Slow Trader

Tag: Tony Robbins

  • More on the long-term investment model

    My recent blog(s) were in regard to long-term investing. By long-term I’m thinking 15 to 30 years. Nick has given us, from each companies past ten years of annual reports, where available, his estimation of a company’s future value (MOS) and measure of consistency as a percentage of growth.

    From the FTSE 350 companies, Nick found that only ten companies met his criteria. Of these top ten companies, meant for long-term ISA or SIPP investment, we need to understand the principles of the company and be satisfied that a company has a product, method or brand that will be around after the next ten years.

    Nick has provided us with an old 3rd, mid 3rd and latest 3rd consistency to help us determine this. For example, Blackberry would have scored highly all the way to its end on this system; however, the clue would have been in Blackberry’s old, mid and latest consistency which would have shown a big down slope.

    Nick will refresh these calculations every few months. Primarily to capture the most recent annual report – three of which, on our current calculation, were from the end of 2015. To help, or possibly confuse, I’ve provided a brief chart synopsis of each of the top ten companies. I will continue to do this at the release of an updated calculation from Nick.

    New readers to this blog please note that my full-time business is short-term trading. Most of my blogs therefore will be focused on the short-term stuff. My detailed ‘how I trade’ page is only associated with short-term trading.

    Personally, I’m only in favour of short-term and the very long-term trading/investing model. I’m not in favour of the mid-term trading timeframe which constitutes the majority of the trading/investing world – pension funds and the like. This is a timeframe from the near term out to 15 years. I also feel that many pay too much for the services of providing mid-term investing. ‘Tony Robbins, Money Master the Game’ shows how every 1% in charges results in providing the investing company 20% of the final fund. Possibly a reason why a finance company made our top ten!

    If we are to invest in the mid-term, Robbins advocates a cash, share, commodity and bond mix. There are a few investment companies that provide such a fund – an independent financial advisor could help. Such funds are not exciting when the share market is going up rapidly; but such a fund usually provides a profit  – even when the share market heads south.

  • Why do I trade?

    At dinner a couple of weeks back, JB asked me ‘why did I trade, is it about money’?

    My answer agreed: that it’s about money. However, the question subsequently got me thinking.

    Al Brooks, whom I regard as my mentor, says that the aim (of short-term trading) is to make money – so I suppose I copied Al’s answer.

    To consider the question further, the aim for me is not about the joy of trading. That is too much like hard work. It’s also not the gratification of correctly calling a good trade. Because without money on the trade it’s like.. well, like going to bed with my socks on, it does nothing for me.

    Many beginners start with a dummy account. They make trades without committing cash and the dummy account records potential gains and losses. Many do exceptionally well at this because they are trading without emotion. The real account, the beginner finds, is a different thing altogether.

    So, it’s not the pure thrill of trading that does it for me either, and, therefore, we’re back to the money as the reason.

    I spoke with my son, Nick, about the question when I visited him in Bristol. Nick’s good at this sort of stuff. He mentioned a podcast he’d heard between Tony Robbins and Tim Ferriss. (Robbins is a popular motivational speaker in the States, and Ferriss is an author, notably of the 4-hour Workweek).

    Robbins mentioned ‘achievement’ and ‘fulfilment’ – which, Nick says, might help me to analyse my ‘why’ question.

    With that prompt I understood that for me my ‘achievement’ in trading is the making money bit; however, my ‘fulfilment’ is that I’ve got to the point in my trading that I can, with, I guess, some degree of consistency, actually regularly make money trading.

    …..For those interested, here are my trade statistics for the past week: 54 trades made in total, of which 25 were losing trades amounting to £5,982 and 29 were winning trades amounting to £11,295 making a total profit for the week of £5,313.

    That was over four days. We didn’t trade Friday due to the potential volatility of the US non-farm payroll announcement; which turned out to be a missed excellent chart readable day! We won’t trade this coming Monday or Tuesday either, to any great extent, due to the potential volatility the US election provides.

  • This is boring but its important

    There are so many ways to trade it can take you years to figure out what is right for you. However, we can put all of them into three simple categories.

