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The Conviction Five: 2006-19

General discussions about growth strategies which focus primarily on investing for capital growth
OldPlodder

Re: The Conviction Five: 2006-19

#371909

Postby OldPlodder » January 1st, 2021, 9:47 am

Bagger is so right.

We built our pot with roughly 70% in all out growth, well away from the FTSE100, and even the 30% income component itself was not FTSE dominated at all. Never regretted it. In our case it was all essentially done through ITs, nowadays we hold mostly ITs and a few ETFs for specific themes or markets. Without that approach, if we had put it in a typical HYP instead (as for example posted by one poster yesterday) , we would not have been in the comfortable retirement position we are in today because our returns in the pot building decades would have been quite a few percentage point lower(I reckon about 3%) each year on average, making a compounded very large difference in our pot size over our decades of pot building. We would have ended up chasing yield in retirement, highly undesirable imho, whereas now we can still have about 40% of our portfolio in a growth component, and our income component has a lot of built in slack, so we will use a smaller proportion of its income than planned in 2021. And we won't need to touch my wife's ISA for our retirement needs at all, the brood will enjoy that. When I did the switch, from 70% in the growth component to around 40%, as we approached retirement, the costs were peanuts in portfolio value terms, so the arguments against having to do that which HYPers are fond of are invalid. We feel that we won't have to do much in our portfolios, beyond re investing the slack in my ISA's income twice yearly, just after the two yearly peaks of spare income. And that slack won't go anywhere an HY investment, as Bagger says, the best of investing future is elsewhere.

A happy, prosperous year to you all. Few of us will regret the passing of 2020.

Some will rejoice re Brexit, I hope they are right for all our sakes, but I fear the reverse will prove true in the long term.

Plodder

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Re: The Conviction Five: 2006-19

#371931

Postby dealtn » January 1st, 2021, 10:22 am

ReallyVeryFoolish wrote:
ADrunkenMarcus wrote:
Bagger46 wrote:An update on the above: And, yet again, it has happened again, PNL looked good against us earlier in the year, but it finishes well behind.
PNL up 8.5% YTD, so it did OK, but we are up an average of 15.1% YTD across our three portfolios.
Over the past five years, it is up about 40%, we average 95%.

This pattern is similar if I look at ten, twenty years too.

So called wealth preservers definitely not for us.


Me neither!

What's worse, is the compounding effect of these laggards over time. If we are generous and assume a 'preserver' increases 50% in the first five years compared to 90% for other holdings (instead of 40 and 95% in your experience), then each £1 invested has become £1.50 instead of £1.90.

Let's say the same happens in the next five years. The preserver gets you to £2.25 instead of £3.61.

Another five years?

The preserver is almost up to £3.38, which is less than your other holdings had got to five years earlier. Meanwhile, the other holdings are up to £6.86.

Another five years, taking it to twenty?

The preserver gets you to £5.07 while other holdings hit £13.03.

Twenty years is less than an investing lifetime. For the sake of less volatility (perhaps) on the downside, your £1 grows five-fold instead of thirteen-fold. :(

Happy New Year! We're doing a Zoom party.

Best wishes

Mark.

Exactly. You need time. But as long as you start early enough, so called wealth preserving funds/trusts are anything but. I have never considered using them. Solid, diversified, international growth equity investing over several decades is always going to be the best wealth preservation strategy, I feel.

RVF


Really?

In the example above the more than preserve wealth, doing (more than) what is claimed in the name.

If they were called "superior growth funds" you might have a point of relevance.

Dod101
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Re: The Conviction Five: 2006-19

#371936

Postby Dod101 » January 1st, 2021, 10:25 am

If anyone wants an indication of what is wrong with the old style HYP investing, from a preliminary analysis of what went on in my portfolio last year, we could note that Shell is down by about 45%, HSBC is down by 36%, Glaxo by 24% and Imperial by around 17%. Both HSBC and Imperial were already well off their peaks by 1 January 2020.

In contrast in my Growth portfolio, Scottish Mortgage is up by 109%, Smithson up by 32% and BG China Growth since I first bought it on 1 October 2020, up by 23%.

I need to do a bit more analysis and some serious thinking.

This is not the right thread but I was really responding to Bagger's post above.

