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Put your mouth where your money is!

Stocks and Shares ISA , Choosing funds for ISA's, risk factors for funds etc
Investment strategy discussions not dealt with elsewhere.
mc2fool
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Re: Put your mouth where your money is!

#333133

Postby mc2fool » August 14th, 2020, 10:51 am

Arborbridge wrote:Perhaps this is the wrong board?
After all, it is the strategies board which implies discussion about possible approaches. It isn't the "here are my results of a particular strategy" board - which would account for why there are few results here but lots of words about what one might do.

"Here are my results" are on the Portfolio Management & Review board.

tjh290633
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Re: Put your mouth where your money is!

#333134

Postby tjh290633 » August 14th, 2020, 10:51 am

Urbandreamer wrote:Picking this calandar year, the May fall in the market was 33%, my portfolio fell by 43%, Ouch.
Since then there has been a recovery. The market is down 19% and my portfolio by 9% on the year.

HOWEVER I still think that my analysis is faulty. HYPTUSS gets the FTSE100 and FTSEall index so that is what I'm benchmarking against. However my portfolio reinvests dividends so my results are flattered against those benchmarks. This is most clear if I view performance over my entire record set. I'm up 20% while the benchmark is down about 3%. Assuming that I'm Mr Average, then that would entirely be due to reinvested dividends.

I need a better benchmark!
I might see if I can't create a spreadsheet with Hiriskpaul's benchmark's over the weekend.

You need to use the TR versions of those indices, which you can find by Googling "World Markets at a glance". That will give you the latest numbers. Somebody will no doubt be able to tell you where to find historical values.

Look for the FTSE Actuaries Share Indices box on the left hand side, low down. The TR values are in the right hand column of that box, so for the FTSE100 (UKX) it is 5959.66 at last night's close. For the All-Share it is 6575.60.

TJH

hiriskpaul
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Re: Put your mouth where your money is!

#333137

Postby hiriskpaul » August 14th, 2020, 10:55 am

tjh290633 wrote:
Arborbridge wrote: The thrust for HYP is income, not TR. I was looking for an annuity substitute in effect, so capital is just the seed corn which buys my income. So the comparison is not with an index so much as with alternative investments producing a similar income over a long time. Well, no need to go down that discussion - we both know it by heart :)

Arb.

I have said it before and will say it again. TR is not a strategy, it is a means of measuring performance. You can compare different strategies using TR, or accumulation unitisation, or XIRR, but you cannot define TR as a strategy.

TJH

For once, I agree. TR is sometimes expressed as part of, or a goal of a strategy. For example, a fund manager might target a long term TR greater than a particular benchmark, but using a particular strategy (seeking undervalued stocks, backing macro themes, etc.).

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Re: Put your mouth where your money is!

#333151

Postby GoSeigen » August 14th, 2020, 11:22 am

CryptoPlankton wrote:
tjh290633 wrote:
Arborbridge wrote: The thrust for HYP is income, not TR. I was looking for an annuity substitute in effect, so capital is just the seed corn which buys my income. So the comparison is not with an index so much as with alternative investments producing a similar income over a long time. Well, no need to go down that discussion - we both know it by heart :)

Arb.

I have said it before and will say it again. TR is not a strategy, it is a means of measuring performance. You can compare different strategies using TR, or accumulation unitisation, or XIRR, but you cannot define TR as a strategy.

TJH

But if people claim that they invest with the express purpose of maximising total return and believe prioritising income is a flawed strategy then clearly they must have a different strategy or strategies. This thread was started in order to ask for some transparency from such people about their own investment experiences.


Who claims to invest "with the express purpose of maximising total return"? No-one. That is made up by you, a straw man.

We measure total return which is a DCF of ALL cashflows. What we object to is a world view in which only dividend/interest cashflows are relevant, especially where there is an evident misunderstanding or misrepresentation of bonds such that they are dismissed out of hand, especially in a world of practically zero inflation.

