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A new user of this sites strategy

Stocks and Shares ISA , Choosing funds for ISA's, risk factors for funds etc
Investment strategy discussions not dealt with elsewhere.
IanSmithISA
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A new user of this sites strategy

#120956

Postby IanSmithISA » February 28th, 2018, 8:52 am

Good morning,

I am new to LemonFool but not investing and I follow what I believe to be an uncommon strategy, I can't find anywhere on the Profile page to explain this, but without explaining it it may be hard to see the logic of my posts.

A while ago, 2006 (ish, very ish), I used to post on the Fool under a similar, possibly even the same name.

There was a thread where ngaunt or similar got quite stroppy when I was explaining that I had invested £10K in various AIM companies which had all done badly and I wasn't prepared to do what he said.

I have learnt a lot since then, hopefully, of course he was still wrong.:-)

The internet is full of information on share trading and when I started I took a lot of it to heart.

After trading for a while I began to question a lot of what I was reading as it sounded sensible but did not relate to the reality that I was seeing.

One of the reasons for the dearth of relevant information is surprisingly obvious, before on-line share dealing there were very few private share traders. So there has been a very short period of time for anyone to gain and publish their experience.

There is one thing that everybody knows and I now believe to be fundamentally wrong for the private investor
Shares should be bought for the medium or long term.

Please put Warren Buffer to one side for the moment as he is so atypical of the private investor.

My investment funds are split into about 10 pots, these pots are used to purchase shares in a range of solid companies,(FTSE 100, 250 or All Shares but not The AIM) trading at around 30%-50% off from their recent peak price but not "falling knives".

Note that the PFG investment mentioned elsewhere consisted of multiple pots.

This fall must be due to reasons that I think I understand and have been declared over the last year or so and there must be a credible reason to believe that the problems declared are fixable and likely to be fixed.

These pots are then sold when they offer a profit in the range of 5%-15%, meaning that you are selling well below their peak prices and hopefully trading each pot 3-10 times per year.

Although these profits sound small, taking them means that at the end of the year there has actually been some growth, rather than none whilst waiting for that "big one".

The objective is compound growth and the low profit and high trade frequency aims to avoid the much more frequent than I originally expected massive share price drops, overnight 20%-40% drops that wipe out the growth from all the other trades.

I came to the conclusion quite a long time ago that as a small investor it is impossible to research companies beyond the superficial as you simply don't have enough access to the people in the business to know the truth behind the accounts. This was way before Carillion. :-)

Yet when bad news is announced and you wait a few months you usually see either more bad news or indications that the problems can be fixed. Whilst you can not know exactly where you are in the ultimate recovery or collapse you are dealing in a company with much of its dirty laundry in public. As time progresses since the last bit of bad news you slowly slip further and further back into the darkness.

Taking it to an extreme I now view management priorities as often being something like
Acting in the best interests of the directors.
Then the best interest of the large organisations that have lent the company money.
Then the interest of the large shareholders.
Then any other interests.
Then the best interest of the employees.
Finally the interest of the small shareholders.

Out of interest I did a chart of Barclays Bank starting from 2002, if you had bought £5K worth of Barclays and reinvested all dividends in more Barclays shares you would have spent £7.7K and have a pot worth £3.5K, the number of shares that you own would have gone up from 899 to 1566.

This is a mega ouch, although the numbers are a few months out of date they did show something that surprised me, yet the reason is semi obvious, when a company is paying dividends its share price is high, so reinvesting dividends inherently means buying at the top of the market.

Please feel to advise me that I am an idiot. :-)

Bye

Ian

p.s. can anyone explaing the etiquette for the Thanks system?

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Re: A new user of this sites strategy

#120986

Postby tjh290633 » February 28th, 2018, 10:23 am

IanSmithISA wrote:This is a mega ouch, although the numbers are a few months out of date they did show something that surprised me, yet the reason is semi obvious, when a company is paying dividends its share price is high, so reinvesting dividends inherently means buying at the top of the market.

