Tim Hale - Smarter Investing

learning_every_day

bowlhead99 wrote: »

To be honest, it sounds like a nice fantasy. I'd certainly like to have enough liquid capital to generate meaningful amounts from working for myself as a trader. Or even working for someone else where all I can lose is my career prospects and not my own cash. Of course, when I was a small child and didn't know that share trading existed, I might have liked to be a spaceman or a footballer...

There are certainly people on these forums who live off their investments (or have a meaningful side income from them), whether they are retirement age or not and whether the investments are actively managed or not.

But if you consider people who work in the City as traders or investment managers for a living - they might have professional investment qualifications, they might have 10+ years of 50 hours a week practical experience. If they quit and work on their own sizeable portfolio, they might make enough in a year to make an annual salary out of it, or better. Or, they might have a bad year and lose several annual salaries out of it.

Say they get half way through the year and they've lost 80% of an annual average salary. They could keep going and make back a full annual salary from that point, still ending up with only 20% of an annual salary to live on for the year. Or they could keep going and lose another 200% of their annual salary, severely limiting their capital and therefore the trading prospects going forward, and writing off years of conventional earnings from their earlier professional career. Or they could realise the enormity of the risks and give up and get a proper job!

Clearly the people writing books about it, saying it can be done, are going to be the majority of books you can buy, and they are going to be the more inspirational ones and appear higher in the bestsellers lists. If Robbie Burns had lost his life savings he would likely not have been able to generate the same interest in a 'how not to do it'' series of internet articles, seminars, and books. So there is bias to what you can read.

You might not be planning on trying to earn an annual salary from sharetrading. Perhaps just a 10% supplement on the side. But the logic is the same - you could easily lose 50-100%+ while trying to make 10%.

Remember your competition is trading computers financed by large institutions which can buy a share and sell it again in the same second. Good luck pondering over a trading purchase which you took the day off your real job to be able to monitor a screen and execute, and which ends up losing you money rather than compensating you for the day off a real job in the real world.

Well put and grounding. Thank you

learning_every_day

sabretoothtigger wrote: »

Its not that RMP is bad, these guys are not dishonest but risk vs reward was gigantic on this and still is.

I'd never buy a share like this again. It wasn't until I bought this share that I began to get interested.

Since I only hold 1300 shares I think I'll just keep it now.

Looking back it's clear how much of a gambler my ex-colleague (who recommended the stock) was too, with the snippets of info and tips he was always reeling off to me and others!

brasso

learning_every_day wrote: »

You're spot on there. The dream sounds great but in my gut I know that I should be investing over trading.

Would you be happy to give me some examples of different trading strategies you use?

Well, fair play to you for not being too stubborn about the trading idea. I actually share your mindset, which is why I said what I said.

I think I started in the same place, about 10 or 12 years ago, and made all the usual mistakes. Buying high, selling low, trying to time the markets, and so on. i still make these mistakes, but perhaps less than I did.

One of the problems is that a spell of growth in the markets, as we have had for a few months now, turns us into euphoria-driven optimists about how easy it all is. We tend to see a rise in our portfolios as proof of our great judgment, when really we are simply being carried along with everyone else. A dip in the markets, as might be happening now, is always a chastening experience.

As for trading strategies, I have most of my money in a SIPP (self-invested personal pension) and I am fairly cautious, investing with a mostly passive approach i.e. steady investments like Troy Trojan, IP High Income, S&P 600 and FTSE all-share trackers, big emerging markets funds, and so on. Not immune to market falls, of course, but diversified enough to avoid catastrophic drops as can happen with individual shares. That pot has drifted on quite nicely over the years, roughly increasing by an average of about 9% a year. Sounds unspectacular in the Robbie Burns world, but the magic of compounding makes this a very decent return.

In my ISA I'm much more adventurous, or foolish. Take your pick. I buy individual stocks that I expect to give me a decent profit. I don't do a huge amount of research but I do follow some recommendations e.g. from the Motley Fool paid services. These have had a good year but overall, if I look back through my spreadsheet, I see that I haven't actually done as well as the SIPP. If I could isolate particular years, it looks great. I could show great profits -- 45% one year, 30%+ in a couple of other years. But then there is 2007/2008, when some of my bank shares that I was into heavily (great dividends etc) plunged by 95%. (Yep, read that last bit again!)

