding for the period and just sitting back and collecting dividends means you now have around A$ 500,000,000,and an income of around $40 million gross.

Obviously I was not alive then.When I bought them in mid 1980,s I did exactly the same thing,except I did not spend 4 years wages on them.

Hang on to them forever and reinvest dividends.Retire on a large income and still put excess income into buying more shares annually,thus increasing income every year.

I realise very few people will ever do that.Just seems so obvious and easy to me.

Had I spent 4 years wages on them back in say 1984 a motza would have been made.Share price of around $3 ,dividend of around 12 cents.Average wages of around A$12,000,perhaps a touch more .Four years wages would have bought 16000 shares.

Today that 16000 shares are worth around $450,000 .Had dividends been reinvested then I would now have around 125,000 shares,worth approx $3.5 million.
I realise that facts are never fashionable,and truth is always stranger than fiction.I don't think that plan will ever change to produce wealth and income. Never being fashionable that strategy is never used ,however I always used it from day one.

Anytime over that 201 years that bank could have gone bust,2 or 3 times in the early days it almost did.Anytime in the coming 201 years the chance of that bank going bust is exactly the same.That is the chance that people have to take,and will never take.

[odysseus2000]

I never watched the video,and I was buying shares online in 1998 I think.As for more modern and better methods I think not.

WBC ASX was listed 201 years ago,at a price of £100 per share.That was around 4 years average waves then.Dividend yield was 15% and interest rates were 10%.

There were 200 shares issued thus a market cap of £20,000 and the same amount of capital to kick the bank off .

Holding on to that shareholding for the period and just sitting back and collecting dividends means you now have around A$ 500,000,000,and an income of around $40 million gross.

Obviously I was not alive then.When I bought them in mid 1980,s I did exactly the same thing,except I did not spend 4 years wages on them.

Hang on to them forever and reinvest dividends.Retire on a large income and still put excess income into buying more shares annually,thus increasing income every year.

I realise very few people will ever do that.Just seems so obvious and easy to me.

Had I spent 4 years wages on them back in say 1984 a motza would have been made.Share price of around $3 ,dividend of around 12 cents.Average wages of around A$12,000,perhaps a touch more .Four years wages would have bought 16000 shares.

Today that 16000 shares are worth around $450,000 .Had dividends been reinvested then I would now have around 125,000 shares,worth approx $3.5 million.
I realise that facts are never fashionable,and truth is always stranger than fiction.I don't think that plan will ever change to produce wealth and income. Never being fashionable that strategy is never used ,however I always used it from day one.

Anytime over that 201 years that bank could have gone bust,2 or 3 times in the early days it almost did.Anytime in the coming 201 years the chance of that bank going bust is exactly the same.That is the chance that people have to take,and will never take.

Yes, this is good and positive if you have this kind of time scale and if you pick the right equity.

But if you don't have this time scale and you pick the wrong equity things look very different. e.g. if you bought Lloyds bank 10 years ago, you are still underwater and if you bought it a few years before the crash you are massively underwater.

My takeaway from the financial crisis were several:

One was that a life long investment program in a diversified range of blue chip equity, better if your parents do it for you, and enough resources to survive a strong bear market such as we had in the 2008 period plus a belief that by holding on to your shares that the equities will recover can be great. This is easy to type but coping with the media assault and not getting influenced is hard. Some folk manage it, many don't, leaving equities never to return. Within this frame work the odds of success imho went down enormously if you held small caps which were often extremely volatile and often not supported by dividends. Back then and earlier on the Fool site, Soco was a cult stock and it made folk good money. It was greatly promoted by a user called Emptyend who was followed by many but who did not imho call the top well and sell and over the last decade it has been a dog.

Another that the 2008 crisis provided an enormous opportunity to make a huge amount of money. If you had cash and could buy at the bottom you did extremely well. Equity prices in those times of huge emotion were not set by fundamentals and one needed other techniques to prosper.

My approach to equities changed and evolved to focus much more on price action and on to business that were charging the world and how to trade them to take advantage of the emotional input into price.

Another clear message to me was that the commentary of pundits, industry experts and that includes CEO etc should be mostly shut out. Almost all of them haven't got a clue about much and are so detached from the emotions running through the minds of folk who hold equity and need them for capital and income as to be dangerous. IMHO if you start reading and listening to these folk you will likely make bad decisions. These folk are paid to have opinions, not to make money from equities and those are so orthogonal that there is little of use to be had from one group studying the other and in many cases the commentators are specifically forbidden from owning equities making them totally detached from the emotions of those who do own them.

Having now studied many equity markets and many investment/trading tactics it seems to me that there are very many ways to make money in equities and many more methods to lose it. From a risk adverse stand point, I now believe that a properly trained and disciplined day trader is the one most likely to prosper over time and to make substantial money in a typical investment period of 20 -30 years, but it is a job and requires many hours per week. The long term buy and hold person can do very well, but if he or she picks the wrong equity it can all end in tears and so the idea of buying the lowest cost fund covering a diversified range of equities, what Buffett likes to recommend, has a lot in its favour for long term buy and hold. There are examples such as PYAD's High Yield approach that have done well, but it requires huge discipline and an ability to stick with it and some good picks. The changes in technology also make me more nervous about how well this approach will go in the future. E.g. if you have oil equity can you be sure that there will still be demand going forward or will it be like holding shares in coal or railways that were for many years great, but have since withered to nothing. As technology changes many more business could face such changing circumstances as to make them also fail. E.g we have all seen the decline of the high street stores, e.g. the collapse of Jessops and rebirth as a smaller business, and the rise of the value retailers but that has been far from easy as the recent collapse of PoundWorld showed.

