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You are correct but I'm not seeing your point? I explicitly said yield and dividend cover if it's >1 then it's out of profit. Clearly the data is historical and past performance doesn't reflect future performance etc etc but you can get a pretty good idea of the current years performance by looking at the Investor Relations part of a companies website and RNS releases followed by a cursory glance at the balance sheet paying particular attention to liabilities, debts and amortisation. Not one of my shares selected this way in the last three years has yielded a loss. My high risk investment strategy is another story however.

Fair enough. I'm not familiar with your terminology, that's all, my bad.

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But retail traders tend to go in for 'fading' and 'breakouts' which are not high probability trades. Indeed they are to some extent 'trained' to fail this way.

One of the other posters has the right idea with his 'balance areas'

You could be right, but when you say retail traders are trained this way, then perhaps that's the training industry's fault?

I, like most, tried to look for the holy grail of trading, but came to the conclusion the holy grail is risk mgt depending on your psychology and your time frames. Every type of conceivable trader is covered in the market wizard series, throw in the seminal Mark Douglas's series on psychology and you can learn as long as you have the patience and passion for it.

Thinking about it logically, if all you needed was to read a few books then we'd all be doing it. Trading is a bit like driving, it's only when you start doing it is when you learn is my view.

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You could be right, but when you say retail traders are trained this way, then perhaps that's the training industry's fault?

I, like most, tried to look for the holy grail of trading, but came to the conclusion the holy grail is risk mgt depending on your psychology and your time frames. Every type of conceivable trader is covered in the market wizard series, throw in the seminal Mark Douglas's series on psychology and you can learn as long as you have the patience and passion for it.

Thinking about it logically, if all you needed was to read a few books then we'd all be doing it. Trading is a bit like driving, it's only when you start doing it is when you learn is my view.

There's a lot of truth to what you say. Even a mediocre trading 'strategy' can work with the proper money management. It's the human side of things that bugger it up.

Edited by honkydonkey
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There's a lot of truth to what you say. Even a mediocre trading 'strategy' can work with the proper money management. It's the human side of things that bugger it up.

Yes I agree. I don't know which companies you follow (I am assuming you follow UK companies), but when AFR got smashed I was reading on Advfn two people who, appeared, to be fully invested.

One was a car dealer with 250k in AFR the other had roughly £125k. The latter had been investing and trading for 10 years so he explained. He bought them at 27p, at the time, they were 4p (currently about 9p ish). From his musings he didn't know what to do was his quote. Now unless his pot was 10 times his £125k then he's let a loss really run against him and why?

They both sounded genuine, the first guy was explaining he could afford the loss, 'just', but people who he knew had followed him in and there we people's pension pots on the line. Incredible. :(

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Here's Vodafone. These things are often shrugged off when people don't understand this but very small details give the clues, it never jumps out at you and shouts OH MY GOD CHECK THIS OUT!!

This is a weekly chart but I'll narrow it down to a smaller timeframe to really show you how it's done over the weekend.

GINCaTD.png

Edited by honkydonkey
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That's another thing about trading rather than investing. It seems to involve big stakes for tiny gains. I'm invested - but I never have more than 5% in one business.

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Yes I agree. I don't know which companies you follow (I am assuming you follow UK companies), but when AFR got smashed I was reading on Advfn two people who, appeared, to be fully invested.

One was a car dealer with 250k in AFR the other had roughly £125k. The latter had been investing and trading for 10 years so he explained. He bought them at 27p, at the time, they were 4p (currently about 9p ish). From his musings he didn't know what to do was his quote. Now unless his pot was 10 times his £125k then he's let a loss really run against him and why?

They both sounded genuine, the first guy was explaining he could afford the loss, 'just', but people who he knew had followed him in and there we people's pension pots on the line. Incredible. :(

It's a tough game. If you make a lot of money on tips from friends and magazine tips you got lucky, simple as. I fully understand price and how the market moves, I'm the person that takes the money off you because I've spent a large portion of my life dedicated to learning how to do it, simple as that.

Now imagine how the banks work. Their lifespan is in centuries.

And they manipulate with their weight, and they collaborate fraudulentely. What you need to do in this game, especially forex, is to get on board their trades.

Edited by honkydonkey
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That's another thing about trading rather than investing. It seems to involve big stakes for tiny gains. I'm invested - but I never have more than 5% in one business.

