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Some thoughts on stockmarket investing

Discussion in 'Shares' started by Mark Laszczuk, 16th Jan, 2006.

  1. Mark Laszczuk

    Mark Laszczuk Well-Known Member

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    *WARNING* This post most likely will bruise some ego's. Seriously.

    Okay, so over the last few weeks there's been much discussion about the performance of Navra. I'm gonna put a disclaimer in here (which I never, ever do - ever): I write this post not as an employee of Navra, but as an investor. Actually, I write pretty much all my posts as an investor, but I wanted to make it absolutely clear in this post.

    Anyway. Was casually reading through a PDS yesterday on a lazy Sunday afternoon when I came across this absolute gem of information. I really strongly believe there are certain people who really really really need to read this over and over and over again until it is permanently burned into their brains. Okay, so here goes.

    Warning
    The Platinum Trust Funds are not suitable for investors who:

    1. Expect returns to mirror or better an index at all times. Platinum investment process pays no heed to recognised benchmarks.

    2. Expect to make significant short term gains. The minimum suggested time horizon for each fund is five or more years.

    3. Cannot tolerate that there may be substantial fluctuations in the value of your investment. Equity markets are volatile and fluctuations will occur in the value of your investment in the funds.

    I've read many books on investing and I found it quite ironic that some of the very best statements I have ever read came from a PDS which I paid nothing for. If you can't deal with your investment going up, down and sideways or get upset when it doesn't do exactly what you want it to do, maybe you're not cut out to be an investor.

    I'm quite sure that the authors of this PDS would have much preferred to use the word 'speculators' in the first sentence there, because people that overreact to standard market and investment fluctuations are certainly not investors, but truly speculators. Ask yourself: do you follow the herd?

    Mark
     
    Last edited by a moderator: 16th Jan, 2006
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    You've actually made some excellent points there Mark. Most people just dismiss the stuff in the PDS as arse-covering, but I think it's actually quite important.

    My advice to people who complain about the performance of funds - if you don't like it, dont invest in it; if you think you can do better - go for it.
     
  3. Mark Laszczuk

    Mark Laszczuk Well-Known Member

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    I chucked a link in the share links dealie there, in my opinion it's a goldmine of information. Check it out. Actually, I'm gonna put another one in there.

    Mark
     
  4. Alan

    Alan Well-Known Member

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    Hi Mark.

    1. Must have missed the link. Are you referring to a NavraInvest PDS or PDS's in general?

    2. Based on the 5 year guideline, do you think people should still temporarily 'park' their Funds in a Managed Fund if they expect to need it in less than 5 years? As a FP, would you make such a recommendation?
     
  5. Tropo

    Tropo Well-Known Member

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    Mark & Sim,
    I guess I know what is wrong.
    It's very disturbing that a lot of people/investors know a lot about real estate and almost nothing about Stock Market or any other Market on this matter.
    I understand that literacy on this subject practically does not exist - but I wonder why people who invest in funds ( any funds ) are lazy to such extend that are not willing to read even one or two books on this subject.
    I am not saying that every investor should be competitive trader / investor - but basic knowledge is the must...
    It's like buying 4 cylinder car and complaining that is not performing like V8.
    And one more ( from my experience ).
    If one is not ready to lose some money (occasionally )trading/ investing in the Stock Market - should not invest in this instrument at all.
    :cool:
     
  6. Mark Laszczuk

    Mark Laszczuk Well-Known Member

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    Alan,

    1. The PDS I was referring to in the original post was from Platinum. I was reluctant to post the name in the original post, but to alleviate confusion, I will edit the post. The links I refer to have been posted in the Shares and Managed Funds links section. Apparently they need to be approved before they get posted up, so look out for them.

    2. That question I'm afraid, is one I'm not willing to answer here. There are just too many anomalies for there to be any clear answer on the subject. It really depends on the situation at hand and since every single person's situation is entirely different from everyone else's.... well, you see where I'm coming from?

    Mark
     
  7. Mark Laszczuk

    Mark Laszczuk Well-Known Member

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    Just out of curiosity, how many people here actually read PDS's? I guess I'd like to split it into three groups:

    1. people who never read PDS's

    2. people who only read the PDS's of the funds they are invested in - and only after they have invested in the fund or funds

    3. people who read and study PDS's and do a bit (or a lot) of research before making an investment (assuming they make one).

    The reason I'm curious as to this is I get the distinct feeling that not a lot of people actually take the time to read PDS's - even of the funds they are invested in!

    Mark
     
  8. Alan

    Alan Well-Known Member

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    Maybe some people just prefer to wait until the movie comes out. :D :D :D


    I'll put my hand up for 'read PDS of Fund before I invest in it' .......however ......I've promised to read a few more bedtime stories before I start reading other PDS's just for the fun of it. :)
     
  9. HHH

    HHH Active Member

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    I also would like some further discussion on Alan's 2nd question. The minimum of five years investing has come up a few time here and on Somersoft recently. My understanding was that one of the suggested uses for the Navra fund was to to help speed up the saving of your next IP deposit. I certainly don't want to be waiting 5 years between IP purchases. Can we discuss this further please?
     
  10. Gonzo

    Gonzo Well-Known Member

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    #3 for me. I've read and tried to understand the PDS of every fund I've bought into. I guess that's why I am a bit confused to see so many people here and on SS diving significant portions of their portfolio into a single fund with very little past history.

    Diversification is key, even in funds. Saying the fund inherently gives you diversification because it invests across multiple stocks is, IMHO, a very naive strategy.
     
  11. Tom&Don

    Tom&Don Active Member

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    Ummmm ... Key for what??