As for aiming to maximise total return what do you suppose that even means? I can't imagine how you could maximise a return measured in any way. All you can do is play off risk and return and do smart things or dumb things. Who is to say the actual outcome of an investment was the maximum possible, however measured?

When gilt yields were above 5% right across the yield curve with inflation near 2% and LLOY yielding 7%, to me it was insane to put 100% of your money in Lloyds, reinvesting the dividends and writing off gilts completely because "their income cannot rise". To me the gilt was going to pay 5% annually without fail and 100 at maturity, whereas the LLOY had a good chance of sending its dividend to zero, causing a nightmare for the holder, because the share price would then also be zero. So a sudden loss of all cashflows. We know the history....

GS

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Re: Put your mouth where your money is!

#333194

Postby CryptoPlankton » August 14th, 2020, 2:05 pm

Okay, can I make one more request for this thread to say on topic, please? Otherwise, it will just descend further into yet another pointless HYP-bashing* exercise and we've had more than enough of them. I'm very grateful to those who have responded to the OP in the same spirit in which it was intended (with particular thanks to SalvorHardin for his excellent contribution), less so to the smug and patronising element who have chipped in - though they have, probably inadvertently, given me a better insight into the reasons behind a lot of the antagonism on this site. Anyway, more topic drift and this thread really loses its raison d'être...


*For the record, I'm not a "HYPer", though I hold a number of high yield FTSE 100 companies in my portfolio (not unlike a lot of insurance companies, pension funds, investment trusts and the like). However, in the round, my investments are well diversified geographically and by asset type. So I am probably not too different to many who have responded here - other, of course, than not being quite as wealthy and/or sophisticated as most. "I know my place" as the sketch goes... :)

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Re: Put your mouth where your money is!

#333232

Postby mc2fool » August 14th, 2020, 4:13 pm

CryptoPlankton wrote:Okay, can I make one more request for this thread to say on topic, please?

I sense your frustration. ;)

But does the Portfolio Management & Review board not fit the bill? I've not really looked at that board before but certainly the top two posts (ADrunkenMarcus' 'Dividend Growth Portfolio' and FF and PP portfolio reviews) seem to be very much what you're asking, IIUC, ongoing and in great detail too.

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Re: Put your mouth where your money is!

#333281

Postby Urbandreamer » August 14th, 2020, 6:57 pm

CryptoPlankton wrote:Okay, can I make one more request for this thread to say on topic, please?


My problem is that I'm unclear what the topic or desire for posts is.

OK, I'll admit that I have responded to questions about how my portfolio performs, which might be better addressed on another board.
However to some extent isn't that what was asked in the OP?

What is conspicuous by its absence, is the same kind of detail from any of these critics about their own investment portfolios. It's one thing to say "I don't invest for income", "money is fungible", "I sell assets when I need cash" and the like, but what does this entail in reality? It would be very helpful in understanding the mindset of someone who invests this way if they would share their investment objectives, how they have built and run their portfolio, what it consists of, how they decide what and when to sell and how they react to unusual (both positive and negative) market events as and when they encounter them.


The lines before that seem to imply that dreaded 3 letter word. Yes I am also guilty of pointing out why I don't follow that method.

SO, can you clarify your OP as to what you actually wanted from those who responded.

Ps, possibly better on another board but I have now benchmarked against TRIUKX (FTSE total return) and, drum roll please....
I've done the same!
Sometimes worse, sometimes better, but on the whole the same.
I'm considering posting how I did the work over on the Financial Software board, if anyone is interested.

CryptoPlankton
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Re: Put your mouth where your money is!

#333314

Postby CryptoPlankton » August 14th, 2020, 9:37 pm

Urbandreamer wrote:SO, can you clarify your OP as to what you actually wanted from those who responded.


I would have hoped that my "Thanks" to your initial reply would have been enough to confirm that you don't need clarification... :)

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Re: Put your mouth where your money is!

#333418

Postby simoan » August 15th, 2020, 1:08 pm

I've never understood the reasons for threads like this or why they seem to proliferate so often here and previously on TMF? Has anyone learnt anything or changed the obvious bias with which they entered into this discussion? I very much doubt it. Other than a way to kill some time I really don't see the point. For me, it's just like sitting in a pub listening to a group of blokes discussing who's got the best looking wife...