Dod

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Re: The Conviction Five: 2006-19

#371947

Postby dealtn » January 1st, 2021, 10:41 am

ReallyVeryFoolish wrote:
dealtn wrote:
ReallyVeryFoolish wrote:Exactly. You need time. But as long as you start early enough, so called wealth preserving funds/trusts are anything but. I have never considered using them. Solid, diversified, international growth equity investing over several decades is always going to be the best wealth preservation strategy, I feel.

RVF


Really?

In the example above the more than preserve wealth, doing (more than) what is claimed in the name.

If they were called "superior growth funds" you might have a point of relevance.

Suit yourself. I am guessing many others don't miss the point that over any significant timescale it is far better to "grow" rather than attempt to "preserve" your wealth along with acceptingincreased volatilitybaling the way.

If you called them "less risky growth funds", you may have a point of relevance.

RVF


Absolutely, over any significant timescale it is "better" to grow if that is you requirement, and buy "growth" funds to do so. That would be my preference too (although I wouldn't use funds personally). I certainly haven't "missed that point".

But if "wealth preservation" was more important to you, then "growth funds" might not be the most appropriate vehicle. Comparing the growth of the alternatives might be interesting, but not the most important metric for someone whose requirements were not primarily growth.

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Re: The Conviction Five: 2006-19

#371990

Postby 77ss » January 1st, 2021, 12:14 pm

Dod101 wrote:If anyone wants an indication of what is wrong with the old style HYP investing, from a preliminary analysis of what went on in my portfolio last year, we could note that Shell is down by about 45%, HSBC is down by 36%, Glaxo by 24% and Imperial by around 17%. Both HSBC and Imperial were already well off their peaks by 1 January 2020.

In contrast in my Growth portfolio, Scottish Mortgage is up by 109%, Smithson up by 32% and BG China Growth since I first bought it on 1 October 2020, up by 23%.

I need to do a bit more analysis and some serious thinking.

This is not the right thread but I was really responding to Bagger's post above.

Dod


Quite. RDSB is my major loser. I bailed out of HSBA and have reduced GSK.

I don't split my overall holdings into Income and Growth, but my overall portfolio has certainly been rescued by 3 ITs having increased by 80-90% over the year (ATT, EWI, JCGI) - much like your SMT. The first two are 0% yield, but JCGI gives a decent dividend as well.

Of my HYP stocks, the only two to have risen this year have been RIO and SSE. Doubtless down to poor stock selection.

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Re: The Conviction Five: 2006-19

#371997

Postby dealtn » January 1st, 2021, 12:21 pm

77ss wrote:Of my HYP stocks, the only two to have risen this year have been RIO and SSE. Doubtless down to poor stock selection.


Or Investment Strategy. It might have been difficult to have selected "winners" like you describe if the Investment Strategy "filter" left a pool with few possible "winners".

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Re: The Conviction Five: 2006-19

#372006

Postby Dod101 » January 1st, 2021, 12:53 pm

77ss wrote:Quite. RDSB is my major loser. I bailed out of HSBA and have reduced GSK.

I don't split my overall holdings into Income and Growth, but my overall portfolio has certainly been rescued by 3 ITs having increased by 80-90% over the year (ATT, EWI, JCGI) - much like your SMT. The first two are 0% yield, but JCGI gives a decent dividend as well.

Of my HYP stocks, the only two to have risen this year have been RIO and SSE. Doubtless down to poor stock selection.


I do not really have a HYP. It would be better called my income portfolio. I have four shares in it that have shown a capital gain, Admiral (25%), SSE, 3i Infrastructure and TD Bank.

I split my total portfolio into an Income one and a Growth one just so that I know what I am expecting from each individual component of the total.

I must be a slow learner because I am now spreading my wings a bit. Typical HYP shares have been a disaster this last year except in my case, for Admiral which has done well. As I said I will need to give this a bit of thought. I suppose the question is what are the apparently bombed out HYP like shares going to do this year?

Dod

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Re: The Conviction Five: 2006-19

#372010

Postby dealtn » January 1st, 2021, 1:01 pm

Dod101 wrote: I suppose the question is what are the apparently bombed out HYP like shares going to do this year?

Dod


Good question.

Many more have appeared on my radar as attractive at current prices, than those they started the year at.

I wouldn't push the definition envelope enough to say they qualify for consideration now as "Growth Shares", but certainly "Recovery" ones. A potential to double my money on a 1-2 year time horizon is sufficient for me to consider, and analyse accordingly.

