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Growth Strategies?

Stocks and Shares ISA , Choosing funds for ISA's, risk factors for funds etc
Investment strategy discussions not dealt with elsewhere.
BR04
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Growth Strategies?

#193242

Postby BR04 » January 13th, 2019, 3:24 pm

Hi,

New member so bear with me...

I've been investing for the past 2-3 years, but I've never felt like I am following a strategy per say. The high yield proposals have me intrigued, but I'm only 29 so income isn't my highest priority at the moment (but appreciate re-investment could be viable for growth).

Are there any total return/growth strategies akin to the HYP I can be reading up on? One key aspect is I'll still be contributing monthly rather than starting with a set amount of money. 5% growth p/a would enable me to achieve my goals, but I appreciate that may be optimistic.

My goals are essentially a phased retirement, so I'm currently contributing to a SIPP for tax benefit (£3k SIPP contributions costs me £1.8k with relief which I'll progressively increase with my salary), my S&S ISA (currently ~£30k and saving ~£8k p/a) aiming to build a pot to generate a tax free income in ~25 years time (55) and then I have a DB pension through work which I will likely draw at ~65.

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Re: Growth Strategies?

#193257

Postby Backache » January 13th, 2019, 4:55 pm

Defining a strategy that is likely to beat the market is a Nirvana that has been sought for years and no-one that I am aware of has really successfully defined long term ones.
Different strategies appear to have different success rates at different times.

The strategy that appears most likely to be successful is to lose as little to the market as possible in fees expenses and taxes.
This generally means investing in low cost cap weighted trackers.

Personally I try and add something on to that generally by tilting towards small caps which appear to have long term higher growth and smaller markets with growing populations. I also try and see what general areas look undervalued and if there are closed end funds trading at significant discounts look at buying these. I find this interesting and it has for me beaten the FTSE , whether or not it has beaten the World Index over the years on a risk adjusted return basis I don't know but have not measured,

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Re: Growth Strategies?

#193436

Postby BusyBumbleBee » January 14th, 2019, 12:45 pm

BR04 wrote:Hi,

New member so bear with me...

I've been investing for the past 2-3 years, but I've never felt like I am following a strategy per say. The high yield proposals have me intrigued, but I'm only 29 so income isn't my highest priority at the moment (but appreciate re-investment could be viable for growth).

Are there any total return/growth strategies akin to the HYP I can be reading up on? One key aspect is I'll still be contributing monthly rather than starting with a set amount of money. 5% growth p/a would enable me to achieve my goals, but I appreciate that may be optimistic.

My goals are essentially a phased retirement, so I'm currently contributing to a SIPP for tax benefit (£3k SIPP contributions costs me £1.8k with relief which I'll progressively increase with my salary), my S&S ISA (currently ~£30k and saving ~£8k p/a) aiming to build a pot to generate a tax free income in ~25 years time (55) and then I have a DB pension through work which I will likely draw at ~65.

First and foremost - welcome - if you learn as much as I have done from the Fool then it will be worthwhile. Wish I had started at your age!

A couple of comments :

It is sometimes a good idea to get one of your pots going with a bigger lump so that fees don't cut into your returns too much. So can I suggest that you put as much as you can into your SIPP this tax year and also again at the start of the next tax year. If you put £6,000 in this way you will have a sum of £7,500 in the SIPP by June this year.

It is comparatively easy to get an RPI indexed yield of about 6% from the Green Infrastructure funds (BSIF, FSFL. JLEN, NESF, TRIG and UKW) where the income is largely coming from Government subsidised investments in Solar and Wind Farms. The two highest yielders at the moment are BSIF and JLEN by the way. All six of these listed at 100 pence per share and have (roughly) gone up in price as the income has increased so the cheapest is now about 107 and the dearest about 126 per share so there has been some capital growth as well as the 6% plus yield.

As always though you must listen to advice but always DYOR to make sure you accept the right advice.

Regards - BBB

BR04
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Re: Growth Strategies?

#193912

Postby BR04 » January 16th, 2019, 8:41 am

What’s a minimum lump sum to be considering a high yield strategy? I have just over £30k in my S&S ISA at the moment.