I just don't understand why there has to be a set and prescribed way of achieving what you need from your investments. Whether it's from capital gain, income, or much more likely, a combination of both. It's all the same! Do people that say they invest only for income really not care if their capital is eroded in the process? I'm sorry but I don't believe that for a second because psychologically that would be very hard to take, particularly where any income generated is not guaranteed. We are all different and everyone's requirements from their investments will be different, and the appetite for risk similarly so, based on many external and unknowable factors. As such I really don't see the point in these types of discussions because everyone is just constantly talking at cross purposes.

Anyhow, fire away. I won't be reading!

Si

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Re: Put your mouth where your money is!

#333440

Postby CryptoPlankton » August 15th, 2020, 3:26 pm

simoan wrote: I really don't see the point in these types of discussions

Si

So the point of contributing to what you already consider, from your point of view, a pointless discussion is to point out that you don't see the point?

Good point. ;)

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Re: Put your mouth where your money is!

#333451

Postby dealtn » August 15th, 2020, 4:16 pm

dealtn wrote:WP

GSK bought April 2014 @ 1537, sold @ 1718, FTSE was 6561/7155 (12% rise vs 9% rise). Dividends received 30% of investment.
WEIR bought August 2015 @ 1264, sold @1852, FTSE was 6000/7010 (46% rise vs 17% rise). Dividends received 5% of investment.
WEIR bought August 2015 @ 1264, now @1370, FTSE was 6000/6207 (8% rise vs 3% rise). Dividends received 15% of investment.
NXR bought December 2016 @ 174, now @ 151, FTSE was 6959/6207 (14% fall vs 11% fall). Dividends received 14% of investment.
FLO bought December 2016 @ 124, now @ 70, FTSE was 6959/6207 (47% fall vs 11% fall). Dividends received 14% of investment.
IGR bought December 2016 @ 262, now @ 510, FTSE was 7020/6207 (95% rise vs 12% fall). Dividends received 8% of investment.
GATC bought December 2016 @ 283, now 55, FTSE was 7040/6207 (91% fall vs 12% fall). Dividends received 9% of investment.
IMB bought October 2019 @ 1850, sold 1329, FTSE was 7155/5002 (28% fall vs 30% fall). Dividends received 8% of investment.
WEIR bought March 2020 @ 1123, now @1370, FTSE was 6020/6207 (22% rise vs 3% rise). Dividends received 0% of investment.



DP

AAL bought August 2015 @ 735, sold @ 1236, FTSE was 5129/6820 (68% rise vs 7% rise). Dividends received 0% of investment.
AAL bought August 2015 @ 735, sold @ 1645, FTSE was 5129/7011 (124% rise vs 10% rise). Dividends received 15% of investment.
BDEV bought November 2016 @ 469, sold @ 807, FTSE was 6823/7500 (72% rise vs 10% rise). Dividends received 28% of investment.
BDEV bought November 2016 @ 469, now @ 517, FTSE was 6823/6207 (10% rise vs 10% fall). Dividends received 28% of investment.
VOD bought November 2016 @ 199, sold @ 220, FTSE was 6823/7517 (10% rise vs 10% rise). Dividends received 0% of investment.
ITV bought May 2017 @ 192, now 63, FTSE was 7517/6207 (67% fall vs 17% fall). Dividends received 10% of investment.
BDEV bought December 2018 @ 450, now 517, FTSE was 7011/6207 (15% rise vs 11% fall). Dividends received 10% of investment.
ITV bought December 2018 @ 139, now 63, FTSE was 7011/6207 (55% fall vs 11% fall). Dividends received 6% of investment.
SOS bought December 2018 @ 37, now 18.25, FTSE was 7011/6207 (51% fall vs 11% fall). Dividends received 0% of investment.
BT.A bought January 2020 @ 172, now 108, FTSE was 7536/6207 (37% fall vs 18% fall). Dividends received 0% of investment.
ULVR bought February 2020 @ 4458, now 4574, FTSE was 7160/6207 (3% rise vs 13% fall). Dividends received 1% of investment.
SOS bought March 2020 @ 13.75, now 18.25, FTSE was 6020/6207 (33% rise vs 3% rise). Dividends received 0% of investment.

