Peter Thornhill 2021

I have a system that works for me re:timing the market. I am always fully invested, but I am continually building cash reserves in our PPOR loan. Every 6 months I split off the paid down amount and put it into the share market.

That little 6 monthly buying window is my chance to play at market timing, so I will look for buying opportunities that I think are good value, out of favour etc. But I will always put those funds into the market, rain hail or shine.

 

NICE ?? ME ???

LOL

the very first word i ever said caused a family controversy for many years ( a baby's first word is normally NO , or mum or dad ( or some variation ).. not this little black duck !!

currently i am home a great deal ( give or take medical appointments )

HOWEVER i think the novices should be aware of complex ideas and THEN choose to ignore the ones that don't suit them , i have heard of folks doing great work using options as an investing tool , but i could never figure out how to get the result i wanted using them ( or self-funding warrants for that matter )

let's face it if a novice with adequate funds starts investing they should at least have a good tax accountant and probably a dedicated financial advisor as well BUT the novice needs to know which questions to ask , or the answer is very likely to be a 'vanilla compromise ' or GASP a scheme that will later get the intense focus of ATO

maybe i have a rough , tough attitude because i grew up on a city fringe , but silver spoons are something i collect at flea markets ( and anything else sterling silver )

investing doesn't have too be scary but there are some NASTY traps out there , a novice has to be able to avoid them , or as least jump back quickly before all the way in

having no idea a market ( share or property ) can drop 20% in a VERY short time is fairly common , can scar the novice investor for life , when it hits , KNOWING this first allows them to have a back-up plan and some safety strategies ready

look at March 2020 i had an untested strategy , at worst i would learn the strategy was rubbish , and formulate a new one ( for the next big dip ) , sitting there in stunned disbelief is a bad option ( and panic-selling would probably be worse )

and yes shotgun works for me until we get a government that plans sensibly AND DELIVERS in a timely manner ( whenever that will be )

we are in uncharted waters so the wise will have the lifeboats in top condition and well stocked with emergency rations

cheers

 

Incredible response @SatayKing, I say this with the greatest respect.

 

You need to be carefull @Big A about dismissing market timing strategies to outperform. You may upset few people from the World Indices Roundup post

Cheers,
Oracle.

 

LOl. My more moderate side asserted itself for 30 minutes. Normal service of being a cynical, cruel, cold-heated sob self has resumed.

And the response to the post is, typically, the complete antithesis of the approach PT has inferred is the preferred one. I don't actually care what PT, or anyone else, holds. I did follow for a while and then decided to also focus more heavily with ETFs rather than just LICs. I'd guess but have no proof those who hold only one or the other are doing, and will do, OK. As long as they get there it's all good.

But one thing which isn't stated very clearly is there is no need to be frightened of the fluctuations, even big ones, in the share market, and use them to buy your preferred investment product at a lesser price. The underlying business are still functioning overall. To drag in matters like ETOs, state it's all very complex and imply it is scary is balderdash. It has absolutely nothing to do with investing but is all about speculating.

If you have cash when the prices go down (a normal situation) then buy. If you haven't got the cash and you feel stressed, take up watching grass grow until you calm down and some cash rolls in. Then buy.

It's very simple really in my opinion. As of late, with all this type of information readily available if potential investors are prepared to look, I tend to mentally shrug my shoulders and go meh, big deal, when the herds get spooked.

 

Totally agree as many do.I used to think it was complex until I learned it wasn't or didn't have to be. The biggest lesson for me was that if it is complex & scary then I'm doing the wrong thing.

 

He he. I haven't been to that thread for a while. Have not interest in it actually.

Hmm, wonder if a few people in this thread (and the LIC/ETF ones) should be upset with the WIR folks. Fair do's ya know.

 

Delighted to have never read it and having run out of ****s to give.

 

I gave it a good crack. But I failed. I really wanted to believe that market timing could work for me. I mean it sounded so good. Wait till the market drops and just when it reaches the bottom I swoop in and buy up all the cheap shares of you non timing suckers.

And I hate being a quitter. But after a few years of failed timing attempts I have finally waved the white flag.

I wish anyone who can get the market timing right all the best.

I am happy with my fair share of the returns pie. No more and no less.

 

Reality is the crowd and most of those that are half right don’t beat the index after tax, not to mention the opportunity cost of extended cash position and fail to account for these realities.