It wouldn’t be tax efficient to put more than I am currently in my SIPP, but I should see a reasonable uptick in salary next FY so will increase contributions somewhat accordingly (I’m contributing monthly and have my tax code adjusted accordingly).

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Re: Growth Strategies?

#193915

Postby TUK020 » January 16th, 2019, 8:48 am

BR04 wrote:What’s a minimum lump sum to be considering a high yield strategy? I have just over £30k in my S&S ISA at the moment.

It wouldn’t be tax efficient to put more than I am currently in my SIPP, but I should see a reasonable uptick in salary next FY so will increase contributions somewhat accordingly (I’m contributing monthly and have my tax code adjusted accordingly).


For direct holding of stocks, to get a reasonable level of safety through diversification, you really need a minimum of 15 individual shares in different sectors. For dealing costs to be kept to a low % of the shareholding, you need to be talking a tranche of at least £1k, preferably £2k.

£30k is plenty to get you a starter HYP.

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Re: Growth Strategies?

#193961

Postby colin » January 16th, 2019, 11:29 am

BusyBumbleBee wrote:
BR04 wrote:Hi,



It is comparatively easy to get an RPI indexed yield of about 6% from the Green Infrastructure funds (BSIF, FSFL. JLEN, NESF, TRIG and UKW) where the income is largely coming from Government subsidised investments in Solar and Wind Farms. The two highest yielders at the moment are BSIF and JLEN by the way. All six of these listed at 100 pence per share and have (roughly) gone up in price as the income has increased so the cheapest is now about 107 and the dearest about 126 per share so there has been some capital growth as well as the 6% plus yield.

As always though you must listen to advice but always DYOR to make sure you accept the right advice.

Regards - BBB


I am wondering what would happen to the income from these funds if energy prices fall?

JohnB
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Re: Growth Strategies?

#193963

Postby JohnB » January 16th, 2019, 11:45 am

I'd not recommend something that relies of government subsidy to a new investor. We keep hearing the renewable sector complain that the rules change.

@BR04 you need to split your question into two, what investment strategy, and what tax avoidance strategy, as you can apply most of the former within the latter. I'd avoid products with special tax breaks as a novice investor.

I'm a passive investor, so I'd go for a world tracker with low costs, to have "a bit of everything"

As far as tax goes, do you own property. If not look at a LISA. If you are a basic rate taxpayer there is little difference between SIPP and ISA, the lump sum from the former is offset with the risk of political fiddling with the money tied up for so long. Flexible ISAs that allow you to take money out and return the same year for no penalty are very useful for funding big ticket items like weddings, house moves and cars.

When you are a higher rate taxpayer, SIPPs are more attractive, but if you think your lifestyle will require a high retirement income, be very wary of the Lifetime Allowance, as you will badly exceed it to get a HRT income.

At least you can ignore Inheritance tax, which occupies the minds of 40-60 yos.

Oh, and read all the monevator.com articles

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Re: Growth Strategies?

#194002

Postby BusyBumbleBee » January 16th, 2019, 2:10 pm

colin wrote:I am wondering what would happen to the income from these funds if energy prices fall?

JohnB wrote:I'd not recommend something that relies of government subsidy to a new investor. We keep hearing the renewable sector complain that the rules change.

That is where doing your own research comes in.

Energy prices are generally agreed ahead by the generators and are usually above market rates - partly because all electricity supply companies need the renewable energy to keep their customers and the government happy and partly because the generators get extra money for being close to their end user. (not using so much grid capacity)

Bad news always sells papers - good news doesn't. So minor rule changes are magnified out of all proportion by the media and an investor needs to look behind these stories for the truth. The government subsidies were not only available to Companies for a guaranteed length of time but also to individuals - hence the roofs covered in solar panels and the installation of so many heat pumps. These subsidies are being phased out for new installations - but continue for those already built.