(Same caveats as previous comment)

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Re: Put your mouth where your money is!

#333529

Postby Wizard » August 16th, 2020, 8:48 am

What I find extremely confusing is that HYP is an income strategy. There is an ongoing debate on TLF about the merits of income investing versus total return investing. IMHO the thrust of the debate has always been, and remains, the extent an investor is interested in the capital performance of their portfolio versus just the income performance, whatever people call it. Yet I have just come from the HYP-P Board where there is a three page thread on the best way to use XIRR to measure the performance of HYPs. If HYP investors are using XIRR are they not looking at the total return of their investments? If so that seems rather odd to me, surely they do not care even if the XIRR is negative, as long as the income is being delivered?

Anyway, that aside, I think this has been an excellent thread, it has been very interesting to see some of the details of Fools' investment approaches and the quantification of some of the results. Which is, as far as I can tell, exactly what the OP was looking for.

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Re: Put your mouth where your money is!

#333539

Postby G3lc » August 16th, 2020, 9:55 am

PUT YOUR MOUTH WHERE YOUR MONEY IS - sounds like we should be investing in food going forward - and perhaps we should.

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Re: Put your mouth where your money is!

#333545

Postby 1nvest » August 16th, 2020, 10:55 am

G3lc wrote:PUT YOUR MOUTH WHERE YOUR MONEY IS - sounds like we should be investing in food going forward - and perhaps we should.

[joviality]
Tempted to say that could also include sewerage for some, but I shouldn't. Whoops! I did
[/joviality].

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Re: Put your mouth where your money is!

#333548

Postby tjh290633 » August 16th, 2020, 11:01 am

Wizard wrote:What I find extremely confusing is that HYP is an income strategy. There is an ongoing debate on TLF about the merits of income investing versus total return investing. IMHO the thrust of the debate has always been, and remains, the extent an investor is interested in the capital performance of their portfolio versus just the income performance, whatever people call it. Yet I have just come from the HYP-P Board where there is a three page thread on the best way to use XIRR to measure the performance of HYPs. If HYP investors are using XIRR are they not looking at the total return of their investments? If so that seems rather odd to me, surely they do not care even if the XIRR is negative, as long as the income is being delivered?

Anyway, that aside, I think this has been an excellent thread, it has been very interesting to see some of the details of Fools' investment approaches and the quantification of some of the results. Which is, as far as I can tell, exactly what the OP was looking for.

You really are confused, Wizard. Of course HYP is an income strategy. That does not stop those who run an HYP from looking at the XIRR results. It has happened that the TR of such a strategy was, for a good number of years, better than that of the market and of those who went for growth.

So by using an HYP strategy you could get a better than average TR. What is wrong with that. I know that you were late to the HYP game, and got disillusioned after a very short time, but you simply do not understand the strategy and how it has worked. Up to about 2000 I was getting an XIRR of up to 13% or so, but things have flattened out since then. Here are my annual IRR figures since 1987-8 and the FTSE100 figures for the same time:

Yr to 05 Apr   Annual IRR   FTSE100
1987
1988 -6.23% -4.82%
1989 41.81% 10.68%
1990 6.44% 8.80%
1991 19.60% 10.31%
1992 3.31% -0.68%
1993 21.94% 16.51%
1994 17.67% 12.84%
1995 1.80% -2.01%
1996 22.37% 18.21%
1997 15.92% 15.70%
1998 58.44% 37.71%
1999 7.17% 5.47%
2000 -0.23% 4.41%
2001 3.06% -13.86%
2002 6.79% -6.79%
2003 -28.67% -31.17%
2004 34.80% 21.34%
2005 23.60% 11.60%
2006 30.46% 21.87%
2007 19.51% 5.76%
2008 -11.65% -5.72%
2009 -40.73% -33.98%
2010 67.93% 46.32%
2011 17.50% 2.85%
2012 10.38% -3.13%
2013 23.12% 9.19%
2014 7.75% 7.13%
2015 15.75% 2.06%
2016 0.33% -10.86%
2017 16.22% 20.22%
2018 -3.20% -3.64%
2019 8.19% 5.53%