Please feel to advise me that I am an idiot. :-)

Bye

Ian

p.s. can anyone explaing the etiquette for the Thanks system?


Having your own investment method does not make you an idiot. We all have our occasional crosses to bear, but your recent fall seems to be out of character.

A lot of dividend paying companies have relatively high yields, which suggests that they are depressed, compared with the market, and others with low yields are often growing faster than the market. AIM shares are a different matter because, although some do, in fact, prosper, many disappear without trace after a few years. BTDTGTTS.

Perhaps the mistake people make is reinvesting dividends in the source share, whereas for those who seek after income often select the recipient companies according to how much income they offer.

Regarding Thanks, if you wish to agree with a certain post, or find it helpful, then you can click on the "thumb up" icon top right of each post, showing your appreciation without cluttering up the board with more short posts.

TJH

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Re: A new user of this sites strategy

#120993

Postby Alaric » February 28th, 2018, 10:50 am

IanSmithISA wrote:There is one thing that everybody knows and I now believe to be fundamentally wrong for the private investor
Shares should be bought for the medium or long term.
?


High charging advisers like to tell you that, particularly if their charges are hidden in management fees. But commission rates on shares used to be much higher and there's still stamp duty. So it's a warning that if you check the value of your investment the day after you bought it, you will likely find you have lost money, not because of market movements but because of up front charges.

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Re: A new user of this sites strategy

#120996

Postby SalvorHardin » February 28th, 2018, 10:55 am

“I came to the conclusion quite a long time ago that as a small investor it is impossible to research companies beyond the superficial as you simply don't have enough access to the people in the business to know the truth behind the accounts. This was way before Carillion.”

There’s enough information out there for investors to get a reasonable idea as to how a business makes its money without having access to management. What’s needed is enough accounting knowledge to be able understand the profit and loss account and the balance sheet. Learn about some of the common problems with company accounts, such as how balance sheet asset values are often very different from the market value of the assets.

Terry Smith’s “Accounting for Growth” is the textbook about accounting fiddles. I’d rate this as the most important thing on investing that I've read along with Warren Buffett’s annual letters to Berkshire Hathaway shareholders. Buffett provides more relevant information for investors about business and valuing businesses than you get from the typical MBA course (that's not me saying it; MBAs have said so).

The stockmarket was telling investors that Carillion had a problem long before things became public because the yield became so high. When a company’s shares yield vastly more than the average for the sector it’s a safe bet to assume that there is something wrong with the company. The oft-mentioned HYP mantra of "never sell, capital values are irrelevant" meant that many investors followed the share price down to zero.

“Please put Warren Buffer to one side for the moment as he is so atypical of the private investor.”


The thing is that because the vast majority of us migrated here from TMF, a disproportionately large proportion will be aware of Buffett’s methods (e.g moats) or have owned Berkshire Hathaway shares for many years (I'm in my third decade). We’re not typical private investors.

I’ve generally avoided most investment disasters because I avoid the more disaster-prone sectors. Invest in a business an idiot can run because one day one will. Idiocy plus greed plus leverage is a recipe for disaster (that’s why I avoid banks and insurers like the plague). I try to avoid price-takers, such as the oils and miners, with their absence of moats.

I don’t think that the internet has greatly increased the number of people who invest in the stockmarket; rather it has changed the way in which they invest. Back in 1981 when I bought my first share the nearby market town (40,000 population) had four stockbrokers’ offices; there are none today. Most of their clients were investors, not traders, if only because this was pre-internet. The internet to my mind has given private investors three things:

1) Cheaper dealing costs, which has encouraged many investors to become traders (most people are awful traders, the most important thing I learned in the early 1980s is that I am awful at trading).

2) A massive increase in the quality of information and speed of access to that information. Having to wait two months to get an annual report from an American company is thankfully a thing of the past.

3) The ability to communicate with other private investors. I’d still be working were it not for the TMF Oil & Gas boards in the early 2000s and TMF USA, both of which drew my attention to companies that I would never have heard of without the internet.

“p.s. can anyone explaing the etiquette for the Thanks system?”

