testing my investment mettle

tushingham

Hi All,

Started my very short investment career last July after lots of time researching and sitting on cash holdings. Went for a passive approach and loaded up on the trackers I wanted with the weightings I wanted them in.
More through luck than judgment they've all gone up decent amounts and the average % over 6 OEIC/IT is about 25%. This seems to be an across the board thing rather than particular sectors.

Now I kept some cash aside for other investments and am also thinking about maxing out the forthcoming 2013/14 ISA allowance fully in S&S for the first time ever.
The problem I have is knowing where to go next in terms of investment. Everything I would want to invest in has gone up so much and im struggling to see equity funds I like that dont seem top heavy. Same with bonds really.

I think researching and investing in individual shares would help find value but its not something I have adequate time for with my current job and Im not sure I have the knack for that either!
I know this market timing lark is completely against Passive principles but I cant get my head round putting money into something i think might drop.
Is my only solution to take a drip feeding approach?

How do others deal with this sort of issue?
Any thoughts on sectors/areas/funds I might look at? Im currently in your usual global/europe/uk divi/dev markets/smaller companies.

Thanks in advance

t

Linton

tushingham wrote: »

Hi All,

Started my very short investment career last July after lots of time researching and sitting on cash holdings. Went for a passive approach and loaded up on the trackers I wanted with the weightings I wanted them in.
More through luck than judgment they've all gone up decent amounts and the average % over 6 OEIC/IT is about 25%. This seems to be an across the board thing rather than particular sectors.

Now I kept some cash aside for other investments and am also thinking about maxing out the forthcoming 2013/14 ISA allowance fully in S&S for the first time ever.
The problem I have is knowing where to go next in terms of investment. Everything I would want to invest in has gone up so much and im struggling to see equity funds I like that dont seem top heavy. Same with bonds really.

I think researching and investing in individual shares would help find value but its not something I have adequate time for with my current job and Im not sure I have the knack for that either!
I know this market timing lark is completely against Passive principles but I cant get my head round putting money into something i think might drop.
Is my only solution to take a drip feeding approach?

How do others deal with this sort of issue?
Any thoughts on sectors/areas/funds I might look at? Im currently in your usual global/europe/uk divi/dev markets/smaller companies.

Thanks in advance

t

The problem is that experience will teach you that 50% of the time you get it wrong or if you are right and dont put money in then there is a good chance that by the time you are convinced that the price wont drop any further it has risen above what you would have paid at the start.

My, and many others', approach is that we are in for the long term. So in 15 years time when our investments have perhaps tripled or quadrupled the odd 1% we could have gained had we correctly guessed the precise date on which to invest is pretty irrelevant.

brasso

No need to spend loads of time researching value shares. You could pay someone else to do it.

So you could try a service like ShareAdvisor from the Motley Fool. I think it's about £70 a year and they recommend 2 value shares each month. A friend of mine uses the service and says the increases over a year are nearly double the FTSE performance. Because they are monthly recommendations, you end up drip-feeding in any case.

No, I'm not on commission and yes, other services are available, but that is one I'm aware of that seems to do well. Of course, if someone was drip-feeding very small amounts each month, it wouldn't justify the cost.

I'm tempted to join myself.

bigfreddiel

brasso wrote: »

A friend of mine uses the service and says the increases over a year are nearly double the FTSE performance.

its always a friend is't it! how long has this advice been so good 1 year 10 years more? and has he never made a loss? i always wonder why these advisors just take their own advice and not sell it if is so good - treat these sort of stories as uban myths

and also

I know this market timing lark is completely against Passive principles but I cant get my head round putting money into something i think might drop.

no might about it - it will drop and it will rise -sometimes the trend will be up - other times the trend will be down. these periodscan be months or years even

go down the pssive route -keep costs low - frquent trading and high cost active funds will eat into your profits like a plague of locusts, taking as much as half your potential portfolio over 20 years

cheers

fj

brasso

bigfreddiel wrote: »

its always a friend is't it! how long has this advice been so good 1 year 10 years more? and has he never made a loss? i always wonder why these advisors just take their own advice and not sell it if is so good - treat these sort of stories as uban myths

and also

I know this market timing lark is completely against Passive principles but I cant get my head round putting money into something i think might drop.

no might about it - it will drop and it will rise -sometimes the trend will be up - other times the trend will be down. these periodscan be months or years even

go down the pssive route -keep costs low - frquent trading and high cost active funds will eat into your profits like a plague of locusts, taking as much as half your potential portfolio over 20 years

cheers

fj

OK - full disclosure. I'm a member of an 'investment club', which is a posh way of saying a beer-drinking club who sit around and talk rubbish once a month, and run a variety of dummy portfolios as well as a low value real one (£20 each, every month -- more for fun than anything).