These are annual figures. I also have the figures from some of the year ends to date, from about 1998 onwards. What I have not calculated is the XIRR from the start to successive years, but the current value, from 1987 to date, is 8.96%. Because the FTSE numbers are not for the TR version, there is a bias towards my figures of the income accumulated in the year. In some years I have withdrawn part of the income, which may have depressed the figure. However the sum of the differences adds up to 233% over 33 years. Were the average yield to have been 4% over that period, that would account for 132% of the difference, leaving about 100% for the true outperformance.

TJH

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Re: Put your mouth where your money is!

#333660

Postby Wizard » August 16th, 2020, 5:44 pm

tjh290633 wrote:
Wizard wrote:What I find extremely confusing is that HYP is an income strategy. There is an ongoing debate on TLF about the merits of income investing versus total return investing. IMHO the thrust of the debate has always been, and remains, the extent an investor is interested in the capital performance of their portfolio versus just the income performance, whatever people call it. Yet I have just come from the HYP-P Board where there is a three page thread on the best way to use XIRR to measure the performance of HYPs. If HYP investors are using XIRR are they not looking at the total return of their investments? If so that seems rather odd to me, surely they do not care even if the XIRR is negative, as long as the income is being delivered?

Anyway, that aside, I think this has been an excellent thread, it has been very interesting to see some of the details of Fools' investment approaches and the quantification of some of the results. Which is, as far as I can tell, exactly what the OP was looking for.

You really are confused, Wizard. Of course HYP is an income strategy. That does not stop those who run an HYP from looking at the XIRR results. It has happened that the TR of such a strategy was, for a good number of years, better than that of the market and of those who went for growth.

So by using an HYP strategy you could get a better than average TR. What is wrong with that. I know that you were late to the HYP game, and got disillusioned after a very short time, but you simply do not understand the strategy and how it has worked. Up to about 2000 I was getting an XIRR of up to 13% or so, but things have flattened out since then. Here are my annual IRR figures since 1987-8 and the FTSE100 figures for the same time:

Yr to 05 Apr   Annual IRR   FTSE100
1987
1988 -6.23% -4.82%
1989 41.81% 10.68%
1990 6.44% 8.80%
1991 19.60% 10.31%
1992 3.31% -0.68%
1993 21.94% 16.51%
1994 17.67% 12.84%
1995 1.80% -2.01%
1996 22.37% 18.21%
1997 15.92% 15.70%
1998 58.44% 37.71%
1999 7.17% 5.47%
2000 -0.23% 4.41%
2001 3.06% -13.86%
2002 6.79% -6.79%
2003 -28.67% -31.17%
2004 34.80% 21.34%
2005 23.60% 11.60%
2006 30.46% 21.87%
2007 19.51% 5.76%
2008 -11.65% -5.72%
2009 -40.73% -33.98%
2010 67.93% 46.32%
2011 17.50% 2.85%
2012 10.38% -3.13%
2013 23.12% 9.19%
2014 7.75% 7.13%
2015 15.75% 2.06%
2016 0.33% -10.86%
2017 16.22% 20.22%
2018 -3.20% -3.64%
2019 8.19% 5.53%

These are annual figures. I also have the figures from some of the year ends to date, from about 1998 onwards. What I have not calculated is the XIRR from the start to successive years, but the current value, from 1987 to date, is 8.96%. Because the FTSE numbers are not for the TR version, there is a bias towards my figures of the income accumulated in the year. In some years I have withdrawn part of the income, which may have depressed the figure. However the sum of the differences adds up to 233% over 33 years. Were the average yield to have been 4% over that period, that would account for 132% of the difference, leaving about 100% for the true outperformance.

