I was reading Investors Chronicle from 26th April to 2nd May with ‘Breaking the Mould’ on the cover and on page 32 I came across a very interesting article by Alex Newman entitled ‘Finding the Edge’ and it got me thinking and it also struck me that there were some useful concepts in here for me to look further into and to share with a Blog that Reader’s might appreciate.
If you have access to a copy of the mag or the online version, it is certainly well worth a read although I must say that it is rather too academic and theory based for my tastes – I found myself re-reading several bits a few times before I really figured out what point was being made. It suffers I think from the usual issues of being far too over-complicated and I suspect the Academic Research was done by someone who is more of a Professor and Economist than an actual person who Invests or Trades in Shares (or any Asset for that matter). I see this sort of thing all the time - I find it useful because I can take snippets of what the Academic Research covers and think about it in the context of what I do with Stocks and my experience and understanding of how Markets work in reality - and of course in The Real World things tend to be highly different.
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Following on from a different Blog I put out recently that was inspired by some text written by Chris Dillow in Investors Chronicle, again I have been reading one of his Articles and taking inspiration from it. This one appeared in the Magazine from 13th July to 19th July 2018 which had ‘Income Majors’ on the front cover and the Article was entitled ‘In the genes’ and appeared on Page 16. If you are a subscriber to the Magazine then I suggest you go onto the online version and do a search for the article because it is well worth reading. Having said that I have reproduced a few sections of the text here so this will give a good flavour of what is in it.
The starting paragraph is based on some Research that had been done which suggested that Investment Performance was related to our genetic make-up (presumably intelligence levels and Chris mentions the genetic factors that increase our potential Educational Attainment) and that factors such as ACTUAL Educational Attainment, Income Levels and inheritance had less influence. So this suggested that our genes predict how well we save and invest and further on in the article he mentions that such Genetic Factors explain about a third of our Investment Results; and I take from this that at least a part of the other two-thirds is down to how we manage our Portfolios in terms of things like Running Winners, Chopping Losers, Averaging Down at the right time, Avoiding AIM Garbage, TopChopping, Risk Management, Hedging, etc. And of course another chunk of that two-thirds will be down to pure dumb Luck (but if we control as much as possible of the other stuff then the Luck is less of a hindrance and of course sometimes we will get Good Luck which is the sort I like !!).
Conclusion
I have found it very useful creating this Blog Series because it puts down in Black & White what the true likely Costs of ‘Moving into Cash’ are and then the exercise of relating this to Portfolio Size has been highly revealing and has essentially indicated that unless your Portfolio is over at least £100k then it really isn’t worth the bother - and arguably when you consider the hassle and timing issues of doing it, the whole thing might not make sense unless your Portfolio is worth over £300K or so - it is obviously for Readers to run the Numbers and see how it would work out for their own Portfolios in the same way that I have done. And of course it is very much a personal preference thing and related to how comfortable you feel about perceived Risk at any point in time.
As often happens when I work through these big ‘Blog Series’ things, I tend to bash out a Draft and slowly over time I go over it and over it and refine and tweak and invariably they get longer rather than shorter. I am sure the idea of Proof-Reading and refining is to summarise and condense more but I am clearly pretty hopeless at that !!
I guess my logic is that I tend to need to clarify points so adding yet more text achieves this in the best way. As a result of this tweaking I have decided that it would be more appropriate to split what remains of the Blogs into two so we now have 6 Parts in total - but this one perhaps needs Readers to turn their Brains on and think about what I am scribbling, especially in the first section on Probability stuff, so maybe it is for the best that it is shorter. The Final Part will be in essence a Conclusion but there is actually quite a lot in it.
There have been a lot of discussions on the Tweets lately around the idea of ‘Moving into Cash’ when it appears that the Markets are facing what could be a fairly sizeable drop and I wanted to discuss some of the many issues around this and some related stuff. At the time of starting to scribble this we are in the depths of Autumn 2018 which has brought some seriously major Falls in the Markets and the Brexit Talks are in full swing and going terribly - hopefully by the time you are reading this we will have more certainty on the Talks but it wouldn’t surprise me too much if the Parties involved on both the UK and EU sides are still dicking about.
How true the Paragraph above has turned out to be - I am now typing this Paragraph at the end of November and the whole Brexit thing seems to have got even worse with T May seeming to have lost touch with reality and trying to force through some sort of ridiculous ‘Deal’ where we have given away everything and £39bn for absolutely nothing in return. Unreal.
I often get asked how I managed to accumulate enough Capital so that I could retire at the ripe old age of 44. OK, it is time to come clean about one of my Dirty Little Secrets - I am one of the UK’s most prolific National Lottery Winners !!
Obviously I am far too modest to talk about this much and it is no big deal because I have never won the Top Prize or anything but I have a ‘system’ by which I regularly make small Wins which of course add up to a large amount over time.
Lots of People on Twitter etc. are extremely helpful with Tweeting out Stocks they have been buying and selling - which can be great for drawing attention to New Ideas of Stocks to Invest in and also lets People reading the Tweets get an idea of the sort of Approach a particular Tweeter follows. I always say that I can get a very good insight on whether or not a particular person makes Money simply by looking at the Stocks they Tweet about. This really is one of the many benefits I find from being extremely fortunate to be able to interact with so many helpful and collaborative Investors / Traders and it has enabled me to meet a whole new bunch of top quality Mates - and this has without doubt boosted my own never-ending Learning Process.
This Video was doing the rounds on Twitter recently and is merely 7.5 minutes long but in that time the wisdom that Warren Buff puts out is pretty remarkable:
https://www.youtube.com/watch?v=T6HHwOoq9M4 I have watched this a few times (I recommend Readers do likewise) and many of the usual lines Warren trots out are repeated here but they are without doubt bang on the money and if we take these principles on board then that is going to put us in good stead. The following points from this remarkably short Interview stand out to me:
This is something I often seem to discuss with People and to Tweet about but I am not sure if I have ever written much about it in my Blogs. Anyway, the point I am making here is that when calculating the Performance of your Portfolio or of the Stocks within it, it is always a good idea to think in terms of Percentages - not in terms of the Pound Notes.
There are many reasons for this but the main one is that once your Portfolio gets to a particular Size (and this will vary depending on each and everyone of us and our attitudes/personalities especially with regard to Risk and of course how ‘Rich‘ we are in total), if you start to think in Pound Note terms then you can easily frighten yourself and this will lead to Fear, Panic, and other Cognitive Errors that the amount your Portfolio moves about is instilling in you.
This is the Final Part of a 3 Blog Series produced by @vilage_idoit with a focus on Short Term Trading and how to make Money consistently from Junky AIM Stocks - the sort of stuff you find in the WheelieBin. If you haven’t read Parts 1 and 2 then you can find them here:
http://wheeliedealer.weebly.com/blog/guest-blog-on-short-term-trading-by-michael-vilage_idoit-part-2-of-3 http://wheeliedealer.weebly.com/blog/guest-blog-on-short-term-trading-by-michael-vilage_idoit-part-1-of-3 Please note at the time of publishing this Guest Blog on the 17th August 2018 the Books that are under the ‘Recommended Reading’ bit of this Blog are not yet in Wheelie’s Bookshop - my intention is to shove them in their over the next few days. However, all the Books he mentions in the Bibliography are in the Bookshop. Thanks again to Michael for producing this excellent work. Cheers, WD. |
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