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Post by Deleted on Jun 12, 2019 15:20:16 GMT
We have had a few conversations about the stock market in the last few weeks which I tried to keep up with while cycling around Latvia. I thought about the boundless enthusiasm and general concern about S&S during that discussion and I thought I should offer Terry's 7 principles. They are not mine, so don't shout at me, but for those with long memories, some of them chime pretty well with history. I hope it proves of some value to readers.
1 No one can predict market downturns with any useful level of reliability. Forecasts of what may happen in the market are about as reliable as Michael Fish's infamous denial, in the BBC weather forecast on 15 October 1987, that a hurricane was due to hit the UK.
2 However, when one of the repeated warnings proves to be accurate, the forecasters will ignore the fact that if you had followed their advice you would have foregone gains while you waited, given that no one can predict the timing of a bear market accurately. These could have far outweighed subsequent losses.
3 Bull markets do not die of old age, so ignore warnings that begin: "This bull market has gone on for a long time." They usually die from an event, often but not always rising interest rates.
4 Bull markets climb a wall of worry. The troubling events you can readily see unfolding are rarely the cause of a bear market. For example, Alan Greenspan had already described the market as irrationally exuberant in 1996, and the Asian crisis of 1997 and Russian default and LTCM collapse in 1998 looked scary – but they made the Fed hesitate to raise rates, and that in turn gave the bull market a new leg, which lasted until 2000. Maybe the possible trade war with China could have a similar effect.
5 Bull markets do not broaden with age: they narrow. The current bull market began in 2009 when shares rose indiscriminately. After 2014 emerging markets stopped rising. Then the US took the lead. Then the technology sector in the US. Then just the big-hitting FAANGs. The idea that in the late stages of a bull market investors can make gains or protect themselves by switching into the stocks that have lagged flies in the face of history.
6 As for buying so-called value stocks, this is best done after the bear market has struck, not before. If you approached any of the famous value investors and suggested they buy some of the assorted stocks in the FTSE 100 index on a price/earnings (PE) of 15 times as a value play, they would laugh at you. Real value plays, when they emerge in a bear market, involve buying stocks with a yield almost as high as the PE. For example, at the end of 2000 Imperial Tobacco was on a PE ratio of 8.1 times and had a yield of 6.25%.
7 A bear market will occur at some point, but the best stance is to ignore it since you can't predict it or position yourself to avoid it.
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corto
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Post by corto on Jun 12, 2019 16:02:36 GMT
Any evidence supporting any of the statements? Reads like magical thinking to me.
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Post by Deleted on Jun 12, 2019 16:10:43 GMT
One of the most successful fund investors in the country over the past 5 years+
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corto
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Post by corto on Jun 12, 2019 17:07:16 GMT
One of the most successful fund investors in the country over the past 5 years+ Is that true?
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Post by Deleted on Jun 12, 2019 17:20:51 GMT
Well if you use something like Trustnet to look at growth of value over five years you'l find Nick Train and Terry Smith in the top ten or so. Why would I lie?
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Post by trentenders on Jun 12, 2019 17:26:16 GMT
Time to buy Imperial Tobacco then(?). Doesn’t look too dissimilar
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gibmike
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What is a cynic? A man who knows the price of everything and the value of nothing.
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Post by gibmike on Jun 12, 2019 22:25:47 GMT
"Don't overpay" ... well, you have to correctly value a company before you know the answer to that one, don't you ! "Do nothing" ... no short term trading (which I agree with). So I would surmise that Terry is, in fact, buying value stocks. There's just a "bit more to it" than the dusty textbook value investing.
Absolutely. 100% this.
I trade 2-3 times a year and have done through good years and very bad years (2008 was in hindsight pretty funny given all the signs people ignored).
It all averages out in the end, the sky never falls, people will always panic etc. but the above two comments always always play out. Thanks for posting these @wallstreet.
Mike
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gc
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Post by gc on Jun 13, 2019 7:30:13 GMT
Some good advice there bobo, as too many don't really know what to do and panic in certain stress situations, though those situations usually pan out.
Warren Buffett himself said that even he is hard pushed to constantly outperform the S&P500 (for anyone new to this, VUSA by Vanguard is worth a look into)... There are many others that can be bought, I just chose this as an example.