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Re: The Conviction Five: 2006-19

#372053

Postby tjh290633 » January 1st, 2021, 2:35 pm

Bagger46 wrote:I wonder how those ace HYPers have done over 2020, doubt if they ended in positive territory, but of course capital does not matter! As if.

When will they ever learn that the best route to good income has nowt to do with HY.

Since you ask, here is mine:

This year    Inc Units   FTSE       Acc Units
31-Dec-19 6.20 7,542.44 28.84
01-Jan-21 5.57 6,460.52 27.00
-10.21% -14.34% -6.38%

Dividend per unit is 36% down on 2019. 31.63p down to 20.28p. Unit values are in GBP.

TJH

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Re: The Conviction Five: 2006-19

#372080

Postby CryptoPlankton » January 1st, 2021, 3:35 pm

Bagger46 wrote:
CryptoPlankton wrote:Over the past five years, it is up about 40%, we average 95%.

This pattern is similar if I look at ten, twenty years too.

So called wealth preservers definitely not for us.
Only worth it for investors who hate to be well down for a few months, or even a year or so.

I wonder how those ace HYPers have done over 2020, doubt if they ended in positive territory, but of course capital does not matter! As if.
When will they ever learn that the best route to good income has nowt to do with HY.

Happy new year to all.

A notably smug gloat - did you accidently leave out an "r" from your username? :lol:

A happy (and healthy) new year to you too!


Your opinion, which you are entitled to. But I am entitled to mine too.


Not so much an opinion as a jokey play on words that sprang to mind while reading your post after a few glasses of port - sorry if it offended.

Bagger46 wrote:But I wrote this last para to encourage young investors away from any form of HY investing, which destroys or at the very least reduces potential wealth in the very long run.

I'm sure any young investors suddenly feeling inclined towards HY investing after reading this thread about wealth preservers will be very grateful. :?

Bagger46 wrote:If you don’t believe me ask yourself why the great investors of today, such as the managers of SMT, Fundsmith, among many others, think investing for Divis as a primary aim is a bad idea. I have always thought that much of pyad’s precepts are very faulty, and after five plus decades of investor experience, I think I can be confident in such opinions.


I do believe you, and honestly don't think I indicated otherwise.

Bagger46 wrote:Despite the much needed recent rally in typical HYP shares recently, the individual Cos in FTSE 100 generally do not have outfits ready for the transformation which is gathering momentum in trade and business, the future of good investing is elsewhere. If any of our grandchildren should go near HYP, despite my creaking old joints, they would get a firm boot up their backside, lucklily they have listened, and their budding investments are doing fine.


I wouldn't argue with any of that. However, this is a thread about wealth preservation. I'm not sure anyone, anywhere, has suggested young people should invest in HYP or with dividends as their "primary aim". However, as others have mentioned, investment isn't always about maximising returns over the long-term, and "wealth preservers" (and, dare I say, even income investing!) can have a useful place in some people's investment journey. For those who have had neither the time nor resources (or, of course, the skill) to amass a portfolio the size of yours by the time of their retirement, careful management of what they have accrued may be more important than trying to squeeze extra growth out of it - especially if they have more or less all they need to see them out.

To illustrate: I have a relatively small private pension pot, which is providing me with the equivalent of an early State Pension until I am "of age" to receive the latter. Ensuring that it does that is my priority, rather than seeking growth. I am finding that having some of it invested in CGT, is useful in helping to ward off the effects of inflation. The rest of my income comes from equity investments (held almost entirely within ISAs), letting a property, a modest DB pension and what I will call "miscellaneous". I like a "regular" income and the fairly stable dividend stream from the "income" part of my portfolio (a mix of ITs and single company shares with varying yields and dividend growth rates) allows me to achieve that without having to give it much thought . With that in place, I feel comfortable investing the rest (c. 25%) in "racier" growth stocks. Hopefully, this will at some point allow me to unburden myself of landlord duties and, in the process, create other opportunities. Of course, if I had had a longer and more illustrious investment career leading to £200k a year spilling from my portfolio, I wouldn't be troubling myself at all with trivial considerations such as yield!

Anyway, apologies for the joke and sincere congratulations on your success. I just wanted to point out that maximising long-term returns doesn't necessarily have to be the objective, and that there can often be a useful role for "wealth preservers" and "income" shares depending on circumstances and temperament. We can't all be like Terry Smith, but at least we can aspire to do better than just sit around watching our money lose value in a savings account.

All the best,

CP


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