Are you concerned by the current investing climate?

Ray_Singh-Blue

JohnRo wrote: »

A 100% gain is wiped out by a 50% crash. I'm prepared to forego the slight drag on potential performance that holding a small war chest in reserve inflicts.

I've managed it with BRWM and PEW without any strain and it's quite obvious when the time comes what opportunities are there for the taking that significantly reduce book costs. BIST is looking like the next candidate but there are a few concerns there I haven't reconciled yet, like whether I even want it any more given the ineptitude of the manager.

Being mostly in the equity market and having a mechanism in place that allows me to take advantage of relatively simple opportunities like that is a very different proposition to sitting entirely on the sidelines in other risk assets or cash, gambling they'll do better, while waiting for the perfect storm in the equity market .

Today is the day that I sell half of my BRWM. It has increased in value 104% since I bought in January 2016. This happy -and basically lucky- occasion is the first time I have ever had the chance to withdraw my original investment, leaving an equal amount on the table.

My luck came from having not bought while it seemed cheap, or even supercheap, but waiting until it seemed super-super cheap. Of course there is no guarantee that something cheap will ever hit supercheap, and therein lies the gamble.

PS not gloating- I have just lost a similar amount when an AIM share was taken private. Swings and roundabouts.

JohnRo

Well done but that quote you've highlighted was intended to be read within the context of a long term investment rebalancing plan, not market timing for a quick smash and grab profit.

Ray_Singh-Blue

Apologies JohnRo if I have misrepresented you!

I'm curious how that could be though - how in the context of "not market timing" was it obvious when the times to buy and sell had come?

You refer to war chests, a fine furniture item, but one not normally associated with simple rebalancing.

JohnRo

Ray_Singh-Blue wrote: »

Apologies JohnRo if I have misrepresented you!

I'm curious how that could be though - how in the context of "not market timing" was it obvious when the times to buy and sell had come?

You refer to war chests, a fine furniture item, but one not normally associated with simple rebalancing.

No need to apologise I just wanted to clarify the part you highlighted, you've made a fair comment. All I mean by war chest is a larger cash sum than I would ordinarily want or need, shoved in various bank accounts and p2p lending, earning interest, that I will redeploy if there was a huge fall in stock markets.

Only if a fall presents good opportunities to significantly reduce investment book costs though. It will probably never happen but that's the intention, gambling that the difference between the interest being earned with the cash and any investment growth over and above which it might have otherwise gained is worth risking for the 'crash' opportunity should it ever arise.

My deployment of capital is ordinarily based on simple allocation maintenance with a tilt for any premium/discount but a huge fall in market values might not necessarily alter the portfolio allocations so I'd have to weigh the net reduction in book cost of the underlying stocks at the time, I have cobbled a spreadsheet which schedules and prioritises dividend and new money deployment so that's as close to timing as it gets.

In the case of BRWM a -60% valuation shoved it to the top of the allocation rebalance list as did a -40% valuation with PEW. Both subsequently recovered well but even if they hadn't the book cost was significantly reduced. That's all I meant by 'obvious'