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  #81  
Old 14.07.2018, 20:49
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Re: Are you happy to lose 50%-80% of your wealth?

I manage the risk tied to my wealth by not putting all the eggs in one single basket. How well will it work for me in the long run, the time will only tell!

I can only share that from all the high risk bearing stocks that I own, 70% perform very well. That’s an acceptable risk level to me in order not to panic prematurely.

Normally, I invest in properties and beginning of this year I bought another two apartments in JHB’s posh suburbs where there is a high demand for rental. Both flats with tenants in them and monthly income averages CHF1500 from all three properties. Risk factor - always have a good tenant who is always paying rent on time. All is managed by the real estate agency that I have a good relation with built over the years. Therefore less stress And all it takes is few clicks of the email button and online banking plus Excel management-system on my part plus taxes done by my tax agent. That’s what I call a passive income extra retirement moneys in my pocket. When push comes to shove, I can always sell one or all of them later

Planned retirement age at early 50’s.

To answer the original question: I’m not happy to lose 50-80% of my wealth, that’s why I’m always careful and give thought to my investment strategies.
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  #82  
Old 15.07.2018, 12:26
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Re: Are you happy to lose 50%-80% of your wealth?

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Clearly fundsmith will be at the mercy of the market, just like everybody else. He’s not a magician.
Whilst your soundbite does make sense the return on the Tullet Prebon pension fund from 4/12/2003 to 4/12/12 was 14.49% compound before fees. His defensive investments perform better relative to the market during bad times, the financial crisis was about as bad as it gets tripling your money after fees in 9 years.
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Old 15.07.2018, 13:12
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Re: Are you happy to lose 50%-80% of your wealth?

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Plenty of articles about Fundsmith going back 5 years saying the performance could not continue & it was time to jump ship, £100 became £250 & the record still plays every week. Don't buy crap in an attempt to diversify would be my advise.If you had bought an FTSE 100 tracker you would not have come close to 8% for either the last 5 or 10 years. 26.56% over 5 years or 39.08% over 10 years.
the 8% is referring to the cited average performance of the broader market.
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  #84  
Old 15.07.2018, 13:50
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Re: Are you happy to lose 50%-80% of your wealth?

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Maybe "denominated" is the wrong word. What I mean is, if present day fiat currencies do a Wiemar style disappearance act such things as real estate, farms, companies, works of arts and commodities would still retain their value for what they are, but would not be expressed in said fiat currencies which would go to zero
A total collapse of fiat currencies would hardly be a standalone event. It would probably be as a result of much turmoil, probably even war. That's not the sort of climate in which works of art are highly sought after. Rather, looking at the Weimar example, it was a period that the middle classes traded the family silver for a few days worth of food.

Similarly, ownership of farmland is worth nothing if it's only on paper and possibly through the intermediary of some fund claiming to be putting your money into farmland, but without their being an actual parcel of land that, when push comes to shove, you can put a fence around and feed yourself from.

Ownership of farmland is only really safe if you actually occupy the land yourself. Well, even then you might be confronted with wandering hoards of cutthroat nomads who can take it away from you. But at least your chances of keeping it are highest if you're actually there. So own land, own a firearm, and know how to use it. And make sure you get on well with all the neighbours and that they are of similar mind, because you yourself can do nothing really.
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  #85  
Old 15.07.2018, 14:02
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Re: Are you happy to lose 50%-80% of your wealth?

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A total collapse of fiat currencies would hardly be a standalone event. It would probably be as a result of much turmoil, probably even war. That's not the sort of climate in which works of art are highly sought after. Rather, looking at the Weimar example, it was a period that the middle classes traded the family silver for a few days worth of food.

Similarly, ownership of farmland is worth nothing if it's only on paper and possibly through the intermediary of some fund claiming to be putting your money into farmland, but without their being an actual parcel of land that, when push comes to shove, you can put a fence around and feed yourself from.

Ownership of farmland is only really safe if you actually occupy the land yourself. Well, even then you might be confronted with wandering hoards of cutthroat nomads who can take it away from you. But at least your chances of keeping it are highest if you're actually there. So own land, own a firearm, and know how to use it. And make sure you get on well with all the neighbours and that they are of similar mind, because you yourself can do nothing really.
This is an example from Zimbabwe’s history and hopefully such case won’t take place in RSA.
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  #86  
Old 16.07.2018, 10:34
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Re: Are you happy to lose 50%-80% of your wealth?

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You did not backtest Attachment 133832
That's a cool chart, but you need to remember that in 1970 gold was "freed" from the peg with the dollar and it began its march, trying to find the fair price, which peaked in 1980. I'm not sure if it's a fair moment to start your comparison.

