What % gain should I be expecting each month??

18th Jun by N0vice1Nvest0r

26 comments 1107 reads

So I have my own contrarian investment style and it is working. However I don't know how to judge my gains....

Put in the simplest terms, the overall view is that you need between 7-10% returns to be beating inflation and/or the S&P500. Whilst I do appreciate that sometimes it is easier and probably better to just stick my money into an S&P500 ETF or World ETF.

However this year I'm testing my own strategy without the S&P500 due to my age and the low amount I am risking.

I set tight stop losses and then decide whether to add more or get out when alerted.

However my problem is that whilst im currently up 4.5% for 4 months, is this poor as it should be 7%?

I don't believe this is the case, so should I just be comparing to the all world or S&P500?

What if my contrarian style which is 4.5% suddenly goes to 20-25% come the end of the year....

Im always open to suggestions and never ever claim to be an expert in trading and investing, I want to learn from errors and those willing to give advice or help.

So how should I be assessing my portfolio or style come 6 months? or should I just wait until the end of the year?

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BnB

18th Jun

Expect none and be delighted if you have gained!

The Phoenix

All sound stuff Wolf there are some great traders on here yourself amongst them but it is a tough game to master consistently.

As mentioned I work in the industry and would put myself against most fund managers I have met (some of whom are terrible).

I would say I know more after 20 plus years than 99% of the population but I'm still not good enough to get into the 20% plus average year on year returns band.

We are fortunate on here to have Paul, Graham, Roland, Wolf, RD, Timarr, the two Marks, David, Donald, BnB, the two Mitchells and a host of others who I can't remember but who know their onions.

Novice as I say its super tough game I'm not quite good enough to get into the top table group the flip side is you have some of the very best in the UK on this bulletin board and they are mostly top fellas who will share their wisdom if you ask for it.

N0vice1Nvest0r

ive tried odd months on here in the past, but I don't think its a coincidence that my full year subscription has led to a good return, with help from the group and regular updates. Not forgetting being able to properly dig deeper in a company

Wolf of Small Street

Yes, it's not easy alright Phoenix. Really have to enjoy it and throw yourself fully into learning as much as possible, Id say it took me 10 years and lots of mistakes to get to grips with things, with another 5 to become consistent -and I've got lots to learn still, so can understand people just shoving cash in a tracker. I'd probably have done the same 25 years ago if they'd been around.

Interesting you say you're moving towards a 70/30 equity/bond holding. There's so many good ETF and funds now it makes sense. No profit warnings either.

Got any fun stories about fund managers Phoenix? :)

I've gone from being absolutely clueless about trading and investing back in 2021, to regularly understanding TA (not excelling) and regularly investing. All whilst continually listening to investing/financial/economic audiobooks.

In three years I cannot underestimate how much I've learnt, but I also appreciate how much I'm yet to learn.

I originally took the easier approach with ETFs, but wanted to test my style for a year and get fully into it. Stopping should my returns look poor after 6 months. However the amount of decent stocks ive found, missed or got out too early has only given me further encouragement.

I know what I'm doing is correct and I even think I should be returning better figures than I am.

I would love to do something permanently with finances/economics, but deep down I know ive left it too late due to being early 40s.

My plan is to self learn, hold my current job, and hopefully retiring early or changing job to something that just covers my needs and investments.

That's the dream, however the reality is that I'll just be doing enough to tick through and will be working until 67 or 70 knowing my luck, lol!

GloucesterBob

This is a brilliant thread and there is no easy answer, but to quote "Titus Maccius Plautus" you need money to make money, and you state you are in your early 40's, so you have plenty of time to accumulate.

I think you need to create your "wedge" and at your age, the easiest way is probably by investing as much as you can in your pension probably by investing in a SIPP as you can control that money. 20% on a £10,000 wedge is nice but not life changing, 20% on a £200,000 pot and life is easier.

I wouldn't concentrate on beating a certain benchmark, but work out how much do you need to earn to live a comfortable life. If I make 7.5% then I will never touch my capital, so why chase 20% per year. If I do make 20% happy days, but I do not need to.

I invest because I enjoy the challenge, if you do not enjoy it, put it all in a tracker and go and do what you do enjoy doing. Investing should not be stressful.

Well I'd say go for it Noviceinvestor if its something you really enjoy, commit fully to seeing it through for say the next 5 years. Its not easy but nothing worthwhile ever is, and is very satisfying to do well in difficult years especially. Stop hoping to make a profit, expect it and work towards it, manage risk and tweak errors/strategy as you go along.

Keep it simple, find something that works for you and repeat. Best of luck!

KevinS1

19th Jun

Hi NoviceInvestor,

Firstly, great thread with some really interesting comments, which I would completely echo.

Secondly, I am not a trader (although if anyone were to assess my PF movements I am pretty sure they would say otherwise - I buy & sell way too much!!)

I tried trading for a couple of years, but found I wasn't very good at it - and even when I sorted most of my faults I still had the odd big loss by not getting out when I should have done. It was a relatively small amount of capital so no harm done and I learnt a couple of things from it - including that I had better things to do than to sit and watch a screen all day.

