Generating Income From 200k?
Discussion
walm said:
If you have 25 reasonably diversified equities, you are going to track the market to a very close proximity.
http://www.investopedia.com/articles/stocks/11/ill...
Aaaaand the FTSE 100 is now FLAT over 10 years.
Good luck with outperforming the market. The average fund manager, working full time, with access to all the available data and management teams of his investments, still fails to do it.
ftse 100 flat over 10 yrs with reinvested divs?http://www.investopedia.com/articles/stocks/11/ill...
Aaaaand the FTSE 100 is now FLAT over 10 years.
Good luck with outperforming the market. The average fund manager, working full time, with access to all the available data and management teams of his investments, still fails to do it.
gibbon said:
ftse 100 flat over 10 yrs with reinvested divs?
So what? Money in the building society will be almost as bad over the same period and with no hope of recovery.Remember FTSE is very lop-sided towards a limited number of sectors and Energy is a major culprit. Also in my opinion some of the computerised trading has the effect of increasing market volatility.
I think it's "trackers" who will be taking the worst hammering on this occasion because of their inability to react as a situation unfolds. They are always the passenger, never the driver. Fortunately my own strategy has been to avoid tracking like the plague!
I placed a buy order yesterday which will have been actioned today. Hmmmm.....
Edited by Ozzie Osmond on Wednesday 20th January 15:18
walm said:
If you have 25 reasonably diversified equities, you are going to track the market to a very close proximity.
http://www.investopedia.com/articles/stocks/11/ill...
Aaaaand the FTSE 100 is now FLAT over 10 years.
Good luck with outperforming the market. The average fund manager, working full time, with access to all the available data and management teams of his investments, still fails to do it.
http://www.investopedia.com/articles/stocks/11/ill...
Aaaaand the FTSE 100 is now FLAT over 10 years.
Good luck with outperforming the market. The average fund manager, working full time, with access to all the available data and management teams of his investments, still fails to do it.
Yes, but with the FTSE 100 you are talking averages, with a particular weighting for each constituent company. Your 25 holdings would not necessarily perform as an index fund. You might be fortunate that a large proportion of your fund is in one or two of the better index performers. You would then beat the average. It works the other way round of course.
Remember most funds looking after other peoples money, are rewarded by fees and charges, so a different mindset. I get the impression that many commercial funds do a large number of transactions (with their customers money). It can all add to the cost and so have a negative effect on overall performance. They might have 'all the available data and management teams', but now with the internet, private investors can probably access far more than they actually need. It is very easy to over complicate this subject. For long-term equity investors, live share prices are irrelevant.
Another important point concerning publicly available funds, is when holding stakes in very successful businesses, those holdings become an ever larger proportion of the fund and probably would have to be scaled back. I don't know what the figure is, but a unit trust might not be allowed to have say more than 3% of a fund in any one company. With your own money, if you are happy with the additional risk that has arisen, you can keep the whole stake even though it might grow to become say 30% of your fund. That can massively help with out-performance, but remember the risk. The big FTSE 100 companies do usually provide a certain amount of extra safety. Think of the BP disaster - smaller companies would not have survived.
With 25 FTSE 100 shares you might decide to avoid particular sectors (eg. Minerals perhaps, because it has historically been volatile), then you would again diverge from the average.
There has been a great variation in the performance of FTSE 100 companies. Have a look at which have performed best over the past 10 years. Not sure where to see 10 year data, but the right hand column of this link shows 5 years. As you will see, the variation in success or otherwise is considerable. http://www.hl.co.uk/shares/stock-market-summary/ft...
Thanks for the good luck. I certainly had some last year. With no changes to my fund at all during 2015, it finished the year at +7.56% (incl. divs.), compared to the FTSE 100 which as you will know, was down at -4.93%.
With my system of not making changes, provided the overall fund percentage is generally ahead of the market, one does notice the change in performance of some companies. Two examples are BT and ITV, which seemed very average for many years, but then began a much improved period.
Flat over ten years. Even flatter now. About 3% down today, and about 13% down this year. Some of the constituents are up massively over those ten years. As always long-term, it depends upon company profit growth.
If the present market slide continues, my thoughts will turn to purchases, but I only seem to do that, when most are selling.
Edited by Jon39 on Friday 22 January 22:58
Jon39 said:
With no changes to my fund at all during 2015, it finished the year at +7.56% (incl. divs.), compared to the FTSE 100 which as you will know, was down at -4.93%.
And you think this (good) performance is something people can easily replicate by choosing 25 "good" stocks?Or do you think your experience counts for something?
walm said:
Jon39 said:
With no changes to my fund at all during 2015, it finished the year at +7.56% (incl. divs.), compared to the FTSE 100 which as you will know, was down at -4.93%.
And you think this (good) performance is something people can easily replicate by choosing 25 "good" stocks?Or do you think your experience counts for something?
To answer your points;
I do think experience of past market behaviour does help. It is certainly useful when markets turn down, because at least there is some previous experience of the situation (many times).
I do an end of every business week valuation (a spreadsheet is quite sufficient), measuring each year from 1st January, compare fund with FTSE percentage change. If the fund is above the index, even if both are negative, then why would you worry? I just leave the holdings alone under those circumstances.
Many people panic and sell, probably because they don't work to the above basis, but when an upward bounce does occur, and it is often quite a sharp movement, those who have already sold will miss out on that bounce. It can happen that you lose a lot by being 'out of the market'. There are many who think they can predict market movements, but you probably know the jokes about that. There was an example of a sudden market fall in May 2013. From being 15% up that year, within a short time fell 10%. Those who panic sold then missed out, because there was a quick recovery and the market ended the year at about 15% up. Those who had sold might have been reluctant to repurchase at higher prices, than they had recently sold at. The long-term approach is simpler and does work, provided the companies selected perform well.