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You did not go from 1979/80 when gold hit $850
The peak gold would also not be a fair starting point.

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Why choose the exact date of a price peak? How about we check year 2000. Attachment 133833
Again. I think measuring from the peak of the bubble, or from the bottom of the crash can prove anything you want.

I have recently discovered that a really nice tool for comparing returns is a rolling returns chart. Just fix the timeframe to 20 or 30 years and then you will have a nice overview of all the starting points, so nobody can twist it to prove his point.



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essentially buy stuff that has intrinsic value.
Buy productive assets.

Btw I would name the topic "are you prepared" instead of "happy". I am really scared of it, as I am 90% invested in VT, 10% in CHF. On the other hand, if a crash should happen, better sooner than later. Let it happen now, then I will be able to buy more with my salary. 1 year after reaching FIRE would be the worst. You think you've retired, but oh no, your portfolio is now worth 2-3 times less.
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Old 16.07.2018, 10:45
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Re: Are you happy to lose 50%-80% of your wealth?

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You think you've retired, but oh no, your portfolio is now worth 2-3 times less.
So what? there is no connection with life expectancy & most people live till late 80's so they have plenty of time for assets to recover. Hold 1-3 years spending money as cash if your risk averse.

Out of interest how have your portfolio grown v Fundsmith as you were unimpressed with it's performance last time we spoke.
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  #88  
Old 16.07.2018, 11:16
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Re: Are you happy to lose 50%-80% of your wealth?

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So what? there is no connection with life expectancy & most people live till late 80's so they have plenty of time for assets to recover. Hold 1-3 years spending money as cash if your risk averse.

Out of interest how have your portfolio grown v Fundsmith as you were unimpressed with it's performance last time we spoke.
Over 20-30 years the opportunity cost of that might well be higher than the loss of withdrawing those 1-3 years of spending money at a "bad" time.

Nevertheless you do need an emergency fund, but 3 years?
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  #89  
Old 16.07.2018, 11:21
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Re: Are you happy to lose 50%-80% of your wealth?

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Over 20-30 years the opportunity cost of that might well be higher than the loss of withdrawing those 1-3 years of spending money at a "bad" time.

Nevertheless you do need an emergency fund, but 3 years?
Being able to use 1 years spending money during the crash to buy more stock would probably even things out, being able to sleep at night is worth quite a lot to some people.
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Old 16.07.2018, 11:22
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Re: Are you happy to lose 50%-80% of your wealth?

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So what?
What I mean is, if you set your FIRE goal to 1 million CHF, reached it, and then it drops to 400k. You already don't work, maybe moved out of Switzerland. It would be tempting to come back and work more to buy more cheap stocks. Just inconvenient, no?

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Out of interest how have your portfolio grown v Fundsmith as you were unimpressed with it's performance last time we spoke.
Let's see:



Well, it seems to be doing really well since the beginning of 2017. I'm happy for you . I just don't know anything about this Terry Smith and would not like to put all my money in the hands of one man. He may be the next Buffett, then I will have missed a great opportunity. But I embrace indexing, as it's automatic and the human factor is strongly reduced.
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  #91  
Old 16.07.2018, 11:29
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Re: Are you happy to lose 50%-80% of your wealth?

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What I mean is, if you set your FIRE goal to 1 million CHF, reached it, and then it drops to 400k. You already don't work, maybe moved out of Switzerland. It would be tempting to come back and work more to buy more cheap stocks. Just inconvenient, no?



Let's see:



Well, it seems to be doing really well since the beginning of 2017. I'm happy for you . I just don't know anything about this Terry Smith and would not like to put all my money in the hands of one man. He may be the next Buffett, then I will have missed a great opportunity. But I embrace indexing, as it's automatic and the human factor is strongly reduced.
The more money that is invested by index trackers the easier it will be to outperform them with a simple strategy like Fundsmith. Interested to have this conversation in 10/20/30 years.

You might want to read his book 'Accounting for Growth' that got him sacked from UBS Philips & Drew where he was their chief Banking analyst over 25 years ago.
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  #92  
Old 16.07.2018, 12:23
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Re: Are you happy to lose 50%-80% of your wealth?

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The more money that is invested by index trackers the easier it will be to outperform them with a simple strategy like Fundsmith. Interested to have this conversation in 10/20/30 years.

You might want to read his book 'Accounting for Growth' that got him sacked from UBS Philips & Drew where he was their chief Banking analyst over 25 years ago.
I agree, the more money in ETFs, the less efficient the market, as prices of the biggest companies are all bid up by weight.