My portfolio has gone through a few iterations - up until 2020 it was largely Unit Trusts & IT's with a handful of individual holdings. In 2020 I went completely the opposite, but like Phoenix, I am now going back again and have a good proportion in ETF's and IT's, with a very small number of UT's (the costs are excessive on these so I tend to avoid them unless there is a very good reason).

My individual holdings are probably way too many, so I would suggest I am a bit of a closet tracker, so I do not compare to anyone who holds a concentrated portfolio eg. Cockney Rebel, Paul Hill etc. I would have trouble sleeping at night knowing that I could wake up and find my PF down significantly on the back of one or two poor outturns.

The way I review things is to compare against the FTSE All-Share, The FTSE All-World and a small portfolio up until recently that I held with a broker (largely UK large caps).

The table below does this - and it is clear that without the 2020 outcome I had, I'd probably be better off leaving it in a small number of ETF's & IT's. However, I enjoy the process of investigating, analysing and then investing in a small number of individual companies, so I will keep going, although will move a greater % across to my favoured ETF's/IT's as and when I come out of certain investments. The bottom half looks at the compounded value of £100 across each of the comparitors across the 11 years.

I only started tracking the PF in greater detail from 2013 so I don't have figures for the previous 8-10 years.

Good luck and I hope things work out for you - I know I wouldn't have been able to retire early without investing into the stock market. Plus, the value of this board and the contributors should not be underestimated.

Edit - I should probably also say, that the single biggest lesson I have learnt in both trading & investing is around stop-losses. The big down years could have been significantly reduced had I simply sold out at a 20% loss. the last three years have had some painful losers and I now pretty much cut anything that crosses a 20% loss, unless there is an absolute case for not doing so.

Indie

Hello N1,

the overall view is that you need between 7-10% returns

Thanks to the miracle of compounding, if you were consistently up 0.8% each month for 12 months you would be up 10% on the year.

Agree on stop losses Kevin, this is the key point I think.

Learn to be a good loser, as Minervini says once you hit the buy button there's only 4 outcomes small loss, big loss, small gain, big gain. Remove big losses from the potential outcomes and already you nudge things in your favour. Obviously there's nothing you can do if a profit warning comes along.

I work on the basis if 50% of my buys work, 50% are stopped out Ill still make money so long as I stick to stop losses. My £ profit:loss ratio is over 3:1 so no need to be correct all the time. Average up on the best holdings where possible and reduce/cut the worst. Ideally in a 15 share portfolio I want the top 5 holdings to have 2-3x £ invested compared to the bottom 5. Never average down, I'd rather sell and buy back later at a higher price when things improve.

If I don't make money it's either because of my ill discipline or the market is bad, in which case slow down or stay in high cash % until things improve.

Anyway that's just my opinion, there's much better traders and long term investors than me out there who will see things differently, but it's a simple strategy that's worked for years and most importantly protects capital during downturns.

ken mitchell

My method works well but is rarely used it seems.

1. Buy quality at bargain prices…which often means buying when most are selling. I.e during the worst times in a bear market when advice everywhere is often to stay away. I do most of my buying in bear markets and in specific sector bear markets like the huge Mining bear market that ended in 2015. My buys then sometimes multibagged in 2016 with a couple ten bagging. And do most of our selling and top slicing in bull markets. It works,

2. Look to have a lot of big dividend payers in the portfolio but to focus on those likely to increase the dividends year on year. If a share is paying 10% or more….and in time some of our holdings pay MUCH more than that (e.g John Lee holds shares paying him 100% and more just in dividends every year). I.e the annualised gain just in dividends becomes massive,

3. Run our winners.

4. Sell for investment reasons and not on some arbitrary stop loss figure. E.g in a bear market a quality share we hold falling to a 20% loss might well be a screaming buy.

5. Sell on any bad news. E.g poor update, hints in a good update of a problem ahead and almost always on a profits warning. Be ruthless on this.

6. Don’t hold too much in any one share. So stop slice big winners that get to a too high a percentage of the portfolio.

There are still a lot of bargains available including Investment Trusts on unusually big discounts to NAV. Investment Trusts are now more than 50% of our portfolios.

There is a very good Investment Trust thread here on Stockopedia and updated with a new thread every month by Charles Mitchell. Here’s the link for the June thread:-

https://www.stockopedia.com/di...

Logical David

Hi N0vice 1Nvest0r,

Regarding your statement: "but deep down I know ive left it too late due to being early 40s".

My view is that being in your early 40s means you are still a 'spring chicken' in the world of investing. Warren Buffett has accumulated around 99% of his wealth since turning 65 years old due to the power of compounding.

Warren Buffett Accumulated Most of His Wealth After Age 65. Here's Why That's Great News for Your Retirement Savings. | Nasdaq

Most of Warren Buffett’s wealth came after age 65. Here's why (cnbc.com)

You still have many years of investing left in you. As WoSS says "Go for it".

David.

jmallin1972

"throw yourself fully into learning as much as possible"...................if you were a newbie investor what books would you start with on learning on how to value / analyse shares. Also what sites / podcasts / periodicals would you recommend (apart from Stockopedia) to use to build up that knowledge.

