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100% cash or 100% invested ?

Discussion in 'Investing Strategies' started by crc_error, 22nd Oct, 2008.

  1. crc_error

    crc_error The Rule of 72

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    Last edited by a moderator: 23rd Oct, 2008
  2. islandgirl

    islandgirl Well-Known Member

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    But Warren Buffett doesn't have kids in school, mortgages and have to put food on the table. He can afford to be brave
     
  3. crc_error

    crc_error The Rule of 72

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    I think he has more to loose than all of us!
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    When your future income is pretty much guaranteed - you can afford to lose all your invested capital ... you know you won't go hungry.

    When you have effective control over the assets you are buying (ie the companies), then your investment is far safer than where you have zero control.
     
  5. crc_error

    crc_error The Rule of 72

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    You really think Warren Buffett is planing on leaving a legacy which says "He became the worlds wealthiest man, but lost it when he died"?

    I don't think so.

    Warren Buffett isn't controlling all the companies he invests in. Do you really think such a old man takes a active role in managing the companies? Not even warren buffett can avoid financial turmoil for companies in bad times.

    http://www.nytimes.com/2008/10/17/opinion/17buffett.html?_r=1&oref=slogin
     
  6. crc_error

    crc_error The Rule of 72

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    and one more thing Sim.. no offense, but you were investing in shares, when warren buffett was in 100% American government bonds, now your in cash when he is in 100% American equities?

    lol :confused:
     
  7. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    You completely misunderstand what I'm saying.

    I am saying that it is far less risky to Warren Buffett the person to be investing "all his personal cash" because he won't go hungry if everything does go wrong and he loses all of his invested capital. I was not saying that he was going to lose it - just that he can afford to.

    Again you miss the point - I'm not saying he is controlling them personally - but he employs the best managers he can find to do the work for him.

    I don't get to choose the CEO of NAB if I invest in them (I don't have a large enough shareholding).
     
  8. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I do take offense because you make the same ignorant statements over and over again in most of the threads you post in. You continue to pull out the same cliches and frankly it is getting rather tiresome.

    If it was so easy to "do what Buffett does" then why aren't you the third richest man in the world right now ?

    Have you invested all of your money into American equities ? Why not ?

    Yes we can learn a lot from Buffett - but you need to keep it real.

    If you think Buffett is the only person who knows what he is doing (which may actually be the case!), then the only investing advice I have for you is to go buy Berkshire Hathaway shares - currently trading at the bargain basement price of $117,950 per share (down from $147,000 per share just recently). Have you bought any of these shares ? Why not ?
     
  9. austing

    austing Well-Known Member

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    Pretty much fully invested in aussie industrial stocks. As more money comes in I keep buying.

    Rules are simple and probably in line with some of Buffet's views (for the average investor):

    1. Let go of all the analysis paralysis, getting paranoid about timing the market and start thinking long term.
    2. Diversify to minimise stock specific risk or better still invest a sizeable core in index ETFs and LICs.
    3. Spread your buying over time with an emphasis on Buffet's motto of "be greedy when others are fearfall and fearfall when others are greedy.
    4. Focus on income - capital growth will sort itself out over time as it always does.
    5. Minimise costs - hold long term or forever and hence avoid active trading unless you want a christmas card from the broker.
    6. Keep debt at a conservative level (I never let my LVR get past 40% and generally keep it a lot less). All loans are against property - I don't use margin loans.

    Personally I have invested a considerable sum into the market since May. After taking dividends into account I'm down bugger all as of today. Sure it could go down a lot further but the short - medium term capital volatility is of no concern. And even if dividends are slashed it will still be a very attractive income which will enable me to continue to afford quality beer:).

    Also the above takes next to no time to implement - basically set and forget.

    Just my strategy developed over time after trying most things in my younger days such as technical trading of stocks and futures etc and certainly this is not meant to be a recommendation for others.

    Cheers - Gordon
     
  10. crc_error

    crc_error The Rule of 72

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    very good post Gordon. I agree with your stratergy. I'm doing simular things to you.

    Are you buying stocks or funds persoanlly?
     
  11. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Thanks austini - that is a very useful and practical post (very different to just quoting someone else's words).
     
  12. austing

    austing Well-Known Member

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    Hi crc_errror,

    About 60% in top 200 quality industrial stocks paying good dividends (held in disc trust) and the other 40% in LICs and local ETFs (held in SMSF). Over time I expect to hold a greater percentage of ETFs and LICs.