    Mediocre returns?
    Mimicking indexes?

    Diversification is a touchy subject that has different points of view - sophisticated investors would chuckle at that comment. Actually maybe they wouldn't chuckle ... just smile to themselves on the inside and agree with you. And keep making bucketloads of money, without diversification.

    Back to the topic though ... the average investor I would guess is not sophisticated, would possibly read a PDS but wouldnt truly understand what they are reading anyway. They listen to the media for their financial lottery.


    T.


    PS .. having said that, there COULD of course be very particular scenarios where you WOULD want to diversify.
     
  12. MichaelWhyte

    MichaelWhyte Well-Known Member

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    Mark,

    Some good points. And, yes, I have read the Navra PDS before investing. I just want to clarify my position on the whole "underperforming the index" issue. Basically, I don't care really as I'm in it for the long haul. What I do want to understand is "why it underperformed the index" in this quarter, and is this symptomatic of the fund in a rising market. Also, has this underperformance been locked in or is there some really sneaky hidden value hiding somewhere waiting to be released when I'm not looking. :)

    Anyway, just thought I'd clarify. I turned a profit in the quarter and am happy. I'm just an informed, active investor who likes to know what's going on with his investments. To look at underperformance and just shrug it off is foolhardy in my opinion. That's like buying a suite of properties and not assessing their performance and learning from the process.

    Its basically a learning process or a virtuous circle or whatever they call it. Something like: Act, immerse, asses, modify, act. If you don't immerse and assess then you can never modify before you act again...

    Just my 2c,
    Michael.
     
  13. gazza

    gazza Well-Known Member

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    Mark

    Michael beat me to the punch with his comments, with which I wholeheartedly agree. I think the questions he and I (and others) have raised about the performance of the Navra funds during the last quarter are very relevant. We all understand the time horizon for investing in the fund ie 5yrs plus but the fund has always been sold as one that will outperform the market especially given conditions like we have just experienced ie a fall of 5% followed by a rise of over 8%. To date we have seen no outperformance and I posted an explanation (as explained to me by Steve) which went along the lines of the fund loses money on the first third back, breaks even in the middle third and creams it in the final third. Given the continued rise of the market since I posted that comment, I would have thought we should be closing in on the final third and therefore expect to start seeing the outperformance kick in. If not, I think an explanation as to why not and where the fund stands, would be very useful and enlightening.

    cheers
    Gazza
     
  14. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Hangon - this isn't a discussion about NavraInvest - let's keep it on topic.

    I am in the "read a PDS from cover-to-cover before investing" camp, but I don't read them for fun. Because I am very time-poor at the moment, I only tend to look at investments based on the recommendations of people whose opinions I trust - so if one of them suggests that they think X is a good investment, I will look at the PDS, do some other research and make up my own mind.
     
  15. Alan

    Alan Well-Known Member

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  16. gazza

    gazza Well-Known Member

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    Sim

    While the topic might be about reading PDS' closely and understanding what you are getting into before investing, I sort of got the feeling that Mark's comments were suggesting that the people who raised questions about NI's fund performance, needed to read the PDS closely so that they understood investment timeframes, how performance might fluctuate year to year , etc. If they had and still invested, they wouldn't be asking any questions. If I misunderstood Mark's intention, I apologise but that's how it read to me.

    Gazza
     
  17. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    That's fine gazza - just wanted to make sure we didn't duplicate all the performance discussions already had in the other threads about NavraInvest :D
     
  18. Gonzo

    Gonzo Well-Known Member

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    TD, not sure how much you're chuckling but I'm surprised at your comments. I may not be a sophisticated investor, unlike yourself, but I consider myself informed.

    I use funds to invest in the US, European and Asian markets. I don't have the time for proper DD in these markets so I choose to use funds to do this. Currently three funds in each market. I certainly wouldn't trust all my holdings in a segment to one fund manager, no matter how sophisticated I thought I was.

    In the local market, I have a basket of stocks varying between 10 and 15 in a couple of sectors. While I'm confident they are all winners but I'm not sophisticated enough to plunge all my my stake into a single stock.

    So for me, diversification is key. It allows me to get a finger into the markets I think are performing well without needing to quit my 9-5 to concentrate on DD or rely on a single entity to perform.
     
  19. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I think it's a bit dangerous discussing "sophisticated investors" and their diversification preferences in the context of non-sophisticated investments like managed funds.

    I think you might find that most truely sophisticated investors don't diversify because they've found one or two investments that make ALL of their money for them - and they are very good at making money with that investment. For many, this means a business, and their entire life (and fortune) is tied up in that business. They might also own some property - but that's not always seen as a money-making investment, more of an asset backing (and a place to live!). That's not to say these people don't try and make money out of property - they can't NOT try ... making money is habit forming :D ... just that this is not their primary route to wealth. Real estate is often where they STORE their wealth.

    For people who CAN'T find an investment that you have good control over and returns of 50% compound growth every year (and sometimes 100% or more) ... then you are stuck with the non-sophisticated investment markets of publically listed shares and managed funds, and real estate - where you have limited returns (20% is considered good), and diversification is about the only control you have!

    Think about Steve Navra ... where is his money ? 1) NavraInvest, 2) NavraInvest Funds, 3) Real Estate. Diversified ? No. Control ? YES !
     
  20. Tropo

    Tropo Well-Known Member

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    William O'Neil quote:

    " Diversification is a hedge for the ignorant ".
    There are several problems with diversification as a money management tool for stock traders.
    If one cannot get one stock right how one are going to get a dozen right ?.
    I tend to agree with W. O'Neil....
    :cool: