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Preservation of capital
King Lodos
Posted: 27 May 2017 18:08:09(UTC)
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Jeff Liddiard;47223 wrote:
Why Henderson European Smaller Companies OEIC as opposed to TR European Growth Growth Trust PLC?


I'm a Value investor at heart, so I'll usually pick the fund with lower P/Es and PEGs – especially if it's a smaller-sized fund a bit off the radar.

I'm really looking for the potential for explosive upside, and then getting out of the market if things start to turn south – as a buy-and-hold investment, I might choose TRG.
1 user thanked King Lodos for this post.
Jeff Liddiard on 27/05/2017(UTC)
srg751
Posted: 28 May 2017 06:52:09(UTC)
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King Lodos;47222 wrote:
@srg
]

And dividends are an illusion .. They're just earnings a company can't find anything better to do with .. You'll never get the return from dividend stocks I get from high growth Small-Caps.




So, if the company decides to spend money decorating the office rather than pay a dividend, I'll benefit from that will I....... You've spent too many lonely Saturday nights cooped up in that bedsit allowing us revellers to make you bitter.


Oh, so it's " high growth small caps" today is it. Remind me, what was it yesterday ?

Sorry, anyone who invests in Russia via an OEIC (that could take days to sell), and at the same time advocates minimising losses isn't worth listening to. Stick to politics mate, I'm sure they'll allow you in with your crayons.
Your on filter ...again.
srg751
Posted: 28 May 2017 07:00:53(UTC)
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King Lodos;47224 wrote:
Jeff Liddiard;47223 wrote:
Why Henderson European Smaller Companies OEIC as opposed to TR European Growth Growth Trust PLC?


I'm a Value investor at heart, so I'll usually pick the fund with lower P/Es and PEGs – especially if it's a smaller-sized fund a bit off the radar.

I'm really looking for the potential for explosive upside, and then getting out of the market if things start to turn south – as a buy-and-hold investment, I might choose TRG.



P/Es on OEICs are meaningless out of date historical numbers. So that's a non answer.

You're looking for "explosive upside" eh. By that do you mean us "peasants" are looking for something more pedestrian,
As I've said before, you don't buy IT's because the £10 dealing fee is a lot of money to a student.
Mr Helpful
Posted: 28 May 2017 08:02:26(UTC)
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King Lodos;47222 wrote:

And dividends are an illusion .. They're just earnings a company can't find anything better to do with .. You'll never get the return from dividend stocks I get from high growth Small-Caps.


WOW : Dividends An Illusion !!!

That's nailing colours to the mast !!!

Have noted a growing profusion of anti-dividend views on other sites such as BH.
Is this a sign of an approaching market top, whereby investors now need to create self-reassurance, by asserting that all will be well without serious income from the majority of asset classes today?
1 user thanked Mr Helpful for this post.
Mickey on 28/05/2017(UTC)
King Lodos
Posted: 28 May 2017 08:13:21(UTC)
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srg751;47231 wrote:


P/Es on OEICs are meaningless out of date historical numbers. So that's a non answer.

You're looking for "explosive upside" eh. By that do you mean us "peasants" are looking for something more pedestrian,
As I've said before, you don't buy IT's because the £10 dealing fee is a lot of money to a student.


I see what Jon Snow means .. A feisty, combative srg!

My opinion on dividends is shared by Terry Smith .. There are lots of factors, but generally when a company can reinvest its own earnings at a high return, it will do so and will generate a higher return .. I don't think office fixtures would factor into even the smallest companies I invest in (but good ergonomics can have a very high return on capital – as anyone should know).

For mean reversion we actually want P/Es smeared across time – that's why we invent things like the CAPE ratio, which smear them over 10 years .. When I talk of explosive upside, momentum actually tells you what earnings estimates are doing months before your stock screen – if you think about that one: price movements generally reflect changes in earnings estimates as they happen .. It's not simple – if it were, everyone (and no one) would generate alpha.
King Lodos
Posted: 28 May 2017 08:23:56(UTC)
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Mr Helpful;47233 wrote:
King Lodos;47222 wrote:

And dividends are an illusion .. They're just earnings a company can't find anything better to do with .. You'll never get the return from dividend stocks I get from high growth Small-Caps.


WOW : Dividends An Illusion !!!

That's nailing colours to the mast !!!

Have noted a growing profusion of anti-dividend views on other sites such as BH.
Is this a sign of an approaching market top, whereby investors now need to create self-reassurance, by asserting that all will be well without serious income from the majority of asset classes today?


I love dividends .. I wish I had an income portfolio – it makes you feel like holding assets is worthwhile even when they're overvalued and nosediving .. It feels productive .. But I can't let psychology get in the way of returns (which are likely to get harder to come by).

There's a good case that most of the S&P500's returns over a century are from dividends – but then, 100 years, and no market timing, does give those dividends a lot of room to compound, and because cap-weighted indexes are dominated by dinosaur-sized companies, it has proven true that they can't generally reinvest capital as profitably for investors as paying a chunk of it out.