Within in the frame work of active trading, likely too advanced for most folk on this site, there are weekly options which can give very good risk/reward if you know how to use them but that requires a lot of effort.

Mostly if anyone asks me about equities I suggest they do something else, property, business, job... Equities are hard and require a lot of work and the ability to cope with ones emotions. Some people do very well in them, but it is important to recognise that the winners have a skill set that is not common in most people and that most of the folk who one imagines will help you like media commentators etc will instead hurt you. People might have liked to listen to Peston's comments, but did they make you any money, likely the inverse imho.

Regards,

[IanSmithISA]

Good morning,

.....
But if you don't have this time scale and you pick the wrong equity things look very different. e.g. if you bought Lloyds bank 10 years ago, you are still underwater and if you bought it a few years before the crash you are massively underwater.
...

Lloyds is a good example and not at all exceptional a while back I did a summary of Barclays assuming a £5K investment and reinvesting dividends in more Barclays shares.

Share             Dividend
Pot     Pot              Qty of  Price   Dividend  Amount Per  Dividend  New Shares
Cost    Value    Profit  Shares  Pence   Date      Share(p)    Amount(p) Bought
£4,998  £4,998            899     556				
£4,998  £3,811  -£1,187   899     424    Aug-02      6.35        5708      13
£5,055  £3,184  -£1,871   912     349    Feb-03     12.0        10949      31
£5,165  £4,322    -£842   944     458    Aug-03      7.05        6653      15
£5,231  £4,629    -£603   958     483    Feb-04     13.45       12889      27
£5,360  £5,112    -£248   985     519    Aug-04      8.25        8126      16
£5,441  £6,064     £623  1001     606    Feb-05     15.75       15760      26
£5,599  £6,037     £438  1027     588    Aug-05      9.2         9445      16
£5,693  £6,402     £709  1043     614    Mar-06     17.4        18143      30
£5,875  £6,809     £934  1072     635    Aug-06     10.5        11259      18
£5,987  £8,611   £2,623  1090     790    Mar-07     20.5        22344      28
£6,211  £6,833     £622  1118     611    Aug-07     11.5        12860      21
£6,339  £5,571    -£768  1139     489    Mar-08     22.5        25634      52
£6,596  £4,362  -£2,234  1192     366    Aug-07     11.5        13705      37
£6,733  £6,011    -£722  1229     489    Mar-08     22.5        27656      57
£7,009  £4,706  -£2,304  1286     366    Aug-08     11.5        14786      40
£7,157  £4,244  -£2,914  1326     320    Nov-09      1.0         1326       4
£7,170  £3,578  -£3,592  1330     269    Feb-10      1.5         1995       7
£7,190  £4,521  -£2,669  1338     338    May-10      1.0         1338       4
£7,204  £3,958  -£3,246  1342     295    Aug-10      1.0         1342       5
£7,217  £3,689  -£3,529  1346     274    Nov-10      1.0         1346       5
£7,231  £4,202  -£3,029  1351     311    Feb-11      2.5         3378      11
£7,264  £4,100  -£3,165  1362     301    May-11      1.0         1362       5
£7,278  £3,047  -£4,231  1366     223    Aug-11      1.0         1366       6
£7,292  £2,279  -£5,013  1373     166    Nov-11      1.0         1373       8
£7,305  £3,535  -£3,770  1381     256    Feb-12      3.0         4143      16
£7,347  £2,990  -£4,357  1397     214    May-12      1.0         1397       7
£7,361  £2,302  -£5,059  1404     164    Aug-12      1.0         1404       9
£7,375  £3,248  -£4,127  1412     230    Nov-12      1.0         1412       6
£7,389  £4,255  -£3,134  1418     300    Feb-13      3.5         4964      17
£7,439  £4,505  -£2,933  1435     314    May-13      1.0         1435       5
£7,453  £4,606  -£2,847  1439     320    Aug-13      1.0         1439       4
£7,467  £4,000  -£3,468  1444     277    Nov-13      1.0         1444       5
£7,482  £3,927  -£3,555  1449     271    Feb-14      3.5         5072      19
£7,533  £3,640  -£3,892  1468     248    May-14      1.0         1468       6
£7,547  £3,198  -£4,349  1474     217    Aug-14      1.0         1474       7
£7,562  £3,553  -£4,009  1481     240    Nov-14      1.0         1481       6
£7,577  £3,880  -£3,696  1487     261    Mar-15      3.5         5204      20
£7,629  £3,872  -£3,757  1507     257    May-15      1.0         1507       6
£7,644  £3,781  -£3,863  1513     250    Aug-15      1.0         1513       6
£7,659  £3,903  -£3,756  1519     257    Nov-15      1.0         1519       6
£7,674  £2,576  -£5,098  1524     169    Mar-16      3.5         5336      32
£7,728  £2,365  -£5,362  1556     152    Aug-16      1.0         1556      10

I haven't updated this recently but Barclays are currently at 172p.

The thing is that I didn't pick Barclays as they are a special case, I picked them because they were a included in pretty much most investment strategies.

Bye

Ian

[odysseus2000]

IanSmithISA
I haven't updated this recently but Barclays are currently at 172p.

The thing is that I didn't pick Barclays as they are a special case, I picked them because they were a included in pretty much most investment strategies.

Bye

Ian

Kind of sad to see it laid out like that.

Often people suggest that a better approach would have been to put in £500 per year over 10 years, but starting in 2002 this would still have bought you shares when they were higher than today.

Thank you for posting.

Regards,