TJH

Maybe I am, and maybe it is because (like the alternatives) there are many different versions of HYP being run by different people. I do not want to drag this thread off topic, but I have one simple question, is XIRR a measure of total return? No need for the history of your portfolio to be repeated again, just a brief answer will suffice.

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Re: Put your mouth where your money is!

#333695

Postby hiriskpaul » August 16th, 2020, 8:06 pm

Wizard wrote:Maybe I am, and maybe it is because (like the alternatives) there are many different versions of HYP being run by different people. I do not want to drag this thread off topic, but I have one simple question, is XIRR a measure of total return? No need for the history of your portfolio to be repeated again, just a brief answer will suffice.

I think you probably already know the answer! Quick answer, IRR is not really TR, but might give a ballpark value for TR in some circumstances.

Geek answer:

I assume XIRR refers to the Excel spreadsheet function here? If so, then this calculates an internal rate of return (IRR). IRR is not really the same thing as total return, unless there are only 2 cashflows involved (one at the start, one at the end), but might be an approximation of TR in some circumstances and will likely give a better estimate of TR than ignoring the intermediate cashflows completely would.

Total return over a period usually refers to the increase in value of an investment when all distributions are reinvested. TR need not be annualised.

The Internal rate of return is a discount rate that makes the sum of the NPVs of a series of cashflows equal to zero. IRR is (by definition) an annualised rate.

When comparing a single investment into an income producing asset, the annualised TR will not usually be the same as the IRR. Could be higher or lower as it depends on the returns on the reinvested distributions. When used this way, IRR implicitly assumes that initial investment and all reinvested cashflows produce the same rate of return. This means you can calculate IRR without any knowledge of the reinvestment prices. To calculate TR properly you need to know the reinvestment prices.

TR is often calculated assuming reinvestment occurs on XD date, which is a bit of a con, but means you don't get big jumps in the time series between XD and payment date. IRR calculations would normally use the actual payment dates.

XIRR needs to be used with care. It is fine when used to analyse a single up front investment which produces a series of distributions, but when used with multiple investments over a period of time there may not not be a unique discount rate for the cashflows! There can be more than one, which renders the analysis meaningless. XIRR will happily still give you a meaningless number though.

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Re: Put your mouth where your money is!

#333708

Postby MDW1954 » August 16th, 2020, 9:26 pm

I am not a fan of XIRR.

On the rare occasions I want to do an IRR, I do it using a BASIC program I wrote in 1979 (as I wrote on another board a few days ago).

Hiriskpaul is correct:
The Internal rate of return is a discount rate that makes the sum of the NPVs of a series of cashflows equal to zero.


I am not persuaded that the majority of people happily churning our XIRRs know what an NPV is, or fully understand what it means.

MDW1954

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Re: Put your mouth where your money is!

#333725

Postby tjh290633 » August 16th, 2020, 11:02 pm

Wizard wrote:I have one simple question, is XIRR a measure of total return?


As it happens, I have used both XIRR and IRR. IRR only works if you use a constant period, be it 12 months, 28 days or 7 days. Hence if you work on 28 day periods, you need to use the 13th root of the answer to get the correct annual result. XIRR, on the other hand, works on a cash flow at irregular intervals.

Whereas I get 8.96% for my cash flow using XIRR, if I use IRR I have to assume monthly periods, which are not equal numbers of days, and take the 12th root of the answer, which gives me 8.86%.

So, as far as I am concerned, XIRR gives me the best measure of TR that I can get for an irregular cash flow.

TJH

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Re: Put your mouth where your money is!

#342321

Postby tikunetih » September 23rd, 2020, 5:59 pm

Bagger46 wrote:For us, as a close group of family and friends(36 different portfolios as of yesterday, total value in excess of £100m) who all share the same online portfolio system,


So, not a "family office" setup but more a "family & friends office"? Sounds a bit of an unusual setup... Are you able to expand on any background to this without giving away details you don't wish to?

Just caught my eye that's all...


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