5% seems like good risk mgt to me. As an example; if you have £100k spread over ten companies and one gets clobbered by 50% then, (taking out dealing costs for the moment (which at £5 a trade is negligible I'd argue)), the whole portfolio only has to rise by 5.3% ish for you to be back to break even.

Although if you are actively managing a portfolio of 20 (5%) companies surely you might fall in to the trap and being overly diversified?

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5% seems like good risk mgt to me. As an example; if you have £100k spread over ten companies and one gets clobbered by 50% then, (taking out dealing costs for the moment (which at £5 a trade is negligible I'd argue)), the whole portfolio only has to rise by 5.3% ish for you to be back to break even.

Although if you are actively managing a portfolio of 20 (5%) companies surely you might fall in to the trap and being overly diversified?

Terry Smith reckons to hold 20 to 30 shares. The more shares you hold the less you are going to know about each company. Diversifying you holding over more companies has diminishing effect by the time you get to 20 you have gained nearly all the advantages of diversification.

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Really. Funny eh? Probably all go to the moon now....

My view. I run a balanced portfolio covering various asset classes which includes global equities. I flex my equities portion based on a mechanical valuation method of a few global indices (including the FTSE100 and S&P500) that I've developed over the years. Today I believe the FTSE100 is 12.8% over valued and the S&P 500 a much larger 66.1% over valued. My allocations are therefore reduced but I haven't sold out completely. In the interests of full disclosure my current equities allocation is 52.1% of total portfolio valuation which I am slowly reducing as new money enters the portfolio and dividends are spun off. A nominal holding if all indices were at fair value would be 57.0% with the over valuations currently forcing me to work towards 49.3%. Of course I also could be very wrong...

If you sold everything where did you put the money?

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That feeling might have been spurred with "ALL TIME HIGHS, STOCK MARKETS AT THEIR BEST EVEAAAAAAAAAR" MSM comments.

when things are at ATH, what is the more likely outcome, bearing in mind markets swing up and <down>?

Which market is at an all time high? My analysis from a couple of weeks ago suggests it's not the FTSE100. Relevant chart which corrects the FTSE100 Price for the devaluation of it's unit of measure via inflation:150214-2.png

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My view. I run a balanced portfolio covering various asset classes which includes global equities. I flex my equities portion based on a mechanical valuation method of a few global indices (including the FTSE100 and S&P500) that I've developed over the years. Today I believe the FTSE100 is 12.8% over valued and the S&P 500 a much larger 66.1% over valued. My allocations are therefore reduced but I haven't sold out completely. In the interests of full disclosure my current equities allocation is 52.1% of total portfolio valuation which I am slowly reducing as new money enters the portfolio and dividends are spun off. A nominal holding if all indices were at fair value would be 57.0% with the over valuations currently forcing me to work towards 49.3%. Of course I also could be very wrong...

If you sold everything where did you put the money?

I've given up taking a view on what indices are fairly or unfairly valued (I thought houses were overvalued in 2006 - it appears that the market didn't agree).

I've taken a ten/fifteen year view that equities will outpeform bonds, and I drip my money into a basket of ETFs that is basically 15% bonds, 15% commercial property and 70% global equities. I rebalance this portfolio 6 monthly back to the target allocation and re-invest dividends.

The only thing I know for certain is that it won't prove to be the optimal strategy for the next 10 years in hindsight.......

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I've given up taking a view on what indices are fairly or unfairly valued (I thought houses were overvalued in 2006 - it appears that the market didn't agree).

I've taken a ten/fifteen year view that equities will outpeform bonds, and I drip my money into a basket of ETFs that is basically 15% bonds, 15% commercial property and 70% global equities. I rebalance this portfolio 6 monthly back to the target allocation and re-invest dividends.

The only thing I know for certain is that it won't prove to be the optimal strategy for the next 10 years in hindsight.......

Combine that with a very high savings rate (50% of gross or so) and it also has financial independence written all over it in a similar time period. I'm 7.5 years in and at current run rate should be FI in less than 2 years.

Given your bond holding % plus say half your commercial property as your low risk assets I'm guessing you are quite young?

Have you considered a splash of gold for further diversification?

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Combine that with a very high savings rate (50% of gross or so) and it also has financial independence written all over it in a similar time period. I'm 7.5 years in and at current run rate should be FI in less than 2 years.

Given your bond holding % plus say half your commercial property as your low risk assets I'm guessing you are quite young?

Have you considered a splash of gold for further diversification?