People ignore it? Posts on the decent TMF investment boards (e.g. Bert's Investors Sanctuary, Paulypilot's Pub) which would generally get anything up to 20 recommendations get none on TLF. Then again there's been quite a shakeout of users; I know a couple of people offline who used to post on TMF but haven't migrated here.

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Re: A new user of this sites strategy

#121011

Postby GeoffF100 » February 28th, 2018, 11:46 am

“p.s. can anyone explaining the etiquette for the Thanks system?”

I believe that you thank someone when they tell you something important that you did not know. On the TMF boards people usually recommended posts that told them what wanted to hear, which was often the opposite.

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Re: A new user of this sites strategy

#121161

Postby LooseCannon101 » February 28th, 2018, 8:25 pm

I don't understand the reasoning behind 'selling when the shares have risen 5-15%'. What if the shares continue to rise, perhaps by 100% or more? Warren Buffett buys shares or sometimes whole companies based on their earnings growth, a fair price and a protective moat. His favourite holding period is 'forever'.

In my opinion, buying and selling shares like your pants are on fire is really great news for your stockbroker but not for your bank balance. Tips given in the business sections of newspapers and/or magazines are not meant to make retail investors money, but to enrich advertisers and stockbrokers.

I like investing in a low-cost world equity fund with dividend re-investment, so mitigating currency and individual company risk, and having a long-term, buy and hold policy. This is extremely boring and certainly not suitable for excitable types.

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Re: A new user of this sites strategy

#121191

Postby jackdaww » February 28th, 2018, 10:34 pm

GeoffF100 wrote:
“p.s. can anyone explaining the etiquette for the Thanks system?”

I believe that you thank someone when they tell you something important that you did not know. On the TMF boards people usually recommended posts that told them what wanted to hear, which was often the opposite.


---------------------------

well spotted , have a rec !!

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Re: A new user of this sites strategy

#121222

Postby IanSmithISA » March 1st, 2018, 9:14 am

Good morning,

LooseCannon101 wrote:... What if the shares continue to rise, perhaps by 100% or more? .


Do you remember Transvision Vamp, ......Baby I Don't Care. :-)

More seriously the whole strategy is based around the notion that it is quite possible that I am being lied to, deceived or the management genuinely don't know what is going on.

So the objective is to only be in a company when all the bad news is public and then get out before new problems emerge and are kept hidden before they forced into public knowledge by events.

It is surprising how many decent sized companies fall into this category and I am more comfortable changing companies rapidly foregoing the ultimate possible profit for safety.

The rule is not absolute in the sense that I have an automated trade set at 15% but I manually review things and if it has been a gradual 15% over 3 months then it is time to sell, but if I wake up 5 days later to see 15% then I may defer selling.

My belief is that it is highly likely that most companies that exist today, will not exist in 50 years time in the same form.

Some will merge fairly and the shareholders will have a valuable holding in the new company.

A very small number will stay owned with an ownership structure that remains fundamentally unchanged

The rest will either go out of business completely leaving shareholders with nothing or will slowly lose value and merge on unfavourable terms.

Accepting this, if you do, the longer you hold shares in a company the more likely you are to be holding them when things go wrong. I am trying to minimize the time I am exposed to a risk, although others may disagree, that is unkownable to me.

I accept that this approach does not maximize the profits when you pick the right share, but it gives a reasonable profit along with fewer losses from being in failing companies.

It is so so easy to see an obvious 50% plus profit, be right and have it appear in a year or two, or be wrong and lose a bit more of your capital plus the growth. Even if you are right at the end of that time period would multiple 15% profits have yielded more, not forgetting the compound growth of the size of these investments?

As an example I looked at IG Group IGG when the regulators announced a cap on leveraged trading and the price tanked, I made a reasonable profit on it as I believed that the rule change would have no effect on IG and now the price is back where it was after about 15 months.

Had I stayed in IGG I would have been better of than I am having sold, but during this time a lot could have happened as the business is quite heavily into CFDs and other services that I consider as inappropriate for most retail clients and FCA may have said no more.

Bye

Ian

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Re: A new user of this sites strategy

#121256

Postby TUK020 » March 1st, 2018, 10:20 am

I remember reading that a US broker house had conducted a detailed study on characteristics of retail investors, versus the returns they achieved to see what indicators there were of the groups that attained superior performance in investment.
Unfortunately I never made a note of the details, so cannot supply them here, or indeed verify the story.

Two groups of investors stood out as achieving statistically significant better performance than other retail investors.

They were:
a) dead people
b) people who had forgotten they had investment accounts.

What both of the above groups have in common,is that they do not trade much.

tuk020

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Re: A new user of this sites strategy

#121262

Postby GeoffF100 » March 1st, 2018, 10:29 am

One of the reasons for the dearth of relevant information is surprisingly obvious, before on-line share dealing there were very few private share traders.

That was not my experience. Many of my work colleagues bought shares back in the days of the stock exchange minimum commission. Millions took up the privatisation offers. Millions opened PEPs:

http://www.thisismoney.co.uk/money/savi ... -75bn.html
This is a mega ouch, although the numbers are a few months out of date they did show something that surprised me, yet the reason is semi obvious, when a company is paying dividends its share price is high, so reinvesting dividends inherently means buying at the top of the market.

Reinvesting dividends will not usually help anyone who is trying to preserve even a roughly constant proportion of equities and bonds.

If you do short term trading, you incur additional costs. If the professionals cannot beat the market, except by chance, why should you be able to do so?

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Re: A-new-user-of-this-site's strategy

#121272

Postby GoSeigen » March 1st, 2018, 10:45 am

IanSmithISA wrote:Good morning,

More seriously the whole strategy is based around the notion that it is quite possible that I am being lied to, deceived or the management genuinely don't know what is going on.

So the objective is to only be in a company when all the bad news is public and then get out before new problems emerge and are kept hidden before they forced into public knowledge by events.

It is surprising how many decent sized companies fall into this category and I am more comfortable changing companies rapidly foregoing the ultimate possible profit for safety.

The rule is not absolute in the sense that I have an automated trade set at 15% but I manually review things and if it has been a gradual 15% over 3 months then it is time to sell, but if I wake up 5 days later to see 15% then I may defer selling.



I'm not sure anyone can comment sensibly on your strategy because I don't think you've fully described it.

e.g.
-What do you do if a share never rises 5-15% or falls back before you've sold it?
-What do you do if you defer selling after a quick 15% rise? Keep it forever? Sell when it's up another 15%???



From the OP:
IanSmithISA wrote:There is one thing that everybody knows and I now believe to be fundamentally wrong for the private investor
Shares should be bought for the medium or long term.


There's one thing that I believe to be fundamentally wrong for any investor:
Making any generalisation about investment strategy.

So to me all of these are wrong:
"It is wrong that shares should be bought for the medium or long term"
"High yield shares outperform low yielding shares"
"Value outperforms other strategies"
"Small caps offer more promise than large caps"
"Warren Buffett is infallible" [or similar deifications]
"Passive investing (buying trackers) is best"


I dogmatically assert that an investor should be flexible, inventive and undogmatic in her investment strategy!

GS

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Re: A new user of this sites strategy

#121290

Postby JamesMuenchen » March 1st, 2018, 11:19 am

This article
http://basehitinvesting.com/what-is-your-edge/
also discusses the short-term mispricing of what the OP calls solid companies, but comes to the more mundane conclusion that they offer entry points for LTBH purchases.

Interestingly, the implication is that the general market is more closely aligned with the OP's trading strategy than with LTBH. So Ian's approach is actually more orthodox :)

I post it mainly as I find it quite amazing that the average gap between the 52week high and low price of the top 10 megacaps in the SAP500 was nearly 50%.

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Re: A new user of this sites strategy

#121292

Postby vrdiver » March 1st, 2018, 11:22 am

Ian,
It's an interesting approach, which on paper, looks fine if all your ducks line up!

Like HYP, there are many arguments that can be made for or against such a strategy: the real argument is in the results.

Whilst posting "historic trades" is open to abuse, so not a very strong argument, I'd be interested to see your current "pots" (% holdings and date purchased - not absolute values!) and updates as you execute on your strategy, sales and purchases (with perhaps some small commentary to explain the reasoning).

Here's hoping...
VRD

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Re: A new user of this sites strategy

#121427

Postby IanSmithISA » March 1st, 2018, 5:30 pm

Good afternoon,
GeoffF100 wrote: If the professionals cannot beat the market, except by chance, why should you be able to do so?


I hold IDOX shares, the market cap is about £150million something this small can only be bought in small chunks per day without massively affecting the price.

A professional managing a large fund and needing to invest £50 million this month will have no experience or interest in trading this type of share as the total available investment is too small for him.

Yet for the private investor for whom a couple of purchases (£10,000) would be a significant portion of their total investment this month this could be a great buy. There is a profitable market that the professional is effectively excluded from simply because the absolute profit available is too small.

These companies are not questionable start-ups on the AIM, they can be FTSE 250 or all share companies.

The really nice thing is that rock solid FTSE 100 companies are also available to the private investor, so it's a win win. The professional investor is excluded from smaller opportunities but the private investor is not excluded from the bigger ones.

Just to be clear I am not playing games, I have been through all of the main market and AIM companies with a market cap of over £50 million and am working on the smaller ones, there are quite a lot of them.

When doing so I have set an "interested price" which is 66% of the highest price over the last 2-3 years excluding any blip that I though irrelevant.

I have an application that I wrote for myself, that shows interested price against this target price.
Image

When I set the target price I knew nothing about IDOX, then one day it appeared in my screen as under priced, so I started looking at it.

I then thought yes this is for me.

Bye

Ian

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Re: A new user of this sites strategy

#121436

Postby IanSmithISA » March 1st, 2018, 5:55 pm

Good afternoon,

vrdiver wrote:Ian,
I'd be interested to see your current "pots"
VRD


I can't get pre to work, sorry .:-)

Share       Qty      Buy Price     Buy Total
PFC 1915 541.72 £10,380
DTY 1355 810.41 £11,042
IDOX 26657 35 £9,335
PFC 3012 454.5 £13,695
OPHR 25612 53.2 £13,700
PFG 1310 1039.4 £13,690
ISAT 2872 474.35 £13,697
MTO 8753 155.66 £13,699


Bye

Ian

Moderator Message:
Sorted out the formatting. Tabs appeared to be the problem. Use 3 spaces as the column separator, not tabs.

TJH

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Re: A new user of this sites strategy

#121457

Postby kiloran » March 1st, 2018, 7:44 pm

IanSmithISA wrote:
I can't get pre to work, sorry .:-)

Share       Qty      Buy Price     Buy Total
PFC 1915 541.72 £10,380
DTY 1355 810.41 £11,042
IDOX 26657 35 £9,335
PFC 3012 454.5 £13,695
OPHR 25612 53.2 £13,700
PFG 1310 1039.4 £13,690
ISAT 2872 474.35 £13,697
MTO 8753 155.66 £13,699


Bye
Ian

If you want to put tabular data into a post, this may help: http://lemonfoolfinancialsoftware.weebl ... ormat.html

--kiloran

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Re: A new user of this sites strategy

#121460

Postby Itsallaguess » March 1st, 2018, 7:58 pm

IanSmithISA wrote:
My belief is that it is highly likely that most companies that exist today, will not exist in 50 years time in the same form.

Some will merge fairly and the shareholders will have a valuable holding in the new company.

A very small number will stay owned with an ownership structure that remains fundamentally unchanged

The rest will either go out of business completely leaving shareholders with nothing or will slowly lose value and merge on unfavourable terms.

Accepting this, if you do, the longer you hold shares in a company the more likely you are to be holding them when things go wrong. I am trying to minimize the time I am exposed to a risk, although others may disagree, that is unknowable to me.


Does that approach stand up to scrutiny?

We might think that driving is a relatively risky thing to do, and that the longer you're driving in a car at any one time, the larger the risk you are taking that you'll have an accident of some sort.