And this is the problem. With a regular tradingstrategy you can kid yourself about your own cleverness, and get a bit smug, frankly. Then a 2008 comes along and you realise that your feet are clay after all!

The answer people offer to this volatility is some form of trying to time the market. It's easy, they say. Just sell high and buy low. And that's what we try to do. But you very quickly learn just how "easy" (and painful) it is, because you sell too early, missing out on valuable gains, and you buy back in too soon, losing money before it starts to recover. It isn't easy. In fact, it's impossible.

But like you, I still want a little excitement so I allow myself a little bit of fun. But sadly, I have proved to myself that I can't give up the day job just yet!

I have another joint portfolio with my wife, and here we go for an income approach based on blue chip shares and high dividend funds, but well diversified again and rebalanced every year to retain the same asset allocation. It's done well in recent years. Here you have to try to ignore the fluctuations in share price but focus on the dividends, and reinvest them. Over a period, the income becomes more significant than the share price (even though the share prices, not including the banks, tend to stay fairly stable). Again, a rather boring approach but more profitable overall than my "exciting" ISA. Interestingly, because this is a joint portfolio with my wife, I am forced to be more cautious with the choices and this has actually paid off over time.

Sorry for the long and rambling answer. I didn't mean to pour scorn on your enthusiasm. And let's face it, you may be one of those rare people who manage to stay very lucky over a long period. But do think about the Tim Hale points which are very hard to deny or disprove over the long term.

Good luck!

sabretoothtigger

learning_every_day wrote: »

I'd never buy a share like this again. It wasn't until I bought this share that I began to get interested.

Since I only hold 1300 shares I think I'll just keep it now.

Looking back it's clear how much of a gambler my ex-colleague (who recommended the stock) was too, with the snippets of info and tips he was always reeling off to me and others!

Alot of stocks are driven by excitement, normal business is boring. Best start for everyone is buy a fund, then as a small percentage of that buy the wild stuff maybe.
RMP is partner to RRL, if this was a live deal I'd mention them.

RMP came in as a late partner and for RRL it was great as they stumped up cash to fund the drilling (in return for a cut) and actually made RRL much safer.
Now RRL operates in Trinadad and lots of places, hedging their bets.
Some companies are just run clever, theres real skill to swinging deals without getting locked into losses.
They both more then halved from the top. I used to have 377% gain showing on RRL and now


http://www.telegraph.co.uk/finance/financetopics/profiles/8113069/Dana-Petroleum-chief-Tom-Cross-reflects-on-the-deal-of-the-decade.html
Check out Tom Cross, a lady put in 400 and get back like well over 500k because that guy is a deal making genius
Present day he is overhyped and you over pay for the name, thats just how it goes

focus on the dividends

Absolutely, the wife fund is not the first time Ive heard that. Stable gains are often best, boring but compound 'interest' is a powerhouse

The answer people offer to this volatility is some form of trying to time the market.

http://www.youtube.com/watch?v=4xinbuOPt7c&feature=player_detailpage&list=PLH7qwlg3K28S0DbR6Neu6R4xbIjYghZMr#t=3343s

jamesd

Glen_Clark wrote: »

What I meant was that, without money printing, cash would have been better than shares or property over the last 4 years.

Four years ago, in April 2009, was near a market low. Today many are near market highs. Buying then and selling now would in general have made massive profits from long share investing.

learning every day, buy low, sell high. Selling high is the harder part. Though buying with lots of pessimism in the press isn't easy either. If there's been a market crash, that's low. If indexes are reaching new highs, that's close enough to a high to think about selling or reducing exposure to or new investing in that market. It'll fall eventually, can use the money in other places until it does, or can use less there than usual. You'll never get this perfectly right but that's OK, you don't need to, close enough is good enough. Hopefully at least one of the things you read has told you that there's an inverse relationship between stock market indexes and future investment returns.

tushingham

Found this book really useful as we'll as websites such as mse and monevator. Had to take the plunge and go for it in the end. I think u just have to take the first real steps and go from there. No substitute. You can start carefully/cautiously to begin with....however you define that!

T

sabretoothtigger

Four years ago, in April 2009, was near a market low. Today many are near market highs. Buying then and selling now would in general have made massive profits from long share investing.