Jmallin, the best 3 books I've read are

William o'neil "how to make money in stocks"
Minervini "trade like a stock market wizard"
Weinstein "secrets of profiting in bull and bear markets"

They're all American so need tweaked for the UK but theres the basis of everything you need there.

UK based books Simon Thompson wrote a good couple of books, Robbie Burns is good as a basic overview and probably the best one to start ."The art of execution" by Freeman-Shor is good, the whole book could probably be done in a single chapter as its such a simple principle, but I like simple. Then something like "popular delusions and the madness of crowds" its a very old book from the 1800's so a dry read now but shows the idiocy of group human behaviour is timeless.

"Superforecasting" by Philip Tetlock was interesting too.

For macro data I avoid any kind of analysis from the media as its almost always backwards looking and biased, so go straight to Trading Economics. They have a great app that has everything you need.

Only podcast I listen to now is Pauls and Investor Champion which is very good.

Most important tho is to read lots and lots of RNS/Broker notes in the morning. If you find something interesting try writing down which way you think the share price will move and what % then check in 1 day/1 week/1 month to see if you're correct. Go back over lots of winners and read through the RNS to try and spot where the pivot point was when the share price took off. Look especially for a step change in earnings or something new happening. You'll spot similarities in lots of the big risers as you piece together the trading updates over a 2 -5 year period like a jigsaw.

Daft as it is, it was Rich Dad, Poor Dad that got me onto my current path. 5 Books I highly recommend are;

The compound effect - Darren Hardy
The naked trader - Robbie Burns
Thinking fast and slow - Daniel Kahnemann
Mastering the market cycle - Howard Marks
The new market wizards - Jack D. Schwager

This will give you a range of learning to invest, what to invest in, why you should invest, what to look for in stocks and most importantly insight from some of the best traders in the world, including their biggest mistakes.

I listen to them Audible, but can be found on Spotify. I listen at 1.5-1.7 speed to get through the books quicker. But this is not to everyone taste or satisfaction.

22nd Jun

Apologies with delay in replying Wolf been a busy week for work (not what i signed up for when i went part time self employed lol).

Fund managers there are some good ones and there are the others blinded by ego.

I won't name names but about ten years ago I went to a big meet up at a very upmarket racing/stables/country club set up think ,Arab money.

Whisked inside along with my cohorts to a very nice room with people following us around pouring tea/drinks on demand followed by a very nice four course meal.

The manager at the time was very well known in industry circles (not Woodford) and his fund was in excess of a billion ,UK centric looking for turn around/recovery plays.

A slide was brought up listing the top twenty holdings with some real horrors in the list you might remember Quindell from back in the day before it blew up.

Myself and a colleague who was an ex fund manager started asking difficult questions about some of the horrors and the manager was having none of it especially around Quindell saying it was the news papers who were wrong/out of order.

Things got so heated I thought at one point he was going to ask us to leave , i stress here we weren't being obnoxious just asking fair questions, he was getting animated, shouty and generally peed off we were questioning the investments.

This showed me that in the industry I work 90% of the people doing the job don't really understand/know what a fund is investing in, if the fund manager says its great they just trust them.

I have met other managers over the years who held stocks that Paul S called out as frauds and again they all thought said stock was great.

I think theres two issues a lot of managers are successful in one area of the market then set up in a separate area they don't understand and get slaughtered.

The second is a lot of smaller companies are run by brilliant sales people who can come up with stories that make managers think they are getting in on the ground level of the next Rightmove and all common sense around funding/balance sheets then goes out of the window as greed kicks in.

illiswilgig

24th Jun

The Phoenix, excellent insight, along with many in this thread.

I can't resist highlighting:

Oh so true. And much easier to appreciate if you have been on the inside of small ambitious agressive companies struggling to make it big.

The converse is also true. Able, professional competent management - who are not natural sales people tend to put investors off, or at least leave a question hanging? Are they upto the job? Can they make it big?

Because of my experience in small (and large) company management I am much happierinvesting where I can see the management, warts and all. Most importantly because of the subdued sales pitch these companies often trade very cheaply in comparison with the risk/reward.

cheers

Mark

Thanks Phoenix, very interesting. Some do seem quite easily suckered into overpriced stories as we saw in 2020/21.

I'd imagine a lot of these recent takeovers will find their way back onto the market in the next few years at much higher valuations, I suspect fund managers, even a few who pushed for the original sale, will be happy to buy when relisted.

Just wonder how AI might effect the industry. Passive investment is already chipping away right now, could an active AI manager programmed in the entire history of the stock market, probabilities, technical analysis, human psychology and game theory eat their entire lunch in the years ahead?

Hopefully you get to enjoy some sunshine this week Phoenix.

Really appreciate the time you have taken to provide a response. That should keep me busy for the next 6 months and give me time to get used to reading RNS / Broker Notes, and paper trade.

ezlifeme

PS - The best books you have ever read - Should be read again every time you get tough on yourself about your investing. If you think you have gone"off the boil" go back to the fundamentals in one of your best reads, you will find a spark of inspiration that you have lost track of

What % gain should I be expecting each month??

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