Try looking at these as part of your research

https://jlen.com/wp-content/uploads/201 ... tation.pdf sensitivities are on page 16

and https://quoteddata.com/wp-content/uploa ... iew-QD.pdf

Both are about John Laing Environmental Assets Grp (JLEN) because this has the most diverse set of assets. The other five tend to specialise in just one or perhaps two classes e.g wind or solar.

The QuotedData document was paid for by JLEN but does have a lot of industry wide figures so do not just dismiss it out of hand as mere hype. The figures quoted concur with my other research.John Laing Environmental Assets Grp

Hope this is useful.

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Re: Growth Strategies?

#194014

Postby SalvorHardin » January 16th, 2019, 2:49 pm

My vote goes to Warren Buffett's idea of the "economic moat", which involves investing in companies which have some factor which protects their products from being commoditised. This gives them a degree of pricing power and makes their markets more difficult for potential competitors to enter by creating barriers to entry.

This is a stockpickers' strategy and doesn't really work with funds.

A good example of a moat is the Coca-Cola brand (and Pepsi). Many consumers will be reluctant to switch from their favourite Cola and the sheer size of these companies makes it difficult to enter their markets due to their economies of scale.

But watch out for technological changes, as well as changes in consumer preferences. Local and regional newspapers used to have a brilliant moat, most towns could generally sustain one local newspaper which had an effective monopoly over the local news and advertising markets. Then along came the internet which gave us businesses like Craigslist and eBay, destroying the advertising monopoly, with websites and social media ruining the news monopoly.

Johnston Press, what used to be the biggest local newspaper publisher in the UK, has seen its share price fall by over 99% off its peak as a result.

https://www.investopedia.com/ask/answer ... icmoat.asp

I've followed a moat strategy for over 25 years and have outperformed the FTSE100 and the S&P500, with my other main strategy of special situations also being a major contributor. Special situations means going heavily into a share when it has been seriously mispriced by the market. This requires much more work and is prone to sometimes backfiring horribly when you realise that the share was not mispriced and if anything was overpriced.

I'd also argue that what you avoid investing in can be of as much importance as what you invest in. A lot of private investors vanished from the scene during the dotcom crash and the 2008 financial crisis because they were over invested in sectors which collapsed.

Good luck!

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Re: Growth Strategies?

#194028

Postby colin » January 16th, 2019, 4:06 pm

BusyBumbleBee wrote:
colin wrote:I am wondering what would happen to the income from these funds if energy prices fall?

JohnB wrote:I'd not recommend something that relies of government subsidy to a new investor. We keep hearing the renewable sector complain that the rules change.

That is where doing your own research comes in.

Try looking at these as part of your research

https://jlen.com/wp-content/uploads/201 ... tation.pdf sensitivities are on page 16

and https://quoteddata.com/wp-content/uploa ... iew-QD.pdf
Hope this is useful.

Yes thanks very useful, I understand from looking at the sensitivities on page 16 that a 5% fall in energy prices implies a 5% fall in Nav and vice versa,
unless i have missunderstood.

This article gives an idea of how volatile energy prices can be https://www.telegraph.co.uk/finance/newsbysector/energy/6083113/Power-prices-tumble-as-recession-hits-demand.html
I would be concerned that such an investment would be leveraged to overall economic activity and as such offer little diversification to tracker funds?

BR04
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Re: Growth Strategies?

#194106

Postby BR04 » January 16th, 2019, 9:15 pm

JohnB wrote:I'd not recommend something that relies of government subsidy to a new investor. We keep hearing the renewable sector complain that the rules change.

@BR04 you need to split your question into two, what investment strategy, and what tax avoidance strategy, as you can apply most of the former within the latter. I'd avoid products with special tax breaks as a novice investor.

I'm a passive investor, so I'd go for a world tracker with low costs, to have "a bit of everything"

As far as tax goes, do you own property. If not look at a LISA. If you are a basic rate taxpayer there is little difference between SIPP and ISA, the lump sum from the former is offset with the risk of political fiddling with the money tied up for so long. Flexible ISAs that allow you to take money out and return the same year for no penalty are very useful for funding big ticket items like weddings, house moves and cars.