But you'd have done much better in Small Cap stocks.

https://static.seekingalpha.com/uploads/2015/9/17977982_14414909416872_rId7.png
Mr Helpful
Posted: 28 May 2017 10:13:05(UTC)
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King Lodos;47237 wrote:


But you'd have done much better in Small Cap stocks.

https://static.seekingalpha.com/uploads/2015/9/17977982_14414909416872_rId7.png



Data relates to small cap VALUE
And is a much discussed phenomenon.
But that is not the same as pure small cap !!!
Which may or may not align?
And the chart comparator is large cap GROWTH.
Sheds little light on the Div issue?
Was the correct chart posted?

Also just wondering whether survivorship bias creeps in here?
Are Small Caps the more likely to go bust and disappear off the screen?
Probably not the case but struggling to get my mind around how such data would be gathered over such a long period.

But then large caps can be vulnerable to some extent too.
Century or so ago US market was predominately Railroads.

Thanks for the info.
King Lodos
Posted: 28 May 2017 17:06:01(UTC)
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Mr Helpful;47245 wrote:
Data relates to small cap VALUE
And is a much discussed phenomenon.
But that is not the same as pure small cap !!!
Which may or may not align?
And the chart comparator is large cap GROWTH.
Sheds little light on the Div issue?
Was the correct chart posted?

Also just wondering whether survivorship bias creeps in here?
Are Small Caps the more likely to go bust and disappear off the screen?
Probably not the case but struggling to get my mind around how such data would be gathered over such a long period.

But then large caps can be vulnerable to some extent too.
Century or so ago US market was predominately Railroads.

Thanks for the info.


No, there are plenty of graphs showing the Small-Cap premium alone – but they were all too big to post here.

But that's not what I'm looking at (I don't think there is a graph for what I'm looking at), but rather an example of stocks that typically don't pay >1% dividends (Small-Cap Value) vs stocks that often do .. So it's not a clean comparison – but Small-Cap Value has been the best place to be, and it's not been down to dividends.

It's Fama and French's data – there are no more respected academics in investing, so if they haven't fixed for survivorship, they've got big problems .. There is daily data on the US stock market going back a long way .. With things like SCV, there's a constant rotation, as stocks slip into the Value sector, and slip out of the Small-Cap sector, etc. So it's not a sector companies stay in indefinitely.
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Mr Helpful on 29/05/2017(UTC)
Mikesmusing
Posted: 29 May 2017 09:44:54(UTC)
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King Lodos;47163 wrote:


But that's only nominal returns.

Today's cash rates of near-0% are actually in line with historical averages in real terms because inflation's so low .. There have been times you'd get >5% on cash, but inflation might have been 7%.

So it's all relative .. Think of cash as a near 0% real return whatever rates are .. But when stocks drop 50%, cash suddenly buys you a lot more stocks than it used to.



If you think of cash as being 0% real return regardless of interest rates you (like me...) will have lost 10% - 20%+ of your real capital held in cash over the past 8 years or so. Cash is hopeless in preserving capital over the longer term - but would provide protection in a period of deflation. Of course other assets may perform even worse than cash, depending on the scenario (consider some periods in the 20s and 70s, say)
Deano
Posted: 30 May 2017 08:32:08(UTC)
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In order to adopt a capital preservation strategy, whilst also wanting some real growth, I would go for a mix of index-linked gilts, short duration corporate bonds, gold, possibly some private equity and maybe a cautious IT.

As such, something like the following might work:-

20% Vanguard UK inflation linked gilt index
20% GAM Star credit opps
15% ETFS Physical gold
10% Harbourvest global private equity
15% RIT Capital partners IT

and then 20% either in a World Index Tracker to give some "upside protection" should equity markets continue to do well or leave in cash in order to capitalise on any market falls/opportunities.
2 users thanked Deano for this post.
Mickey on 30/05/2017(UTC), dlp6666 on 21/07/2017(UTC)
Alan Selwood
Posted: 30 May 2017 09:08:35(UTC)
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Or perhaps we are back with tbe 'buckets' approach.

Keep in cash enough to cover years 1 & 2 plus about 20% to allow for inflation to the end of year 2.

Then with the rest go into Personal Assets Trust to try for some growth and inflation-protection.

If PNL gains ground, take some profits at the start of year 1 to put into cash to top up your more stable spending money bucket. Repeat at start of year 2.

If. PNL falls, however, don't cash any in unless you are running your cash reserve too low and need the money. Then draw out only enough at a time to see you through the next 6 months.

Monitor carefully at this point, and if PNL recovers, draw out some more to replenish the spending bucket.

Fingers crossed!

You can always create your own version of PNL, but be aware thar they will probably be better than you at taking advantage of low prices to snap up bargains for tbe next part of the cycle before many people think it's time to do so.

2 users thanked Alan Selwood for this post.
Mickey on 30/05/2017(UTC), dlp6666 on 21/07/2017(UTC)
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