So much of this thread is focused on the trees, with no view of the forest.

 

the easiest strategy to out-perform the market ( given market-timing is NOT instinctive ) , is to be in the very tiny group that moves in the right direction FIRST ( first out the door )

a second way is to do the precise opposite of what the masses are doing ( when there is panic-selling , you buy , etc )

a third way is to ignore heavily traded equities , and look for unloved equities ( especially those that are low debt and make after tax profits

at strategy number one , i am terrible

at strategy number two i do a little better , but in mass carnage i get distracted by too many choices/decisions , so do OK but could do much better

strategy number three has been better for me , hence i have small holdings in companies most have never heard or ( or have forgotten )

when there are big trends i normally follow strategy two BUT move a little early ( usually missing bottoms/tops ) AND am not afraid to make multiple buys( sells )

say QBE hits a 'good price ' i buy a few ( and keep cash ready in case in drops (say ) another 10% , the same on a major uptrend ( say ) MQG hits an overvalued price i sell some if it climbs another 20% i sell some more

i think of it as 'carefully greedy ' there is a huge temptation to make big bets , but i resist

and YES the brokerage BITES , but i am making some profit so i don't complain to much

obviously the people with well paid jobs will not have time to do this with their full attention

when i was working i would put 'dream orders in the market when market was closed at set prices NOT market prices , and see what happened at the end of the day ( sometimes the net caught a fish and sometimes it was empty ) not perfection , but a useful compromise

just don't get trapped by your ego ( and good on you if you can time it perfectly )

 

I have not bought direct shares for many years but your example of selling MQG to buy QBE is staggering . MQG can at times have a significant trading range with a general up trend - yes I broke my own rule and just looked. QBE has small trading ranges with a general down trend. I might have missed something but when in the last 10 years was it a good thing to sell MQG to buy QBE?

 

no , they were examples

for QBE i 'channel trade ' i noticed QBE attracts sudden drop events fairly regularly , and eventually returns to around $13 it might 2 or 3 years to complete a cycle but it seems to be something i can take advantage of

in real life i reduced MQG to add extra BHP ( before the S32 spin-off . )

and yes QBE is in a downtrend it would be facing challenging times , very hard to make nice profits on invested premiums , currently , and a regular procession of 'disasters ' but i think a patient person can wait for those $8 and $9 buys and reduce around $13 and calmly accumulate via using the DRP

currently the div. returns are unappealing but so is the interest on my savings account

when i bought into MQG i was hoping it would get to about $60 by now , i am happy to say it beat my expectations , so i took some profit of the table ( pushing it into BHP which i consider a safer long term bet despite buying cyclical )

BTW i reduced MQG because i bought repeatedly in 2011 as low as $20 and once it had divested the SYD holding MQG was an uncomfortably large holding ( for such a risk-taking bank ) so sold 66% of the holding most of the cash going into BHP ( but not all of it )

at one stage i had holdings in MQG , Macquarie preference shares and Macquarie hybrids ( the latter two have since been redeemed ), so a very large exposure not counting exposure via LICs and ETFs

cheers

 

Agree 100% I have been following more out of curiosity two Aus based podcasts of investors who use two different methods to outperform the market in both of them to my untrained eye would seem portfolio turnover is relatively high each year if you followed their methods of investing and also extended periods of sitting on cash in one strategy, yet neither of them mentions tax or potential cost of sitting in cash?
And just to bring this thread back to PT given it is his thread after all haha - one of the reasons he likes LICS almost irrelevant if it is true or not (as confirmed many times not true for most cap-weighted ETF's turnover is low) so maybe something to keep in mind for me at least

 

You have noted a number of strategies that you have experimented with and have worked to varying degrees.

I look at this and think sure such a strategy could work for me but could just as easily not. At best I have a 50/50 chance of outperforming a simple index / put your money straight to work strategy.

This comes back to ones own situation / position. I have been fortunate enough to have earned well above average through business. The need to take on additional risk for a possible outperformance would be reckless in my opinion. The market return should ensure my portfolio continues to grow ( of course unless future returns become negative for a pro longed period ) without the need for outperformance. So why would I risk the possibility of underperformance?

As I said I would be more than happy with my fair share of the market return pie. Since I listened to John Bogles The little book of common sense investing, I now use the market return as a whole pie analogy. Just take your piece and be happy. Why must you try and eat someone else piece as well?