Your approach, on the face of it, seems to be suggesting that rather than driving on a single road for a given length of time, you've decided that you're going to take the same journey, but by using lots and lots of different, shorter roads.

I don't think you're reducing the risk that you think you're reducing by taking your approach of limiting the ownership time of a particular share.

You don't know if your next share is just about to meet the trouble you're trying to avoid shortly after you purchase it.

Cheers,

Itsallaguess

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Re: A new user of this sites strategy

#121478

Postby Clitheroekid » March 1st, 2018, 9:41 pm

I understand and endorse Ian's strategy, which is hardly surprising as I apply a similar one to a substantial chunk of my own investments. But I'd hesitate to call it a strategy, as it has no set rules and decisions are very much made on the hoof.

It's based on the principle that the market often over-reacts to bad news, pushing the SP down much further than is warranted. I like to think (rightly or wrongly) that some of this is driven by automatic trading, which is simply following the other lemmings. My `strategy' is to try and wait till the SP is as low as I think it'll go and then buy, with a view to selling when the market realises it's over-reacted and the SP bounces back.

I try to limit the risk by dealing mainly in companies that (1) I consider to be basically `safe', which means mostly FTSE 100 and generally nothing outside FTSE 250; and (2) offer a decent yield that I consider sustainable, so that if the bounce doesn't happen I can happily sit on them to draw the dividend.

Specific examples where I’ve done this – often more than once - over the past year or so have been Aviva, Admiral, Carnival, HSBC, IWG, Petrofac and RSA.

However, because I have long term holdings in some smaller companies and therefore watch them quite closely I'll sometimes trade them as well. Although the yield argument rarely applies my feeling that they are safe bets does. Two specific examples are Sirius and Hurricane Energy. I consider them both to be excellent long term investments, but I've noticed that their SP's do move up and down for no apparent reason on a regular basis, offering trading opportunities that are really too good to miss.

Of course the strategy doesn't always work. It's impossible to time the bottom exactly, and I sometimes buy and the price keeps falling for a while - I recently bought PFC at about £4.67, and they subsequently fell to around £4.10, though they've now recovered a bit to around £4.30. I'm not bothered, as I continue to think they're good value at the price I bought and that I'll soon be able to take a profit.

And even if the profit doesn't materialise quickly I'm happy to hold on for the yield and I don't have any serious concerns about the basic health of the company.

I will also sometimes take a small profit if it's a quick one. If an investment of £20k produces a profit of £500 in a couple of days I'll sometimes take it. After all, that return over 3 days represents an annual return of about 300%!

I appreciate that many people wouldn't be bothered for such small returns, but I take the view that it's basically £500 for nothing, so why not?

People also say that it's not worth it as the costs outweigh the profits, but that's nonsense unless you're dealing in tiny amounts. For all its many faults III does offer cheap dealing rates, and even with stamp duty at 1/2% I only need an increase of 3% or 4% to generate a reasonable return (by my humble standards).

One of the biggest problems I face is greed. If the SP has recovered by 5% but looks to be on an upward trend it really can be difficult to take a profit. Because I’m not a disciplined trader I don't automatically sell at any given percentage increase, but I can and have come unstuck, hanging on for more only to see the SP drop back again, occasionally wiping out the profit completely. Despite my resolve not to let it happen again I'm afraid it does. I also can’t help watching what happens after a sale, and it’s surprisingly irritating to see the SP continue to rise. But it’s also jolly satisfying when it drops back!

Over the past year I've made an overall return (including the odd dividend) amounting to over 40% of the capital employed. This is significantly more than the non-trading part of my investments has achieved. Admittedly, I'm still holding some shares (such as PFC) that are under water, but I'm happy to hold.

I’m of course aware that these profits have been made during what’s been for the most part a benign investment climate, and that in a falling market it may well come unstuck.

I would also accept that there is the risk of the odd disaster, such as Carillion or Provident, where I might buy on the dip only to discover I've bought a falling knife. So far, I've managed to avoid this (though probably more by good luck than good management) and statistically it's a low risk in the case of FTSE 100 or even FTSE 250 companies.