    Firstly, there is day-trading. Self explanatory. You are in a trade sometime during the day and you are out of the trade before the day ends. Great fun. But few make a profit doing this.

    Secondly, there is short term trading (often referred to as swing trading). My preferred trading style. You follow the rhythm of the share price and try to catch the most lucrative part. You’re in for a few days to a few weeks. Using this style you may miss the big up, but you have a fair chance of missing the big down too!

    Thirdly, longer term trading. This is what most of you have through your mutual fund investments and pension funds. Recall that over the longer period, every 1 percent in charges results in you giving back to the fund some 20 percent of your final amount. So if your fund was worth £100,000 after 40 years of investing the average mutual fund would have cost you between £40,000 to £60,000. Thats a large chunk. Few people realise this and this is why mutual fund managers remain in the top echelons of earners.

    The younger investor would be better placed choosing a low cost index tracker fund. It will win hands down over most mutual or managed funds.

    The mature investor should always consider fixed index annuities – Read Tony Robbins, money master the game. Its only 616 pages! or take my word for it.

    We should consider another problem with the mutual fund (and there are several more) is the equity crash that seems to come around now and again. If you were financially retiring in 2008, your long term investment would be half of what you expected. If you had more than 15 years to retirement your fund could recover if it were in US stocks. Most UK shares have not even yet recovered to the high of 2008.

    Discuss with your independent financial advisor fixed index annuities such as (from Tony Robbins): Barclays Dynamic Balance Index (a mix of stocks and bonds) and Morgan Stanley Dynamic Allocation Index (a mix of 12 different sectors). Your IFA should find you UK index equivalents if you prefer.

    B

  • Go Back to Basics

    Some of you have asked recently for thoughts on what/when to invest next.

    Before that, lets go back to basics.

    Something I got from Tony Robbins’ last book, the most important thing is to firstly sort out our income, growth and fun.

    I’ll run a blog or two sometime later to expand on these but for now: income is stuff that generates you cash without having to get out of bed; growth is mostly what we talk about when we refer to share investment; and finally, fun is shorter term high risk and reward.

    All of us dismiss this as either too simplistic or we think we have done it. When actually we haven’t. Honestly, its key.

    Now, take your growth part and decide what to do with it.

    I recently enquired after a few internet trading systems and took a look at some of the more popular trading magazines. Wow, you quickly get inundated. If its all that good why are they not billionaires?

    The point is, most of the magazines and probably all of the trading systems are not for your growth but for your fun. they are mostly short term and reactionary. So, back to the beginning, lets not get confused and put our growth stuff into short term, high risk by mistake.

    Growth is a nine month view, and a few years reviewed six monthly is best.

    Trying to judge your growth fund from the popular magazines is almost like trying to judge the long term weather forecast from the front page headlines of the Daily Express. Its reactionary. It will at best get you in when you should really be getting out and at worst make you procrastinate with headline information overload.

    Take your allocated growth pot of money and divide it into investment portions. (You are looking for growth here. If from your popular magazine you have the company with the latest oil exploration technique then this is not growth but the high risk fun part).

    With your growth portions: less is more. Look for solid companies that are in areas that you think will continue to grow. One of my portions would be an index tracker of the FTSE 100 and/or S&P 500 (e-mini if I could get it). I would also save one of these portions to put into gold but not until mid February. The same timing for an oil or oil associated company like Petrofac.

    Shares will trend up this year. That is, the index will finish higher. But there will be a bit of ‘fun’ in-between.

    B

     

     

  • How to get the most from my retirement pot

    First of all, because of the holidays, the next fund report (Slow Trader and Ferrari Funds) will be about 23rd January 2015. With Slow Trader, we took a hit in the last report and we had 2 or 3 trades that were still to come off. These took us a good 10% lower than my last report. However, on the plus side we currently have several trades that are running and these are in profit. Let us see.

    I’ve made simple but significant changes to our trading technique. In terms of timeline, I’ve come out more – now taking a broader view. To that end we will use the ‘futures style’ purchasing rather than the relatively expensive Daily Fund Bet. This will help to reduce our fund operational costs.