 

Nice try @Big A but you may be up against thought disorder. No chance if that's the case.

 

in my estimation i had 10 years to double the nest egg ( without losing it all ) BUT set up an income fund to supplement the aged pension on the way ( for when i retired )

what happened was the parallel earning potential only lasted 7 years ( normally one would retire and maybe choose to earn a little pocket-money here and there )

i knew i needed to push , and that is nothing new for me but i also needed to careful ( a whole new world for me to explore )

now part of the luck was i discovered tipping competitions ( on shares ) which had a bit of a fad back then , so i had a way to test strategies without risking cash , now i didn't discover much in superior winning strategies , but i learned a lot on strategies that didn't even work in 'fantasy world' ( and also researched stocks i would never normally look at )

i don't need to move the market , just have a safety buffer in case inflation takes off , or i have unexpected expenses

so my piece of the pie is probably not any larger than most ( that actually invest in shares or property ) but it does have to spit out fairly regular divs. ( so sitting on gold/silver bars wasn't an option either , sadly )

my income earning years were awash with low-paying and casual/temporary jobs , which turned out not as bad as in seemed , take the casual cleaning gig , i got to see behind the scenes in LOTS of places mega-corps and places of less than one hundred employees

so you can see who is awash with bloat and who is lean and efficient , and lots of other tiny clues , the most accountants would never see

regarding that pie , what if the average share is shrinking ( reduced buying power for the average citizen ) ???

another strange concept , i discovered many decades ago the most important person to beat .. is yourself , there will always be some better on the day ( well most times , sometimes i actually won an event ) and some will have a bad day , but if you can keep improving YOUR game you will do OK more often than average

it is case of picking the game that best suits you and work on improving your performance ( a tweak here and a tweak there ) and yes many rivals focused on sandbagging all year and aiming for specific prizes , , but that was there way

in my investing world share prices are only buy/reduce triggers what matters to me is income returns and reliability of that income

those that love Google , Tesla and Afterpay will never be competing with me for that cheap share price ( i can do better elsewhere )

maybe i should double back and recheck those funds ( LICs and ETFs ) that specialize in small-caps again

 

indeed i always knew i was wired differently , but i have adapted and no longer worry if it is a disorder or an obsession

cheers

( going to be sad world in the future when everyone is a carbon copy of 'perfect' )

i wish i could find my copy of Harrison Bergeron not the shortened version now often available ( maybe mine was the original )

 

Fair enough. I like to try and look at things from different perspectives.

I think its much easier for those who have won the so called game ( If there is such thing ) to stick to a simple common sense, tried and tested strategy. For those who feel like they are behind financially I would imagine the urge to take on additional risk for the possibility of enhanced return would be much greater.

Rant alert.

This got me thinking about the whole market timing thing. I have now joined the non timing camp after somewhat having a foot in both camps over the last few years.

I have listened to the likes of yourself @SatayKing , @Nodrog , @dunno as an example who have many years of experience and have done very well for yourselves. You are past the earning a working income stage and for all purposes are not officially in full accumulation mode any longer. Not to say that you don't continue to accumulate via additional spare investment income but generally you are no longer in aggressive accumulation mode.

Now for some one still in a more aggressive accumulation mode who might be re investing all dividends plus putting a significant piece of working income into the market, which could be for arguments sake increasing their portfolio size by 20% or more a year.
In a situation in which one finds themselves adding say 20% or more to their portfolio in any given year, such as myself, Can you see how the temptation to time would be much greater than someone just reinvesting the spare capacity from dividends each year which could be adding only a few % of the total portfolio.

I have increased my equities portfolio by almost 20% in size since the start of this year so far. Some of that has come from gains but mostly from throwing in more capital. With markets having had such a strong run lately throwing in such large amounts and continuing to add more in times such as this will always play on ones mind. I have ignored the negative thoughts and have continued to focus on toiling away and adding as much as possible as often as possible. With a plan to remain in accumulation phase permanently I know what happens this year wont be significant in 5 years let alone 20 or 30 years from now.

Thoughts on the difference between persons at those 2 different accumulation stages? Should there be a difference?

 

This I can agree with. I believe the pie is shrinking and for the foreseeable future returns might well be less than we have seen in the past.