Long Term Investing Valuation and Timing Strategies

Discussion in 'Share Investing Strategies, Theories & Education' started by Nodrog, 2nd Jan, 2017.

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  1. Redwing

    Redwing Well-Known Member

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    Hi @Perthguy

    You could look at the Permanent Portfolio

    25% Australian Stocks
    25% Australian Long Term Bonds
    25% Gold
    25% Australian Short Term Bonds

    Or I read another example i.e

    25% Vanguard Australian Government Bond Index
    8.33% Vanguard Australian Shares Index
    8.33% Vanguard U.S. Total Stock Index
    8.33% Vanguard All World (ex U.S.) Stock Index
    25% BetaShares Gold Bullion ETF
    25% Cash

    Permanent Portfolio

    http://seekingalpha.com/article/4032910-perm-best-way-implement-permanent-portfolio

    The Permanent Portfolio

    The portfolio was designed to weather the four economic conditions: prosperity, deflation, recession and inflation
     
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  2. Redwing

    Redwing Well-Known Member

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    @Perthguy

    I found this which may be of interest

    What if Vanguard Went Broke?

    This is a very serious and timely issue, so I'll address it to hopefully set everyone at ease.

    First, The Vanguard Group Inc. (VGI) is actually a subsidiary of the various mutual funds, each of which is a separate legal entity. The best way to describe Vanguard's unique structure would be to think of General Motors turned upside down, with Chevrolet, Cadillac, Oldsmobile, Pontiac, etc. as the corporate parents, and General Motors as a subsidiary. If you think of Chevrolet, Cadillac, Oldsmobile, Pontiac, and the other GM divisions as mutual funds, and General Motors (the subsidiary, in this situation) as Vanguard Group Inc., you'll get the picture.

    Since VGI is actually owned and funded by the various mutual funds, it technically couldn't go bankrupt unless all of the various mutual funds that support it went bankrupt. The only way that could happen would be for the value of all of the stocks and/or bonds held by each and every individual Vanguard mutual fund to go to zero. So, forget about Vanguard going bankrupt -- it just isn't going to happen.

    It's also important to point out that even if VGI were to somehow go broke, VGI has no recourse to the assets of the funds. Rather, each fund's custodian holds that fund's assets. Even the fund managers do not have custody of their fund's holdings. They simply decide which stocks/bonds to sell, and the custodian actually delivers (in the case of a sale) or takes delivery (in the case of a purchase) of the actual asset.

    Another huge and very important difference between Vanguard's mutual funds and the Enrons and WorldComs of the world is that Vanguard is required to "mark to market" (value each fund share based on the value of all of the fund's holdings) each day the market is open. That keeps the fund's books current. This "marking to market" pricing is subject to both routine and spot audits by both the SEC and the Pennsylvania Department of Banking.

    One major reason for the lack of problems with mutual funds comes from the fact that they're regulated by the Investment Company Act of 1940, which spells out the legal responsibilities of the mutual funds to their investors. In addition to the provisions of the Investment Company Act of 1940, the SEC also directly regulates mutual funds. While the SEC can investigate fraud allegations against investors at public companies like Enron and WorldCom, where the accounting is much more complex than at mutual funds, it has no authority to set corporate governance rules for these public companies. These are huge differences.

    Keep in mind, too, that, despite all of this, if something were to happen to the Vanguard Group (the entity that provides the fund with the administrative services they need to exist), the funds would continue to operate and would simply replace VGI with another entity to provide these same services.

    Some have expressed concerns about putting "all their eggs in one basket" by consolidating their investments at Vanguard. There's simply no need to worry about that. Each fund is a separate investment company (and part owner of the Vanguard Group, rather than the other way around). Thus, having all of your investments in several Vanguard funds is tantamount to having your investments spread among a variety of baskets, each independent of the other. So, put your fears to rest; your investments are safe at Vanguard.

    For what it's worth, other than my Savings Bonds, all of my investments are at Vanguard, and I sleep like a baby!

    Best regards,

    Mel (Lindauer)
     
  3. The Falcon

    The Falcon Well-Known Member

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    Yep, and All etfs I've looked at are same structure @Redwing , betashares or whoever are only manager, not owner.


    As an aside I'll say it again, the vanguard unlisted wholesale life strategy funds are under rated for the asset allocator I reckon, fair fee for the simplicity and forced rebalancing they do for you.
     
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  4. Perthguy

    Perthguy Well-Known Member

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  5. Perthguy

    Perthguy Well-Known Member

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  6. Redwing

    Redwing Well-Known Member

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    I agree, its not for me, but Gold can even make Clint Eastwood sing ;)

     
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  7. Shady

    Shady Well-Known Member

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    Can any of you more edumacated people hazard a guess at what happens to a geared ETF if the markets fall significantly? eg GGUS or GEAR. I dipped my toe in the water and bought some GGUS today .