    I’ve back tested weeks worth of trades to find the best timelines for our indicators. There is never a sure bet, if it were that easy…

    However, I am confident that we have something that suits the current market. These things need regular review as what worked a while back might not necessarily work as well today.

    I’ve titled this article – how to get the most from my retirement pot – because that is what I’ve been looking at recently. Primarily to find the best pension scheme for my small company and employees. The one I have chosen is http://bandce.co.uk/ the peoples pension.

    Other than it being internet based, so no middle man, the pension is clear and easy to use and provides some great funds to choose from. More importantly, it only charges 0.5% with no other costs. The low charge over a 20 years or more is significant.

    One of the problems with mutual or managed funds (including banks) is the high management cost of their funds. This is a secret the big funds have kept for decades. For every percentage charged in management you can deduct at least 20% from your final lump sum. If you’re keeping a fund for 40 plus years the percentage is higher than this. Therefore, a managed fund that is costing you say 2.5% will reduce your final award by some 50%. If your fund was due to pay out £100,000 then you would only get £50,000 – maybe as little as £35,000. You’re giving the fund managers potentially £65,000 – and for what!

    How is this possible? Its all to do with that magical reason: compound interest. Probably the most powerful tool you can financially teach your kids, grand kids etc. If you want more proof of this read Tony Robbins recent book Money: Master the Game. Its a mammoth read but well worth it. Obviously the book uses American terminology, but the UK is similar with different names.

    If not managed or mutual funds then how do I invest my money? Simple, self-managed index or tracker funds. This is something that will track a bunch of companies – say the FTSE 100 or S&P 500 – and will cost you very little to do so. In compound terms you keep that £65,000 rather than, as in the example above, give it to a bank or fund manager. Also, don’t let your broker suggest that a managed fund will get you more return over time for your money – your broker is not your friend. Over the last 20 years the stock or share market has gone up almost 10%. The average for managed funds has been about 2.5%. What a difference. Indeed, some 98% of managed funds do not beat the market – or, in other words, do not beat your self-invested index or tracker fund.

    Diversification in funds is important. In our hedge funds, for example, I look carefully at sectors in turn. Careful not to overload in any one sector. An index fund, by its nature, invests through all sectors. How you distribute your money is individual depending on age, retirement goals, health. However, with 15 years to go before retirement be very cautious of being overly exposed to the share market. The reason is that, historically, the share market has taken belly churning drops twice in any 12 year period. The suggestion, therefore, of 15 years gives you a buffer. If you cashed in your fund in late 2008 you would have got nearly 50% less than a few months prior. Not good.

    They don’t get a great press, but fixed annuities are a great way to go. Do not, however, go with the first suggestion from your pension fund if they provide an annuity. Shop around and get the lowest cost. Is a low cost annuity safe? After 2008 throughout the USA hundreds of banks went bust but not one insurance company (an annuity provider) went under.

    I would split my retirement money as:

    • Annuity
    • Go-get-em or growth fund
    • Fun fund

    I would consider 60% of my funds with an annuity. Again, depending on personal funds and circumstance. That is your safe fund. Your income to live on and hopefully help pay the bills. Most of the remainder I would put in a growth fund or a ‘go-get-em’ fund. But of this I would put as much as 50% in gilts or bonds (with a mix of treasury and corporate and the bigger mix being long-term gilts or treasury bonds). Of the remainder of the go-get-em amount, I would put 30% in a cheap to run tracker or index fund: of the small remainder I would split between commodities and gold. My final, now small, chunk of my overall amount would be my fun fund. You might consider the hedge you have with me as your fun fund. The beauty of a hedge is that this fund loves it if the market goes up or down. Both are good. What it does not like is a flat market.

    There you go, I hope that has generated some thought.

    I recommend this 30 minute animation ‘How the Economic Machine Works’ – well worth 30 minutes of anyones time. http://www.economicprinciples.org/

    Also, if you need to check out your state pension statement go to https://www.gov.uk/state-pension-statement

    Have a wonderful Christmas and see you back here in the New Year.

    B