How to get 12%+ annual return

capital0ne

Here's another dismal Saturday afternoon thought for all you fantastic financial wizards out there.

Create a fantasy portfolio that can return 12%+ annually - the simpler the better, and preferably
with a low risk - low volatility strategy.

ChesterDog

Is there a reason so many of your posts include the word dismal?

bowlhead99

ChesterDog wrote: »

Is there a reason so many of your posts include the word dismal?

I'm curious about that too. Why not have an enjoyable Saturday afternoon instead? Don't spend it bemoaning your poor returns and encouraging other people to fantasise about what investments can produce 12% long term with low risk and low volatility. Historically, such a product does not exist.

Except if you go back to when inflation was at 10-15% and bank base rates were at that sort of level too, in which case your return was no higher in real terms than it is if you get 5% over the next year in a 2% inflation environment.

Prism

capital0ne wrote: »

Here's another dismal Saturday afternoon thought for all you fantastic financial wizards out there.

Create a fantasy portfolio that can return 12%+ annually - the simpler the better, and preferably
with a low risk - low volatility strategy.

Invest it all in Lindselltrain or Fundsmith - boith defensive, balanced and currently nets about 20% per year. Nothing else required

A_T

China had a slow 2015 but that apart...

Alexland

For what it's worth we had a very nice afternoon out and about. Certainly not dismal. I don't see any particular reason to target a 12% return. Although I have a general long term target of 2% above fees and inflation I decide my risk, find appropriate investments and then the rewards will be whatever the market delivers.

capital0ne

bowlhead99 wrote: »

I'm curious about that too. Why not have an enjoyable Saturday afternoon instead? Don't spend it bemoaning your poor returns and encouraging other people to fantasise about what investments can produce 12% long term with low risk and low volatility. Historically, such a product does not exist.

Except if you go back to when inflation was at 10-15% and bank base rates were at that sort of level too, in which case your return was no higher in real terms than it is if you get 5% over the next year in a 2% inflation environment.

Far from dismal now, almost exstatic! In fact you can achieve 12%+ return very easily. RIT Capital Partners is but one example, this from their website:

Delivering exceptional long-term performance
£1,000 invested in RIT at inception in 1988 would be worth in excess of £30,000 today, compared to ~£6,500 if invested in the ACWI¹. In the last three years (to June 30th 2017) share price total return has been over 50%.

RIT Capital Partners plc is an Investment Trust chaired by Lord Rothschild, which aims to protect and enhance shareholders wealth over the long term.
Since listing on the London Stock Exchange in 1988, we have generated a share price total return of 12.9% per annum for our shareholders.

Check it out for yourselves: http://www.ritcap.com/

Can I claim my advisors fee now - Oh I forgot, you're not allowed to give advice on MSE, so folks other investments are available

capital0ne

Okay, I know I'll be shot down in flames now because you must not invest in a single product. You must invest in at least a dozen, those poor old stock brokers need a bit of churn so they can pay for their yachts from the fees we all pay.

greenglide

capital0ne wrote: »

Okay, I know I'll be shot down in flames now because you must not invest in a single product. You must invest in at least a dozen, those poor old stock brokers need a bit of churn so they can pay for their yachts from the fees we all pay.

So all the investors here in the VLS products are wrong to use a single product?

and it was a nice day today!

bowlhead99

capital0ne wrote: »

Far from dismal now, almost exstatic! In fact you can achieve 12%+ return very easily. RIT Capital Partners is but one example,

I'm familiar with RCP as it is one of my long term holdings and I read every report.

Just flicking back on a google finance weekly price chart, if you had bought shares in RCP in the third week of September 2008, you'd have had to pay 1217p plus stamp duty, 1223p for a share. Less than six months later, in the first week of March 2009 if you had tried to sell it you'd have received 770p. Which is 62.95% of what you paid for them.

Does something that can lose over 37% of its value in less than six months, with no dividends received in between, fit the brief of 'preferably low risk, low volatility strategy'? I don't see how it can.

If you held that 1223p purchase for another eight and three quarter years until now, of course you would be back in the black. It was 1949p on Friday, which represents a 5.2% annualised return. On top of that, most years it paid dividends. This year 32p, which is about 1.6% on its current price. So an investor since 2008 has made over 6% total annualised return, maybe 7%. A far cry from your 12% target.

Oh, also if we look at the USD exchange rate we'll see that at the time of the 1223p purchase in September 2008, a dollar was worth 54.7p. Today a dollar is worth 74p. So, the trust's substantial holdings of US investments received a 35% boost in sterling terms. Will we get that again over the next nine years like we did the last nine years? That seems quite optimistic.

If I bought in 2008, how many years/decades of super-exceptional performance will I need to stay invested to drag the 9 year 6-7% average up to the 12%? If I bought at today's price, how likely is it that I'll get 12% annualised over the next decade?

So, your claim that "in fact you can achieve 12% very easily" is hokum.

You could have achieved that 12% with that particular product if you fully researched the market and had identified that particular trust with zero public track record as the one share to buy, at IPO, among the thousand things on the London stock market and the hundreds and thousands of investment funds and shares globally that were available, and decided to make it your entire portfolio.

Even if you did make that somewhat fortunate choice in the 80s, that is quite different from saying

a) you could make an equivalent choice again with what is on the market at the moment

or

b) the product will give the same performance over the next 29 years as it did over the last 29 years

Also, if you had invested at inception in 1988, you'd be aware that RPI inflation in 1988 was 6.8%, 1989 was 7.7% and for 1990, inflation was 9.3%. Looking forward, we hope inflation is not running in the high single digits - though if it is, a nominal double-digit return might be expected to be more easily achievable.

Can I claim my advisors fee now

No. You have failed to fill your own brief which was to create a fantasy portfolio with low risk and volatility that can return 12% annually - presumably on an ongoing basis.

What you actually did was fantasise that you had gone back to the late 80s when inflation was 7-9% , identified and purchased a high performing stock at IPO, not cared that the stock could lose about 40% in a six month period, and held it through a thirty year bond bull run and through the ups and downs of equity cycles, measuring your total return when markets were at all time highs.

And claimed "you can achieve 12+% return very easily".

you're not allowed to give advice on MSE, so folks other investments are available

I like my RCP investment though it is not my only holding and I monitor what they are doing with it.

I would take my advice over yours, as I tend to think things through ; while it seems from this and some of your other posts, you don't, and are just pumping out new MSE threads to get over your 'dismal days' and to have fun by taking the mickey out of financial advisors and other investment professionals.

Okay, I know I'll be shot down in flames now because you must not invest in a single product. You must invest in at least a dozen, those poor old stock brokers need a bit of churn so they can pay for their yachts from the fees we all pay.

You did start us off with the brief of creating a portfolio. To then give your own recommendation as being a single stock, using cherry picked historic date ranges to demonstrate the returns, does seem to be cheating.

Badger50

Buy property in a relatively low-priced area of London. Rent it out and sell on when the area gentrifies.