Give Nick Train and others some love too though, Terry Smith ain't the only one

With a bit of time for research you can also follow a good strategy and potentially beat the likes of Smith and Train. It's what I'm trying at the moment.
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Old 16.07.2018, 12:35
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Re: Are you happy to lose 50%-80% of your wealth?

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With a bit of time for research you can also follow a good strategy and potentially beat the likes of Smith and Train. It's what I'm trying at the moment.
So you're smarter than Warren Buffett? Even he recommends index investing. Define "a bit time"? It can't be easy if it's so profitable. And unless you've been doing it for 20-30 years, you can't really tell if you're that good or just lucky. Currently index ETFs have a 20% of market share. There is still plenty room for active traders.
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Old 16.07.2018, 12:44
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Re: Are you happy to lose 50%-80% of your wealth?

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So you're smarter than Warren Buffett? Even he recommends index investing. Define "a bit time"? It can't be easy if it's so profitable. And unless you've been doing it for 20-30 years, you can't really tell if you're that good or just lucky. Currently index ETFs have a 20% of market share. There is still plenty room for active traders.
he recommends index investing to the 'average' (i.e. clueless) investor. he didn't make his fortune investing in indices.
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Old 16.07.2018, 12:49
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Re: Are you happy to lose 50%-80% of your wealth?

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So you're smarter than Warren Buffett? Even he recommends index investing. Define "a bit time"? It can't be easy if it's so profitable. And unless you've been doing it for 20-30 years, you can't really tell if you're that good or just lucky. Currently index ETFs have a 20% of market share. There is still plenty room for active traders.
Sure, you can't tell if you're good or you're lucky until you've done it for a few years.

But you can use fundamental analysis to buy stocks at good prices and enjoy the earnings for many years to come.

I believe Buffett recommends index funds as they are a very cheap entry into the stock market without lining a bogus fund managers pockets. However, if you have an interest in the markets, time to spend, and the right emotional control, I think stock picking has a good chance of beating the market.

"It can't be easy if it's so profitable"...maybe not 'easy' emotionally, but easy in terms of intelligence, I think so.

Try reading books by the likes of Ben Graham and Peter Lynch for an intro

https://www.youtube.com/watch?v=72Pq5zKEi_g
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Old 16.07.2018, 13:09
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Re: Are you happy to lose 50%-80% of your wealth?

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Give Nick Train and others some love too though, Terry Smith ain't the only one
.
I invest 2 of my wife My wife's 4 personal pensions they are invested 65/35 FS/LT. I suggested the same to her professional advisor He went for 25% FS & 25% LF Woodward which has underperformed FS by 33%. His other investments have also been dogs so I will probably take the other 2 over shortly.
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Old 16.07.2018, 13:55
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Re: Are you happy to lose 50%-80% of your wealth?

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I invest 2 of my wife My wife's 4 personal pensions they are invested 65/35 FS/LT. I suggested the same to her professional advisor He went for 25% FS & 25% LF Woodward which has underperformed FS by 33%. His other investments have also been dogs so I will probably take the other 2 over shortly.
Ugh... Woodford...poor guy has had a disastrous few years. With his exposure to the likes of Prothena in his income fund, I sold out of all his funds a few years ago.

He's always relied heavily on pharma and tobacco which haven't been doing so well lately. Especially tobacco.
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Old 16.07.2018, 14:56
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Re: Are you happy to lose 50%-80% of your wealth?

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Ugh... Woodford...poor guy has had a disastrous few years. With his exposure to the likes of Prothena in his income fund, I sold out of all his funds a few years ago.

He's always relied heavily on pharma and tobacco which haven't been doing so well lately. Especially tobacco.
I have a feeling that not having access to Perpetual analysts could be the issue, he was not as much of the brain behind his success as people thought.
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Old 16.07.2018, 16:08
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Re: Are you happy to lose 50%-80% of your wealth?

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I agree, the more money in ETFs, the less efficient the market, as prices of the biggest companies are all bid up by weight.
Huh?

The number of shares bought/sold per company is porportionate to the market value of their float (usually). So for each company in the index the ETF buys x% of the float thus each company gets the same push up or down.

Provided they are comparably liquid the effect on the stock price should be the same.
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Old 16.07.2018, 16:14
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Re: Are you happy to lose 50%-80% of your wealth?

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The more money that is invested by index trackers the easier it will be to outperform them with a simple strategy like Fundsmith.
this is why i think that after the current boom peters out, the rate of return on the index may lower than the long term trend. e.g. instead of 8%, only 3%.

plus i can imagine in the next downturn a lot of new investors panicking and selling off.
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