JPMorgan Natural Resources -48% down but still hanging on

Porcupine

zolablue25 wrote: »

Stuck £500 in this fund this morning. I figure people still need "stuff" and this "stuff" that people need has to be made from something.

I'm in two minds. The thing about rebalancing is that you hope to sell things that are overvalued and buy those that are undervalued. So sell expensive US tracker, buy cheap EU tracker. The quality of the US and EU shares might be roughly comparable over the long run, so this is simple sell high/buy low.

The thing about resources shares is they're pretty vulnerable. If a company has an oilfield, it might suddenly become uneconomic - result oilfield closes, company goes bust. If a company has an exploration block, either they find oil (and maybe win big if the price of extraction is good) or they don't. If the price of copper goes down they have to turn off the mine - but the mine will cost to keep mothballed, so maybe they have to demolish it, and build a new mine when it rises again. It's all-or-nothing: if the price of copper is greater than the cost of production, they make a profit, if the price of copper is less then they sell nothing and go bust.

So in buying resources shares you may be sitting on a goldmine, or you may be sitting on a dirt mine, and it can easily change from one to the other. There isn't a 'what goes down will probably come up' like there is with a simple market tracker (though large cap resources shares have a degree of resilience). A Tesco store is probably worth roughly the same as it was yesterday, but the value of an oil well is very dependent on the price of oil. So any P/Book or whatever measures are almost instantly out of date.

I don't know how much this really differs from other volatile sectors (smaller companies etc). However I don't think there's a natural 'these shares are cheap' level, given the volatility of the underlying assets the companies own.

zolablue25

Fair enough Porcupine. Each person needs to make their own decisions regarding their investments. Maybe I'm not using too much logic, maybe I'm playing a hunch - who knows, time will tell.

I am currently building my portfolio and will rebalance when required but my feeling is still that people still need to make stuff from stuff!

Thrugelmir

zolablue25 wrote: »

Stuck £500 in this fund this morning. I figure people still need "stuff" and this "stuff" that people need has to be made from something.

Over supply of iron ore currently. As production was ramped up to meet Chinese demand. As with oil. Major producers are playing poker while waiting to see who folds first.

Borrowedtune

Iron Ore mines being mothballed in the Pilbara as we speak...


https://au.news.yahoo.com/thewest/a/27046468/atlas-suspends-pilbara-operations/

TakeCareOfThePennies_2

jabbahut40 wrote: »

Hi,Just logged onto HL to check my SIPP portfolio which includes JPM Natural Resources. This fund is now down a staggering -57%.

"Just logged onto" or were you sitting there like a rabbit in headlights watching the thing go down and down since the middle of last year praying to your choice of deity that it would change direction?

The hardest thing people have to learn in this investing lark is when to sell ! When to cut your losses, when to take some profit, when and how to use that sell button ! Never forget the words "sell with regret".

Let me put it this way, JUST in order to get your money back, you would need a 57% rise, let's round that up to 60% shall we ? Now I expect you probably want to make some money too .... so we're talking about a 70 or 80% rise from where we are now in order to give you a half decent return !

How's that for some food for thought jabbahut40 ?

Lesson, hard way, learnt.

Let me let you into a secret jabbahut40, I have two limits on my investments ... soft and hard.

Soft is a subjective level, it is an "alarm clock" set at a percentage level that triggers a manual review where I sit down and ask myself "how has the story changed ? am I still confident in this item ?". If I decide to hold at the Soft level, then I will set a Mid-level so I get a chance at an additional review before things get near the Hard level.

Hard is an objective level, it is my loss-cutting limit, any thought process is removed, stuff will, immediately, get sold if it hits that level.

steelbru

TCotP, your arithmetic is not quite right there.

If something has dropped 57% in value, then if it goes back up 57%, it is NOT back where it started.

eg 100 - 57% = 43, 43 + 57% = 67.51

In order for it to get back to starting point then needs to rise 132%

zolablue25

Thrugelmir wrote: »

Over supply of iron ore currently. As production was ramped up to meet Chinese demand. As with oil. Major producers are playing poker while waiting to see who folds first.

I don't dispute it, but I think it is already factored in to the price - could well be wrong though. I wouldn't be as complacent if I had bought when the price was twice what it is now.

bowlhead99

TakeCareOfThePennies wrote: »

Let me put it this way, JUST in order to get your money back, you would need a 57% rise, let's round that up to 60% shall we ? Now I expect you probably want to make some money too .... so we're talking about a 70 or 80% rise from where we are now in order to give you a half decent return !

How's that for some food for thought jabbahut40 ?

Lesson, hard way, learnt.

Let me let you into a secret jabbahut40,

Wow, you sure schooled him. Well done!

You are right it could take a large rise from here to make a "half decent return" against an initial cost from years ago.

But what's happened has happened. The costs are sunk costs. The challenge for an investor is not to make a return against some historic and irrelevant target. It is to make a decent return with the assets they have now. So, in order to make a half decent return on the assets you now have, you need a 10-20% return on the assets you have now. 10-20% annualised from today is always a decent return on the assets you have. Maybe the best place to get that level of return from here and now is in a JPM natural resources fund or maybe it is somewhere else.

Hard is an objective level, it is my loss-cutting limit, any thought process is removed, stuff will, immediately, get sold if it hits that level.

That doesn't sound very objective to me. That sounds dogmatic rather than pragmatic. Some would say "blinkered".

Removing thought from a process helps to take emotion out of investing which is a useful way of doing it if you fear your ego will write cheques that your portfolio may not be able to stand cashing. However, selling because of some arbitrary pre-agreed point being reached considers nothing of the merits of an investment, so may be short-sighted.

The soft and mid level reviews on your strategy are sensible. Do you reset the hard level as a result of those reviews and potential changed circumstances that you observe? If so then I guess it is OK. That's perhaps what I would do. If you think you have some willpower and can actually be objective in your observations, you should not need a hard level. There is not usually any reason to exit an investment without considering the merits of the investment right there and then.

Linton

marathonic wrote: »

UK Smaller Companies 10.78% 10.00%
SE BAQ UK Equity 14.98% 15.00%
SE JPM Natural Res 8.30% 10.00%
SE BAQ European 20.85% 20.00%
SE BAQ US 15.08% 15.00%
SE BAQ Pacific Rim 15.03% 15.00%
SE JPM EMERGING MKTS 14.98% 15.00%


I done my annual rebalance of my pension fund today - the original and current allocations can be seen above.

As can be seen, JPM Natural Resources is the only one that really went significantly out of balance - although, at the opposite end of the scale, Europe and UK Smaller Companies did perform well.

I should be back to my original allocation, also shown above, by the start of next week. This will reallocate some of my best performing holdings to JPM Natural Resources at current prices - which, although low, have proven time and time again to be nowhere near a bottom :eek:

Exactly the right approach in my view. Something like JPMF NR should only be a relatively small part of a portfolio and its great volatility makes it very useful for diversification and rebalancing. If you were holding it in the period up til the end of 2010 when it rose 4-fold in 2 years you would have banked most of the profits. So a 70% or 80% rise is nothing to this fund. Despite the wild fluctuations, in the long term it should do reasonably well as the world population increases. I first bought in 2003 at the depths of the tech crash. Since then its average return is very close to the average total return of the FTSE100, about 9.5% annually.

Stop loss for a global NR fund just doesnt make sense unless you believe there is a danger that the world is going to stop mining.

racing_blue

TakeCareOfThePennies wrote: »

Let me put it this way, JUST in order to get your money back, you would need a 57% rise

Computer says no

If the fund is down 57%, to get your money back you need a rise of 133%