When you are a higher rate taxpayer, SIPPs are more attractive, but if you think your lifestyle will require a high retirement income, be very wary of the Lifetime Allowance, as you will badly exceed it to get a HRT income.

At least you can ignore Inheritance tax, which occupies the minds of 40-60 yos.

Oh, and read all the monevator.com articles


Thanks for the pointers. I do own property and I am a high rate tax payer. I have a solid DB pension which I already have nearly 10 years contribution toward so I’m not overly sold on having a huge SIPP because of LTA and also a desire to phase retirement well before my actual pension age. An ISA is most attractive in that regard, but still making some use of a SIPP’s high rate tax efficiency to bridge 58-65 when I can draw my DB without too big of a hit.

I think i’ll stick to a primarily passive approach for my SIPP with that in mind, minimising fees. I’ll explore HYP for my ISA as a means to generate tax free income, especially as that pot grows.

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Re: Growth Strategies?

#194137

Postby Muddywaters » January 16th, 2019, 10:28 pm

Just buy an all world tracker and add as much as you can whenever you can.

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Re: Growth Strategies?

#194486

Postby BusyBumbleBee » January 18th, 2019, 12:39 pm

colin wrote:
BusyBumbleBee wrote:
colin wrote:I am wondering what would happen to the income from these funds if energy prices fall?

JohnB wrote:I'd not recommend something that relies of government subsidy to a new investor. We keep hearing the renewable sector complain that the rules change.
That is where doing your own research comes in.

Yes thanks very useful, I understand from looking at the sensitivities on page 16 that a 5% fall in energy prices implies a 5% fall in Nav and vice versa,
unless i have misunderstood.

This article gives an idea of how volatile energy prices can be https://www.telegraph.co.uk/finance/newsbysector/energy/6083113/Power-prices-tumble-as-recession-hits-demand.html
I would be concerned that such an investment would be leveraged to overall economic activity and as such offer little diversification to tracker funds?
Hi Colin - You haven't misunderstood the effect of a 5% fall in energy prices but what they mean is not the spot value - as in the Telegraph article - but the cosensus opinion of what the trend is - and that is very different.

To add to your research read this article https://www.investegate.co.uk/greencoat ... nd%20Alert which has resulted in a near 5% SP uplift today

Among other things it shows how the increase in the estimated life of the major asset (the turbine) within a company can affect the NAV. Thus while UKW's SP increased this morning, there was also a knock on (more muted)effect on other green infrastructure shares as they will also up their "life expectancies".

Coming along are other factors that will increase the NAV of these companies. You need to look at as part of DYOR, the hidden values in :

>> The grid connection - and who owns it? (landowner or operator)
>> Spare capacity in/of the grid connection
>> can battery storage by usefully deployed? (also look at improvements in battery technology coming along)
>> can the site be repowered?
>> are there improvements in technology in the pipeline (better solar panels for example)
>> what is the value of groundworks etc on the site and who owns them?
>> do some or all of the individual sites have high cost amortising loans in place which will drop out of the equation in the short to medium term (particularly applicable to VCTs - see below)
>> what benefit does the knowledgeable manager bring in terms of incremental improvements and scale (common systems for example)
>> Look at the increasing prices being asked for assets such as solar farms and also look at the recent £1.4 billion sale of John Laing Infrastructure Fund Limited at a 20% premium to NAV
>> There are some VCTs which have substantial 'green assets'. Look at their reports as they often give more detail than the six I have listed
^^^^^^ (look at VEN, VEN2, FTSV, AAVC). BUT the market in these (with the exception af AAVC) is thin, as the holders really like them for their tax free dividends and any buy order is likely to move the price upwards.

Hope this is useful - regards - BBB

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Re: Growth Strategies?

#194615

Postby colin » January 18th, 2019, 6:27 pm

Hope this is useful - regards - BBB

yes very useful, thanks again your post demonstrates the necessity of coming to terms with more complexity than I as a quite simple investor would wish to deal with.

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Re: Growth Strategies?

#194720

Postby torata » January 19th, 2019, 1:21 am

colin wrote:
Hope this is useful - regards - BBB

yes very useful, thanks again your post demonstrates the necessity of coming to terms with more complexity than I as a quite simple investor would wish to deal with.


