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SMT at a discount - good time to buy?
Aminatidi
Posted: 25 March 2018 08:47:50(UTC)
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I had a plan to make SMT one of the core trio of equity pots in my ISA.

I need to get £7.5k in to bring it up to the level I want it at. I was going to do £2.5k of this tomorrow and £5k next ISA year but I notice it's now at a -2% discount.

Could someone explain to me like I'm 5 whether the discount is that important and should be enough to make me just do the £7.5k now?
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Guest on 01/04/2018(UTC)
markus
Posted: 25 March 2018 09:20:09(UTC)
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If you're planning on holding a long time >5yrs...then whether its on 2% discount or 2% premium is probably irrelevant for SMT.

Is now a good time to buy...who knows...suspect there are more downward movements to come but suspect these would be irrelevant when you look back in 5yrs time....unless a black swan paddles by.
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Aminatidi on 25/03/2018(UTC), Andrew Smith 259 on 26/03/2018(UTC), AimingforFIRE on 28/03/2018(UTC), Guest on 01/04/2018(UTC)
King Lodos
Posted: 25 March 2018 11:08:30(UTC)
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SMT and what it represents (high growth tech giants) is my biggest dilemma in investing today..

I've gone on about this before, but the stocks it's in fit the classic mould for bubbles and exuberance .. The PE ratio basically tells you how long it takes to make your money back on your investment (a PE10 means you'll get your original investment back in 10 years) .. So people buying stocks on PE100 are either willing to wait 100 years, or they're factoring in lots of growth.

The question is always whether we're under or overestimating that growth .. It could be that 21st century investing plays by different rules (who's disrupting and who's being disrupted) .. However SMT's Ratio Info (bottom of the page) shows that over 3 years, most of the excess return comes from it being High Beta .. So it's acting like a leveraged play on the market .. If you invest now, and markets take a downturn, it may well be a big loser

https://www2.trustnet.com/Factsheets/Factsheet.aspx?fundCode=ITSMT&univ=T

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Sara G
Posted: 25 March 2018 11:29:21(UTC)
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I wouldn't go all in on anything at the moment, and putting the whole £7.5K in over the next few weeks is effectively doing just that. I would drip-feed via monthly contributions over the next year, say. It's good to have target allocations (it takes the emotion out of it) but you can work towards them over time.

As to whether SMT is a good choice right now, it's hard to say. There is a lot of hype around this fund and plenty of scope for the managers to disappoint. Plus it is (I think) the biggest IT among retail investors so potentially vulnerable to significant panic-selling at some point, which may throw up a better opportunity.

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Aminatidi on 25/03/2018(UTC), King Lodos on 25/03/2018(UTC), Alan Selwood on 25/03/2018(UTC), Andrew Smith 259 on 26/03/2018(UTC), Bellabeck on 27/03/2018(UTC), Rickenbacker Al on 28/03/2018(UTC)
Aminatidi
Posted: 25 March 2018 11:35:00(UTC)
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Sara G;59358 wrote:
I wouldn't go all in on anything at the moment, and putting the whole £7.5K in over the next few weeks is effectively doing just that. I would drip-feed via monthly contributions over the next year, say. It's good to have target allocations (it takes the emotion out of it) but you can work towards them over time.

As to whether SMT is a good choice right now, it's hard to say. There is a lot of hype around this fund and plenty of scope for the managers to disappoint. Plus it is (I think) the biggest IT among retail investors so potentially vulnerable to significant panic-selling at some point, which may throw up a better opportunity.



Sara thank you that's a very reasoned and sensible response.

You know the stupid thing? Trading fees is something that always annoys me but when you read it very rationally like your post above, why would I give a monkeys about a one off £10 cost on a transaction compared to returns or losses over the years ahead... I need to slap myself sometimes :)
3 users thanked Aminatidi for this post.
Sara G on 25/03/2018(UTC), Tom Bourne on 28/03/2018(UTC), Robin Stone on 18/04/2018(UTC)
JohnW
Posted: 25 March 2018 11:46:01(UTC)
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I hold SMT, but not as a core holding. For that I prefer the grand old plodders (so to speak) who keep steadily making money year in and year out. The IT's who wont make you a millionaire, but also wont give you sleepless nights. SMT, although has done very well for me, is a trust which by the nature of it's holdings is always a little speculative.

Regards, John
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Aminatidi on 25/03/2018(UTC)
King Lodos
Posted: 25 March 2018 11:53:10(UTC)
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Aminatidi;59359 wrote:
Sara G;59358 wrote:
I wouldn't go all in on anything at the moment, and putting the whole £7.5K in over the next few weeks is effectively doing just that. I would drip-feed via monthly contributions over the next year, say. It's good to have target allocations (it takes the emotion out of it) but you can work towards them over time.

As to whether SMT is a good choice right now, it's hard to say. There is a lot of hype around this fund and plenty of scope for the managers to disappoint. Plus it is (I think) the biggest IT among retail investors so potentially vulnerable to significant panic-selling at some point, which may throw up a better opportunity.



Sara thank you that's a very reasoned and sensible response.

You know the stupid thing? Trading fees is something that always annoys me but when you read it very rationally like your post above, why would I give a monkeys about a one off £10 cost on a transaction compared to returns or losses over the years ahead... I need to slap myself sometimes :)


If you're with Hargreaves Lansdown, and set up monthly savings, you can invest in SMT for £1.50 per trade.

Just look at Eligible Investment Trusts, under Choose your own shares or investment trusts (halfway down).

£10 trades aren't much in the scheme of things, but if you do 30 a year, that's £300 .. That's a 30% return on a £1,000 investment .. It's worth neurotically avoiding those little fees, as they do build up
6 users thanked King Lodos for this post.
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Aminatidi
Posted: 25 March 2018 11:54:40(UTC)
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Fidelity at the moment, likely II in April as I've already an account with them from years back that I'd forgotten about.

Agree entirely about the low cost regular investment options - just got work out what the bloody hell they would be :)
Aminatidi
Posted: 25 March 2018 11:55:51(UTC)
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JohnW;59363 wrote:
I hold SMT, but not as a core holding. For that I prefer the grand old plodders (so to speak) who keep steadily making money year in and year out. The IT's who wont make you a millionaire, but also wont give you sleepless nights. SMT, although has done very well for me, is a trust which by the nature of it's holdings is always a little speculative.

Regards, John


Mind if I ask which please?

Presume the usual suspects like Witan, Bankers etc.
JohnW
Posted: 25 March 2018 12:15:19(UTC)
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In the UK, FGT and CTY. I like CTY because of it's record of increasing dividends, so even if the share price dips this just means that reinvesting the dividends buys more shares. (Or at least has for the last 50 years.)

Globally, yes WTAN, It's done quite nicely for me in recent times

Then I add a few others to put a bit of excitement into the portfolio giving 12 IT's in total. I'm getting on in years, don't actually need my portfolio to subsidise my pension at the moment, but if my health holds up then it's likely in the future.
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Aminatidi on 25/03/2018(UTC), Luca Brasi on 25/03/2018(UTC), Margaret D on 25/03/2018(UTC)
Harry Trout
Posted: 25 March 2018 12:39:11(UTC)
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Have you considered buying Amazon?

I hold SMT but have found it more interesting to build a portfolio of individual stocks. Amazon is (unsurprisingly) my best stock to date.

The price is of course eye watering. I took the plunge at $785 and thought I was bonkers but have topped up twice since. I would add to Amazon again.

I should clarify that my approach is a concentrated portfolio of high quality companies on momentum to hold for a long time.

SMT has been good too though and is on my radar for a top up on further weakness. I also like ATT.
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Freddy4Skin on 25/03/2018(UTC), Aminatidi on 25/03/2018(UTC)
Robin
Posted: 25 March 2018 14:46:47(UTC)
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I have a very difficult relationship with SMT. I invested a lump sum shortly before the 2008 drops. I panicked and sold. If I had stuck in there I would be well up today. I have in the last few months been moving form oeics to ITs for about half of my portfolio.

After lots of thought, I switched a percentage of my ISA portfolio about 2 weeks ago - 1/3 topping up fundsmith and lindsell train global and 2/3 into SMT. The week before the Facebook news and increasing talk of trade tariffs. I felt comfortable, possibly naively so.. Cue another drop. That said, the drop is only a percentage or so over the drop in the tracker fund I was previously invested in. I expect to incur further losses, unfortunately, but hope to view in at least 10/15 years' time, when potentially accessing and feel ok with that - not great now mind and I would follow Sara G's thoughts in hindsight.

SMT now represents about 11% ISA portfolio and circa 6% overall.

My largest holdings are Vanguard Lifestrategy 80 at about 30% overall, LT Global at about 20%, Fundsmith at 8%. And NSI index linked at about 10%. I view this as a kind of composite circa 70% overall core. So SMT not intended as core, but still reasonable sum in it. But, otherwise, I plan to just try to ignore short term and see if I can muster the nerve to stick in there with SMT.
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Aminatidi on 25/03/2018(UTC)
Aminatidi
Posted: 25 March 2018 14:52:40(UTC)
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Harry Trout;59369 wrote:
Have you considered buying Amazon?


Honestly, no chance.

I second guess enough on funds where even if you choose a "bad" one you've usually some dilution of the stocks inside it.

No chance I'm going near individual equities at this stage.
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Harry Trout on 25/03/2018(UTC)
Tom Bards
Posted: 25 March 2018 15:09:33(UTC)
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I see nothing wrong with investing in SMT now. It is one of my core holdings and for good reason. It has been around for over 100 years and has consistently performed well for decades.

It has done equally as well as Fundsmith and Lindsell Train and shows no sign that it would suffer anymore than them in a bear market. My only issue with it is that it holds Tesla, although the position has been decreased quite a lot over the last six months I would prefer it if they sold it.

I often see SMT described as a tech heavy investment trust that only invests in tech hype. I fail to see how this is the case. Amazon is perhaps the greatest investment of the last twenty years, it is no longer a momentum tech stock in the market.

Do people really think Amazon would suffer more than Unilever or Diageo in a bear market? I fail to see why.