If I were more professional about it, instead of doing it for the fun, I suppose I'd impose rigid stop losses, but I don't generally bother, preferring to rely on instinct.

I'd also be far more assiduous about following market news, as to do this properly one has to be watching and monitoring closely. But this demands too much time, and also many of the big drops are as the market opens, when I'm still happily in the Land of Nod. By the time I get round to having a look the price has often already bounced back and I've missed the boat - but as I'm not doing it for a living or because I have any need to increase my pension pot I'm literally not losing any sleep over it!

It's not a strategy I'd recommend, as it doesn't have any specific rules to follow and relies far too much on instinct and gut feeling to merit the description of `strategy'. But it works well for me and provides me with a good deal of entertainment as well (so far) as a decent return, so as the saying goes, what's not to like? :)

Pipsmum
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Re: A new user of this sites strategy

#121482

Postby Pipsmum » March 1st, 2018, 10:27 pm

First derivatives SP rose fast just after I sold it, and I kicked myself, but I walked away with £200 of real money. I could have made double, but that wasn't guaranteed. It then went down again after I bought back in, having regretted the sale, and that wasn't guaranteed either. It's allowed to go down by £200 I suppose.

I cleared out of Saga with only a small £30 profit and i'm glad I did because it carried on sailing down. I cleared out of Carillion in the nick of time leaving in 55 shares for Justin and he's lost them. I've kept others and they've all sailed down at the moment. They currently would all have been better off in a Tescos 3% account, but been much less fun and no learning curve.

The bit that is interesting is this jam layer of trading. I watch some shares that are zig zag shares. They frequently go up and down as a seemingly long term pattern caused by their business activity presumably. If the trading commission is taken into account at the bottom and at the top, then if the trade quantity is large enough, then if the shares make a small profit in the centre of the zig and the zag, then technically it should be possible to realise this middle section again and again rather than waiting for a bigger movement. It's a matter of taking small and often and without greed. Obviously never guaranteed, but nothing is.

One to try with a dummy folio for me. However my dummy folios always do better it seems. My watch lists are mostly in great profit. Plenty to learn.

Itsallaguess
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Re: A new user of this sites strategy

#121500

Postby Itsallaguess » March 2nd, 2018, 5:17 am

Clitheroekid wrote:
I will also sometimes take a small profit if it's a quick one. If an investment of £20k produces a profit of £500 in a couple of days I'll sometimes take it. After all, that return over 3 days represents an annual return of about 300%!

I appreciate that many people wouldn't be bothered for such small returns, but I take the view that it's basically £500 for nothing, so why not?

People also say that it's not worth it as the costs outweigh the profits, but that's nonsense unless you're dealing in tiny amounts. For all its many faults III does offer cheap dealing rates, and even with stamp duty at 1/2% I only need an increase of 3% or 4% to generate a reasonable return (by my humble standards). [My bold]


I'm not sure if the bigger issue might be, not that it's not worth it as the costs outweigh the profits, but that it might not be worth it (at that level of return) as the profits outweigh the risks......

Ignoring the very recent market volatility, I think it's very interesting that these sort of approaches crop up during long periods of market bullishness, and I'd be really concerned that people might think the same approach will continue to work during periods of wider market volatility, or especially during times where markets struggle to maintain earlier levels.

I think these sorts of strategies would then begin to see where the real risks were all along, as they are generally reliant on long periods of buoyant markets, where company-stumbles can be caught and taken advantage of. During more testing markets, I'd be very doubtful if the same level of positive returns were generated.

The other issue I'd have with the above is that during those kinds of positive markets over long periods, it's likely that you can generate decent returns without exposing yourself to the stumbling companies, so again, I'd look to properly assess the real risks being taken, even if acceptable returns are being generated....

Best of luck with anyone taking this approach thought, and I can obviously see the appeal of it when they might well work fairly constantly during long periods of market largess.

Cheers,

Itsallaguess


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