    I assume if it falls close enough to zero equity it will close down?
     
  8. Nodrog

    Nodrog Well-Known Member

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    Yes, and $100k will get you into Vanguards wholesale funds (not $500k as advertised). True set and forget investing. Set up a regular BPay into the account then let it look after itself including auto rebalancing etc.

    Eg: https://api.vanguard.com/rs/gre/gls/stable/documents/8469/au
     
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  9. Zenith Chaos

    Zenith Chaos Well-Known Member

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    I considered Vanguards wholesale funds but found their fee too high compared to ETF equivalents. Asset allocation is important to me but it doesn't have to be exact because of costs associated with rebalancing.

    Do you think the long term cgt benefits in a transition to lower risk instruments say in retirement would be worth it? I could potentially buy the wholesale fund in addition to ETFs and LICs and then when I want to, perform reallocation in the wholesale fund that gives me my ideal overall asset allocation.

    I've always liked the idea of putting away a consistent weekly amount without thinking whilst still save for LIC bundles.

    I assume this works in a trust structure in terms of distributions.
     
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  10. Redwing

    Redwing Well-Known Member

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    You know the saying about gearing it magnifies wins, or losses

    GEAR is limited recourse isn't it?
     
  11. Shady

    Shady Well-Known Member

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    Limited recourse yes...i hope so anyway as i bought in my smsf.

    I expect that if the fund drops in value between 50-60% (which is it's gearing) then the fund would be wound up...there's nothing specific in the pdf but there were a number of 'catch all' disclaimers
     
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  12. Redwing

    Redwing Well-Known Member

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  13. Redwing

    Redwing Well-Known Member

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    The future of long-term investing

    The mountain chicken frog is one of the world’s most endangered species. Once found on many eastern Caribbean islands, its population has been ravaged by human predation and in recent years by a rampant fungal disease. Now, it is believed that there are less than 100 individuals left in the wild on just two islands, Dominica and Montserrat.

    Much like the mountain chicken frog, genuine long-term investors appear to be an endangered species. Their kind has been ravaged by a different form of disease – that of short termism. The future of long-term investing does not look bright in an industry that is increasingly dominated by the twin forces of valuation-insensitive investment activity and the pressure on fund managers to deliver outperformance over every conceivable time horizon, no matter how short.

    To an extent, I can understand why markets have become more short term, and why explicit indexation, exchange traded funds (ETFs) and quantitative investment strategies have gained in popularity in recent years. I believe it’s partly the result of failings in the ‘active’ investment industry – many fund managers claiming to be active have been nothing of the sort, ultimately delivering mediocre, index-like performance but with much higher fees, some of which are not obvious to the end investor. Although things are slowly changing, the practices of closet-indexation and fee obfuscation have contributed to an erosion of trust and confidence in the active investment industry.

    Cont...
     
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  14. Perthguy

    Perthguy Well-Known Member

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    Good article:

    The strategy long-term investors follow is straight-forward:

    Identify companies with strong competitive advantages

    1. Be sure these companies’ competitive advantages will last
    2. Invest in these companies when trading at fair or better prices
    3. Hold these for the long-run
    This 3 step-process greatly reduces the field of stocks that investors have to choose from.
     
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  15. Nodrog

    Nodrog Well-Known Member

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    Two valuation methods that make shares look expensive (Wall St)
     
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  16. BKRinvesting

    BKRinvesting Well-Known Member

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    Bargains coming! :eek:
     
  17. Nodrog

    Nodrog Well-Known Member

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    I have no idea. Main thing is to have a plan for when bargains do arrive:).
     
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  18. Nodrog

    Nodrog Well-Known Member

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  19. Hodor

    Hodor Well-Known Member

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    "Absolute all-time high as of 03/16/2017: 66 days without noteworthy S&P 500 stock price movements"

    Yet the markets managed to squawk everyday about something
     
  20. Redwing

    Redwing Well-Known Member

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    When stocks rise, bonds often fall in price. Having bonds in the portfolio gives me an opportunity to re-balance during market mood swings

    Here’s iShares Core Composite Bond ETF

    In the past five years, $10,000 grew to roughly $12,903.96

    upload_2017-5-26_6-20-0.png

    Heres a chart of the S&P 500 (blue) compared to the U.S. short-term government bond index (red). Not inclusive of interest rates on the bonds, or dividends for the stocks.

    upload_2017-5-26_6-31-59.png
     

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