    Today I'll be adding to STW etf.

    I don't now and never will buy "unlisted" managed funds - only LICs and ETFs.

    Except for a relativelty small holding of SLF in the SMSF I have no interest in LPTs (REITs) now or in the future.

    Cheers - Gordon
     
  13. austing

    austing Well-Known Member

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    Hi Sim,

    I hope that my posts are never interpreted as having a go at anyone or trying to big note myself. I'm merely stating what I do after having made just about every mistake you could possibly make in the past. This is what works for me and provides a wonderful SANF. Hopefully someone might find it useful or wish to constructively add to the topic.

    Cheers - Gordon
     
  14. crc_error

    crc_error The Rule of 72

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    Gordon, have you considered international exposure at all?

    I have about 1/2 my holdings in international funds. Platinum Brands been one which is doing quite well lately.. offsetting losses in Colliers International Property.
     
  15. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I don't think that would ever be a problem austini - I always find your posts thoughtful and well balanced.
     
  16. austing

    austing Well-Known Member

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    Yes - but won't by looking to buy international etfs/funds until some time into the future. Right now I'm focusing on dividend paying local listed funds which provide those wonderful franking credits offsetting tax (and more) in the SMSF.

    To contradict my earlier post I might be tempted to consider a couple of low cost unlisted funds such as Vanguard or DFA to take advantage of hedging. But for emerging economies I would use unhedged ETFs (eg Barclays) so as to take advantage of the potential increased strength in the currency as their economies grow.

    But given I'm an income focused investor it's very difficult for me to get too interested in international funds. It's the income that gives me choice and freedom to do what I want to do.

    Cheers - Gordon
     
  17. handyandy

    handyandy Well-Known Member

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    Hi Gordon

    As someone who has not followed LIC's or ETF's could you please give a rundown on them (codes will do)

    Cheers
     
  18. try anything once

    try anything once Well-Known Member

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    SLF

    "Except for a relativelty small holding of SLF in the SMSF I have no interest in LPTs (REITs) now or in the future."

    Gordon - I too now hold a relatively small holding of SLF. Sadly it used to be a rather large holding!! :(

    I thought I was on a safe bet playing the field with SLF rather than trying to pick a winner. I also thought it was a good diversification to STW which is my main holding.

    I'm still holding on to the SLF in the desperate hope that LPTs will have their day again one day but it just seems to be sinking lower and lower and lower.... (another 7% down today!).

    You must have some good LIC's because I've held STW and SLF for 1.5 years now and I am way down on both!

    Can anyone suggest any solid low correlation options to a portfolio long on STW, SLF, BHP/Rio??
     
  19. austing

    austing Well-Known Member

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    I tend to stick with the older and larger LICs: eg AFI, ARG, MLT, AUI but also the likes of WHF and MIR for smaller coys etc.

    Research on LICs and ETFs found at ASX website:
    Managed Funds & ETFs - ASX - Australian Securities Exchange

    And from that page:
    http://www.asx.com.au/products/pdf/state_street_funds.pdf
    http://www.asx.com.au/products/pdf/asx_aegis_lmi_quarterly_review_june_2008.pdf
    http://www.asx.com.au/products/pdf/bell_potter_lic_research.pdf

    Cheers - Gordon
     
  20. austing

    austing Well-Known Member

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    Good, i hope so, but more of the performance as of late has come from individual stocks and being somewhat fortunate with timing. I just watched for big falls on Wall Street in recent months and looked for buying opportunities of local stocks on those days (greedy when others are fearful basically). I only bought if a particular stock looked a screaming bargain. Focusing on quality stocks with great dividends has seen the income certainly add to overall performance. Note also that I don't hold resource and energy stocks. Many of the industrial stocks I hold are well up from when I purchased them. It is the resource sector that is now feeding into the downward spiral of the overall index. As for LICs a significant amount of them have been purchased recently so capital losses aren't all that great.

    But as stated in a previous post, in the short to medium term, I couldn't care less about price volatility. As long as the overall portfolio keeps paying good income I'll let price sort itself out overtime as it always does.

    Please note that I don't consider myself an expert on stock analysis by any means. I just try to use some some common sense, stick with conservative proven performers and spread my risk with diversification. Boring would pretty much describe my stock portfolio.

    Cheers - Gordon