One of the members is in the MF ShareAdvisor service and he tells us what the recommendations are. He is almost certainly not supposed to do that, which is why I was rather coy.

To answer your questions, the service has been running since the start of 2012.

It's so far about 20% up, based on the 2 picks a month, while the FTSE is roughly 10% ahead. Does this mean that they will do the same in 2013? Of course not.

The suggestion I made was in response to the poster saying that he quite liked the idea of value shares but didn't have the time to do the classic research i.e. price/earnings ratios, dividends and cover, plus that extra element of a changing landscape for the business caused either by a change in market demand or a new management team or the resolution of a long running legal issue blah blah. All standard stuff.

I don't have time to do that either, but there are people out there who do, and they charge for it. They produce reports which you are free to subscribe to or not. You make a decision not just on the fundamentals but on a host of other prejudices and circumstances e.g. ethics. cash flow, short v long term horizon, risk appetite etc.

How long? As I said, just over a year.

Has he ever made a loss? Well individual shares certainly have, yes. The worst so far is in negative territory, the best is +60%.

You may call value investing "uban myths" [sic] but it does happen to be the bedrock of Ben Graham and Warren Buffett et al. Looking at fundamentals is NOT some 'get rich quick' system but more like a 'get rich slowly' system.

I didn't understand the point about not putting money into something that "might drop". Of course all equity investment might drop in value. Value investing is absolutely susceptible to failed judgment/luck. [EDIT - just realised this is a quote from the OP - apologies.]

I believe in passive investment principles too. They are not mutually exclusive.You can have a portfolio that is designed to track the market as cheaply and effectively as possible, and also a portfolio that aims to focus in on a few value opportunities.

Your closing battle cry about "frquent trading and high cost active funds" is absolutely right, but it has nothing to do with value investment which looks at long term stocks i.e. no frequent trading and no charges at all apart from the initial fees and the eventual selling commission.

BLB53

I know this market timing lark is completely against Passive principles but I cant get my head round putting money into something i think might drop

The markets go up and down, you need to accept this as a fact of life if you want to invest, otherwise you will be constantly trying to time your entry points and exit points which, in my experience, is impossible.

Good article on RIT recently - http://www.retirementinvestingtoday.com/2013/02/ignore-price-fluctuation-focus-on-yield.html

akonlki231

The investment mettle you need to accept this a fact of life if you want to invest otherwise you will be constantly trying to time your entry points.

Jegersmart

I disagree with the buy and hold strategy. You simply *have* to take some responsibility sometimes and think about what you are doing. Buy and hold has worked for decades in an environment where money and credit expansion has fuelled enormous growth, but this is unlikely to continue as things are looking now.

Good luck though, whatever the approach.

J

Linton

Jegersmart wrote: »

I disagree with the buy and hold strategy. You simply *have* to take some responsibility sometimes and think about what you are doing. Buy and hold has worked for decades in an environment where money and credit expansion has fuelled enormous growth, but this is unlikely to continue as things are looking now.

Good luck though, whatever the approach.

J

I agree that you have to take responsibility and think about what you are doing. However I disagree that what this means is to continualy buy and sell investments in an attempt to take advantage of the market's essentially random fluctuations.

What taking responsibility and thinking about what one is doing means to me as a long term buy and hold investor is that I only sell when the fund I am holding or its share of the overall portfolio ceases to be compatible with my long term strategy.

IronWolf

Timing the market is futile. If you want to increase your returns you are better off spending time researching individual companies and picking good individual investments.

Radiantsoul

IronWolf wrote: »

Timing the market is futile. If you want to increase your returns you are better off spending time researching individual companies and picking good individual investments.

Do you have any evidence that this approach will actually work though?