And I think you have a valid point, colin.

BBB's reply contained a wealth of useful information, but I imagine there is an ever expanding universe of factors that you could research. For example, on wind turbines, who makes the gearing systems and how efficient and long-lasting are they?*

But coming back to your main point, which I see as 'where are the future long-term growth areas?', I found the information on the iShares site about megatrends in interesting starting point.
https://www.ishares.com/uk/individual/en/themes/megatrends

torata

*As a complete aside, the only reason why I use this example is because of some dealings I had with a company that had a patent for a small-scale windturbine that was not a propeller shape but effectively a screw shape that fitted in a box that could rotate.

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Re: Growth Strategies?

#194763

Postby colin » January 19th, 2019, 10:35 am

torata wrote:
colin wrote:
Hope this is useful - regards - BBB

yes very useful, thanks again your post demonstrates the necessity of coming to terms with more complexity than I as a quite simple investor would wish to deal with.


And I think you have a valid point, colin.

But coming back to your main point, which I see as 'where are the future long-term growth areas?',

torata

No that was not my point at all though it may be interpreted as the point of the OP posted by BRO4 it doesn't seem clear to me.
My point was a concern that any investment in energy is a leveraged investment on the overall level of economic activity and thus wholesale energy prices as such that in the event of a recession renewable energy IT's could not be expected to posses the defensive qualities in the way general infrastructure funds might. Though one might argue that the increased yield available on such funds compensates for the increased risk? Either way personally I prefer to not put myself in a position where such decisions need to be made. While it is clear that carbon emissions MUST fall it is not clear which technologies will prove to be the most efficient and politically acceptable , much may be achieved by increased energy efficiency which is great for the planet but not so good for energy industry shareholders. Whatever happens I assume that a passive index investing approach will capture whatever returns might be generated as the technology of energy production is transformed.

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Re: Growth Strategies?

#194791

Postby BusyBumbleBee » January 19th, 2019, 12:34 pm

colin wrote:
Hope this is useful - regards - BBB

yes very useful, thanks again your post demonstrates the necessity of coming to terms with more complexity than I as a quite simple investor would wish to deal with.

I quite get your point Colin but I do like to know about what I am investing in and renewable energy greatly interests me anyway so what I wrote was as much for me as for everyone else looking at this topic - it helped me consolidate my views and confirm I was on the right path.

Someone mentioned gear boxes - yes they are noisy and unreliable but my lawn mowers use hydrostatic drive trains and these are now being used in wind turbines - lighter, more reliable and less noisy with modular replacement instead of a complete gear box change cutting down maintenance costs dramatically.

regards- BBB

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Re: Growth Strategies?

#194820

Postby richfool » January 19th, 2019, 2:03 pm

I hold JLEN, in the renewable energy sector, but I hold them for their higher dividend yield and in the hope they will provide me with some protection by way of having an inverse correlation to equities in the event of a falling market. I wouldn't however see them as a growth investment.

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Re: Growth Strategies?

#194824

Postby colin » January 19th, 2019, 2:10 pm

BusyBumbleBee wrote:
colin wrote:
Hope this is useful - regards - BBB

yes very useful, thanks again your post demonstrates the necessity of coming to terms with more complexity than I as a quite simple investor would wish to deal with.

I quite get your point Colin but I do like to know about what I am investing in and renewable energy greatly interests me anyway so what I wrote was as much for me as for everyone else looking at this topic - it helped me consolidate my views and confirm I was on the right path.
regards- BBB

What does your research tell you about the relationship between energy prices-recessions-and the return from renewable energy ITs?
regards Colin

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Re: Growth Strategies?

#194953

Postby torata » January 20th, 2019, 3:34 am

colin wrote:
torata wrote:And I think you have a valid point, colin.
But coming back to your main point, which I see as 'where are the future long-term growth areas?',
torata

No that was not my point at all though it may be interpreted as the point of the OP posted by BRO4 it doesn't seem clear to me.


Apologies. You are right, I had confused you with the OP

torata


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