Thats not in isolation to the gov debt though. Buying gold four years ago was also very good. Debt borrowed and gold have risen together for a while now

Glen is probably right in that if they had followed normal bankruptcy and banking law, cash to replace the losses would have been in high demand.
Its arguable taking the conventional route we'd have great growth occurring, lower share prices maybe but also greater cash value and interest.
Im certain had they known gdp would be 0% growth we'd have done no bailouts

learning_every_day

brasso wrote: »

Well, fair play to you for not being too stubborn about the trading idea. I actually share your mindset, which is why I said what I said.

I think I started in the same place, about 10 or 12 years ago, and made all the usual mistakes. Buying high, selling low, trying to time the markets, and so on. i still make these mistakes, but perhaps less than I did.

One of the problems is that a spell of growth in the markets, as we have had for a few months now, turns us into euphoria-driven optimists about how easy it all is. We tend to see a rise in our portfolios as proof of our great judgment, when really we are simply being carried along with everyone else. A dip in the markets, as might be happening now, is always a chastening experience.

As for trading strategies, I have most of my money in a SIPP (self-invested personal pension) and I am fairly cautious, investing with a mostly passive approach i.e. steady investments like Troy Trojan, IP High Income, S&P 600 and FTSE all-share trackers, big emerging markets funds, and so on. Not immune to market falls, of course, but diversified enough to avoid catastrophic drops as can happen with individual shares. That pot has drifted on quite nicely over the years, roughly increasing by an average of about 9% a year. Sounds unspectacular in the Robbie Burns world, but the magic of compounding makes this a very decent return.

In my ISA I'm much more adventurous, or foolish. Take your pick. I buy individual stocks that I expect to give me a decent profit. I don't do a huge amount of research but I do follow some recommendations e.g. from the Motley Fool paid services. These have had a good year but overall, if I look back through my spreadsheet, I see that I haven't actually done as well as the SIPP. If I could isolate particular years, it looks great. I could show great profits -- 45% one year, 30%+ in a couple of other years. But then there is 2007/2008, when some of my bank shares that I was into heavily (great dividends etc) plunged by 95%. (Yep, read that last bit again!)

And this is the problem. With a regular tradingstrategy you can kid yourself about your own cleverness, and get a bit smug, frankly. Then a 2008 comes along and you realise that your feet are clay after all!

The answer people offer to this volatility is some form of trying to time the market. It's easy, they say. Just sell high and buy low. And that's what we try to do. But you very quickly learn just how "easy" (and painful) it is, because you sell too early, missing out on valuable gains, and you buy back in too soon, losing money before it starts to recover. It isn't easy. In fact, it's impossible.

But like you, I still want a little excitement so I allow myself a little bit of fun. But sadly, I have proved to myself that I can't give up the day job just yet!

I have another joint portfolio with my wife, and here we go for an income approach based on blue chip shares and high dividend funds, but well diversified again and rebalanced every year to retain the same asset allocation. It's done well in recent years. Here you have to try to ignore the fluctuations in share price but focus on the dividends, and reinvest them. Over a period, the income becomes more significant than the share price (even though the share prices, not including the banks, tend to stay fairly stable). Again, a rather boring approach but more profitable overall than my "exciting" ISA. Interestingly, because this is a joint portfolio with my wife, I am forced to be more cautious with the choices and this has actually paid off over time.

Sorry for the long and rambling answer. I didn't mean to pour scorn on your enthusiasm. And let's face it, you may be one of those rare people who manage to stay very lucky over a long period. But do think about the Tim Hale points which are very hard to deny or disprove over the long term.

Good luck!

Thanks for taking the time to reply Brasso.

I will probably adopt a similar set up to you and maybe use a SMALL amount to get my 'adventurous or foolish' fix as you well put it.

We are not in a position to begin investing just yet but we are not far off so I have a bit of time on my side.

Now to the bookshop! (And to the various websites people have kindly recommended within this thread that I have now bookmarked!)

Thank you all for your replies, much appreciated

learning_every_day

sabretoothtigger wrote: »

http://www.telegraph.co.uk/finance/financetopics/profiles/8113069/Dana-Petroleum-chief-Tom-Cross-reflects-on-the-deal-of-the-decade.html
Check out Tom Cross, a lady put in 400 and get back like well over 500k

She is one lucky lady! Good for her!

Cpu2007

What I understand from all this is that investment is for long term and trading is for short period.

What route would you guys suggest if someone doesn't want to invest in something (that will take years to build up) and neither he/she wants to do trading that will require working everyday ? is it there something in the middle,like short investments weekly/monthly?