Don't try to play the market, if one wants to invest and has done their homework, then start. For example, currently the S&P is doing well and riding high, does that mean that one should wait until it drops to invest? I would say "no", invest just a little in it now. Maybe set up a monthly DD of a small amount, and when it does hit a low, throw a sum at it.
One of my early rookie mistakes was seeing certain sectors ride well and trying to time it before I invested. When I did invest (and feeling smug thinking that I had timed the market), they decided to go down in value.. I stuck to my guns, never took my money out and they are now all in profit.
One thing I would always advise people is to treat this like you are a employed to buy stocks/shares/etf for someone else, when you do this. The reason is one needs to try to take out the emotional aspect, dehumanise the situation, as once you start making decisions and emotions come into it, be it panic or blind faith that you bought the right thing even though all the signs show it to be sinking, then that is dangerous.
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corto
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Post by corto on Jun 13, 2019 10:12:29 GMT
Well if you use something like Trustnet to look at growth of value over five years you'l find Nick Train and Terry Smith in the top ten or so. Why would I lie? Didn't mean to imply the latter. Not all is that good If you check out FEET it doesn't do so well SSON had a good start but now is indifferent Look up the Fundsmith KIID and you will see principles not faintly similar to those in the first email of this thread. So what to believe of the magic language and self-fulfilling prophecies? 1 says downturns are random (ie no usable information is available) 2 is too twisted to be understandable by the lay man, besides being based on accidentally (randomly) accurate suggestions 3 suggests events terminating bull markets are unpredictable, ie random 4 is a bunch of anecdotes (random historic events) 5 is non-constructive as it stands; the narrowing trend does not converge on to anything; the trend if existent may be usable though 6 is discussed elsewhere in this thread 7 states a prophecy will come true at some random time in the future (but should be ignored) I sense a certain sense of humour
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jonno
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nil satis nisi optimum
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Post by jonno on Jun 13, 2019 10:13:22 GMT
One of the most successful fund investors in the country over the past 5 years+ Is that true? Are you being serious?
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Post by Deleted on Jun 13, 2019 12:22:31 GMT
Thanks.
You make a good point about FEET. I've known Terry for 25 years now and I felt his heart was never in FEET. It goes against some of his beliefs as the elements were never freely tradable and with assets based in the Russia/India/China/Brazil end of the world which he normally avoids. I just took the first 24% growth at the start and sold up.
I'm more confident in the Smithfund. Fundsmith has made me a lot of money and his annual writes ups are always worth a good read just to make you realise how much of the financial press is full of BS.
He has a certain dry wit.
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jonno
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nil satis nisi optimum
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Post by jonno on Jun 13, 2019 14:19:12 GMT
One of the most successful fund investors in the country over the past 5 years+ So far... ... means nothing. Well it does mean at least one thing; i.e. he's made me a shed load over that time. I'm happy with that one thing.
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hazellend
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Post by hazellend on Jun 13, 2019 22:00:30 GMT
One of the most successful fund investors in the country over the past 5 years+ He's had a good run but the past doses not the future. It would not surprise me if he underperforms from here on in.
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Post by Deleted on Jun 14, 2019 9:43:35 GMT
You make a good point I'd offer the following ideas
1) Terry reckons you cannot forecast the future 2) You would not be surprised, and I suspect Terry would not be surprised. If you read back his various reports he is amazed that his main fund has done so well. Equally, Nick Train is often amazed that some of his investments pay off. Both of them limit the total number of assets they invest in (sub 40 I think).
My market position is a bit different to Terry's and yours and is probably a mix of ideas from Naked Trader/ Buffett and other friends who provide me with a bunch of suggestions
I believe:-
I cannot time the market I cannot forecast the future, I can plan a future and I can control some elements of my future but that is different
I can only see the past in any precision Buying is easy, selling is hard Buy what you know The Fed interest rate is the weathercock the world watches I am a sheep not a wolf I like low volatility, my "emotional" connection with money tells me I like things that just go up steadily.
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hazellend
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Post by hazellend on Jun 14, 2019 10:20:47 GMT
I believe nobody knows anything and I just buy the vanguard all world etf when I have more money
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