Bond/property holding is a bit on the low side for my age (should be around 40%) but I don't see the value in bonds with interest rates so low (it's the one "position" I've taken in constructing the portfolio). I'm also nervous long term about inflation (the QE is going to impact on prices at some point) and I see equities as a better hedge in this scenario.

I don't like gold as an investment - it doesn't yield, nor does it grow in value by reinvesting profits (like a high growth equity should), so it's price is set by predominantly speculative activity, which frankly I don't understand.

Been fortunate enough to reach "theoretical" FI (ie. if we cut expenditure to the bare bones) recently through the sale of a business. Have been debating various lifestyle options, feel I'm too young to give up work and toying with the idea of a career change.

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...

I don't like gold as an investment - it doesn't yield, nor does it grow in value by reinvesting profits (like a high growth equity should), so it's price is set by predominantly speculative activity, which frankly I don't understand.

But it might zig while your other asset classes are zagging?

Been fortunate enough to reach "theoretical" FI (ie. if we cut expenditure to the bare bones) recently through the sale of a business. Have been debating various lifestyle options, feel I'm too young to give up work and toying with the idea of a career change.

Congratulations. I'm currently going through a similar piece of psychology myself. I'll be early/mid 40's by the time I'm done. Do I stay in my current career, try something completely new career wise or move away from work altogether allowing time to focus on other pursuits...

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But it might zig while your other asset classes are zagging?

.

I'm hoping to be able to fund most of our income needs in 10 years time from the divi yield. In the addition we hold 3 years living expenses in cash to avoid "forced liquidation" of the portfolio in a downturn... at the moment still have a work income so not tapping savings..of course it could all go to ratshit!

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I'm hoping to be able to fund most of our income needs in 10 years time from the divi yield. In the addition we hold 3 years living expenses in cash to avoid "forced liquidation" of the portfolio in a downturn... at the moment still have a work income so not tapping savings..of course it could all go to ratshit!

Living off interest and dividends is my aim as well. I can see the advantages of this approach as psychologically selling down assets, particularly during a down turn, could be difficult.

My strategy forces me to hold a small 5% allocation of the Precious. I'm then trying to boost my equity dividends with a portion allocated to a High Yield Portfolio. Rationale for gold is here in detail but in short gold in £'s vs FTSE100 has a weak negative correlation over the length of my dataset.

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That feeling might have been spurred with "ALL TIME HIGHS, STOCK MARKETS AT THEIR BEST EVEAAAAAAAAAR" MSM comments.

when things are at ATH, what is the more likely outcome, bearing in mind markets swing up and <down>?

I get where you are coming from, but as has been hinted at WICAO, the FTSE 100 isn't there yet when other factors are taken in to consideration. Whether we like it or not, the US markets, so far have proved to be very resilient. One only has to look at how they recovered in October last year. I don't think we've yet had a 10% plus pull back since 2011, I think it is.

The thing is with market tops you can only call them in when they are actually in, some might be able to hint at them with indicators and volume, even throw in some macro points to boot to make the case. Historically though, this bull market run in the US markets is one of the longest on record, it's also one of the most unloved.

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I hope people have watched that video, that I have put up earlier in this thread. When you see people turning their backs on their own business (in this case it was their carpet business), and reinvesting their incomes and capital into Microsoft and penny stocks, and getting air time on TV, then look to sell in the coming years!

Veterans of the market.

I am one of them - 20 years or so and counting. I remember in the early years checking stock prices on Ceefax, and looking at Cambridge Antibody. And the experience (it costs to learn) has helped me buy part of this house - HOWEVER we are not in a bubble. If people have been watching the markets for years, and they are not multi-millionaires yet - then we are definitely not in a bubble.

If you look at one of the popular traders in the UK, namely Robbie Burns, who has been following the markets for decades, his portfolio is here: http://nakedtrader.co.uk/trades.htm

Now why hasn't he made 10x his money in the last 2 years - that is because you can only get so much out of the market. We are not in a bubble. The other tail tell sign of a bubble is day trading, and people are able to trade within the bid/ask spread.

If everyone on this forum starts to talk about the FTSE Aim-Allshare index (risky), then I would also start to think it is getting over heated. Veteran city man Tom Winnifrith has proclaimed himself a sheriff on AIM, as it is full of bad companies. The day he starts being bullish on most of AIM, that is also an indicator.

If people want to learn, then try and read around the subject, about financial history, and experience from real traders (The Market Wizards Book Series), and of course Youtube has about 10 documentaries about traders. There are lots of VI in the markets - so beware.

Edited by 200p
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