Are Alibaba and Baidu flash in the pan tech companies? I don't think so, there is a good chance that these companies will be the leading companies of tomorrow and that's a bet I'm willing to take.

Is SMT volatile? Yes, there's not denying it, if you can't stand volatility then maybe it is not for you but if you're investing on a long time horizon then I would say invest in it and pair it with a fund which is less tech based and more consumer based.
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Alan Selwood
Posted: 25 March 2018 17:52:29(UTC)
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The main issues seem to be:
a) How volatile is SMT?
(on past evidence, pretty volatile, e.g. halving from a previous peak)
b) How much volatility really matters if you diversify?
(if you have fortunate enough to have a £500,000 portfolio that is 5% cash, 10% short-dated gilts, 10% property, 5% gold and 70% equities consisting of [say] 20% Fundsmith, 10% SMT, 10% PAC, 20% CTY and/or FGT, 10% UK smaller companies, then the SMT volatility is based on a 10% holding (= £50,000).

If SMT halves in a bad period but then rebounds to 50% more than it was before the drop, the movements in SMT are:
Start £50,000
Max drawdown value £25,000
Final value £75,000

The only question then is:
Can you live with that?

If not, you need to de-risk.
If you can, go for it!
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Aminatidi on 25/03/2018(UTC), Alan M on 28/03/2018(UTC), Tom Bourne on 28/03/2018(UTC), Tim D on 29/03/2018(UTC)
Aminatidi
Posted: 25 March 2018 18:08:09(UTC)
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Alan thanks, been doing a lot of reading and your name appears next to a lot of very sagely advice :)

SMT would be 15% with the latest revision.

Interesting you mention FGT as I'm looking at that as well as I'm a massive fan of Nick Train's philosophy so it comes down to whether or not it "conflicts" with LT Global which I already have.

Each would be 15% ratios (as would Fundsmith).

That would leave some spare cash inside the ISA for this tax year to top-up down the line.
King Lodos
Posted: 25 March 2018 18:43:06(UTC)
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Tom Bards;59381 wrote:
Do people really think Amazon would suffer more than Unilever or Diageo in a bear market? I fail to see why.

Are Alibaba and Baidu flash in the pan tech companies? I don't think so, there is a good chance that these companies will be the leading companies of tomorrow and that's a bet I'm willing to take.


On the first, yeah .. Normally Consumer Discretionary (Amazon) suffers a greater loss of earnings in a recession than Consumer Staples.

Basically people spend less in a recession; but they still buy toothpaste.


On Alibaba and Baidu .. I've been in that bet for a while too .. But if you take Tencent, Alibaba, Baidu, JD.com, Amazon, Facebook, Google, Twitter, Snap, Apple .. If history's anything to go by, Apple will still be around (being the largest) but most of them won't.

A lot of them are in direct competition .. JD's planning to come to Europe to compete with Amazon .. They've got some advantages, like owning their own distribution .. A lot of them are in competition for cloud services too.

And what makes competition dangerous is Amazon pioneered building an empire that doesn't make money, just to kill the competition .. If you have two Amazons in competition, you might find the business model becomes who can burn through the most shareholder value without going broke? This happens all the time .. It's why the airline sector's never made money
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raybd
Posted: 29 March 2018 07:28:00(UTC)
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Harry Trout;59369 wrote:
Have you considered buying Amazon?

I hold SMT but have found it more interesting to build a portfolio of individual stocks. Amazon is (unsurprisingly) my best stock to date.

The price is of course eye watering. I took the plunge at $785 and thought I was bonkers but have topped up twice since. I would add to Amazon again.

I should clarify that my approach is a concentrated portfolio of high quality companies on momentum to hold for a long time.

SMT has been good too though and is on my radar for a top up on further weakness. I also like ATT.



I have had problems in the past with stock specific risk. Going back to BPCC/Maxwell (think Carillion), Shell, BP, M&S, Volkswagen, Banks ... One needs diversification.
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Mr Helpful on 29/03/2018(UTC), Tim D on 29/03/2018(UTC), Guest on 29/03/2018(UTC)
Split Cap Jim
Posted: 29 March 2018 13:58:54(UTC)
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Aminatidi;59365 wrote:
Fidelity at the moment, likely II in April as I've already an account with them from years back that I'd forgotten about.

Agree entirely about the low cost regular investment options - just got work out what the bloody hell they would be :)


Interactive Investor offer monthly dealing at £1 per trade - can use a combination of your direct debit and existing cash held in the account. Its seems to be a bit pot luck as to what trusts are eligible for monthly dealing, but SMT definitely is. I'm topping mu holding up using the monthly option.
Harry Trout
Posted: 29 March 2018 14:06:15(UTC)
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Harry Trout;59369 wrote:
I should clarify that my approach is a concentrated portfolio of high quality companies on momentum to hold for a long time.

raybd

Apologies, my portfolio of 6 individual shares still represents only a small part of my overall exposure, less than 15%.

I should have said that this is a work in progress and that I would like to get to a place where my overall portfolio is dominated by a concentrated selection of high quality high momentum shares to hold for a long time.

I will only do this gradually and if it's working; in the meantime I am diversified as you say.
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