I hope those interested in this subject don't need reminding, but too many novice investors buy near the top, then get frightened and sell on the way down. Funny that, because they won't buy their groceries if they think it is too expensive.
We like to think successful investing is skill, but some luck helps of course.
Re. 'replicate'. If anyone held the same companies in the same proportion, they would get identical results. They are not always 'good stocks'. Every year some in the fund perform poorly, but with the established big firms, they do have a greater opportunity to recover. Management changes can sometimes bring about surprising results. It is only the overall fund percentage performance that is important anyway.
Edited by Jon39 on Thursday 21st January 14:16
Jon39 said:
Sorry Foxy, I don't want to deal with emails. Would like to help, but it often tends to become too time consuming.
/pauses for breath
Wouldn't mind running something past you though...if you could humour me for one email
VX Foxy said:
Completely understand. I am a very lazy typist - my posts rarely extend beyond a couple of sentences
/pauses for breath
Wouldn't mind running something past you though...if you could humour me for one email
/pauses for breath
Wouldn't mind running something past you though...if you could humour me for one email
Post your question here, and then I will answer if I have any knowledge about the subject.
Ozzie Osmond said:
So what? Money in the building society will be almost as bad over the same period and with no hope of recovery.
Remember FTSE is very lop-sided towards a limited number of sectors and Energy is a major culprit. Also in my opinion some of the computerised trading has the effect of increasing market volatility.
I think it's "trackers" who will be taking the worst hammering on this occasion because of their inability to react as a situation unfolds. They are always the passenger, never the driver. Fortunately my own strategy has been to avoid tracking like the plague!
I placed a buy order yesterday which will have been actioned today. Hmmmm.....
You miss my point, or maybe i was unclear making it, my point is the ftse, when including dividends, is not flat over 10 yrs, I dont have time to check the numbers, but far from it, it yields whats, 3.5%?Remember FTSE is very lop-sided towards a limited number of sectors and Energy is a major culprit. Also in my opinion some of the computerised trading has the effect of increasing market volatility.
I think it's "trackers" who will be taking the worst hammering on this occasion because of their inability to react as a situation unfolds. They are always the passenger, never the driver. Fortunately my own strategy has been to avoid tracking like the plague!
I placed a buy order yesterday which will have been actioned today. Hmmmm.....
Edited by Ozzie Osmond on Wednesday 20th January 15:18
I too bought some ftse yesterday, i added another £10k to my position.
Interesting thread. I annoy my clients because I tell them to look ahead. That's not the same as being contrarian (anyone ballsy/stupid/insightful enough to be buying commodities?) but if you're a yield chaser, are you heads up for next year or so, when corporate profits will slump and internal growth will fall? Now's the time to be thinking about bleeding off some capital growth.
We always train for, and fight the next battle, like we fought the last.
We always train for, and fight the next battle, like we fought the last.
Ginge R said:
Not good.
These are the professionals that 'gibbon' referred to, ‘... working full time, with access to all the available data and management teams ...' !
Do you think many fund customers analyse their data, when statements are received? They probably do not even know about the aspect which you have highlighted.
I do not take much interest, but I did notice recently that some funds compare their performance against some very peculiar benchmarks. The one I was looking at claimed a good result, but in comparison with the FTSE All-Share Index, it would have been a very different story.
To be fair though, 2015 was not a good year for dividend increases. I did obtain an overall increase, but only +0.64%.
The dotted blue line on my chart below, would usually show a reasonable rise in March each year (final results announcements by the y/e 31 Dec. companies). Last year you hardly see any rise at all. The increases were almost balanced by the cuts. My last overall dividend reduction was in 2002 (-0.35%), but if you were around then, you will remember the enormous market decline (FTSE All-Share Index -24.97%), and that was the third year of declines in a row.
Edited by Jon39 on Friday 22 January 16:58
DonkeyApple said:
Out of interest, would you expect to see dividend growth at the moment as I can't imagine there is much competition for yield in the overall market?
I realised long ago never to forecast anything. Market and economic events are just so unpredictable. The debt boom problems were clear to see (many did not want to), but the timing of the ending was the unknown. It is unusual for forecasters ever to refer back to what they have previously said. Have you noticed the way analysts make company earnings forecasts, but when it becomes wrong, they just forget the first one and make a different forecast? I was recently amused, when the Sunday Times financial 'experts', did own up to their 2015 share tips disaster. Good for them, but it hasn't stopped them making another attempt.
You now know that my answer to your question is, I have no idea.
The present market interest on this subject, I suppose includes Shell. Is it about 45 years without a cut? Remarkable. No CEO will want to be the one to break that record, but presumably there will have to be thought about it. The yield is nearly 10%, which is an unusual sight.
Edited by Jon39 on Saturday 23 January 09:54
Ginge R said:
What the article seems to miss is any analysis of the yields of the top 250 stocks and therefore the impact of underperforming ftse100 stocks ultimately being replaced in the index by better companies. When yields fall on the main index you expect to see well yielding 250 stocks being bid up and ultimately moving into the 100 to replace the failures.
I think one or two contributors, seem to place too much importance on the FTSE 100 Index and dividend performance.
You can hold a quarter of the FTSE 100 constituants, but still achieve a different result. Being a weighted index, the performance is strongly dominated by a minority of the 100 companies.
Here is a real life example, of how FTSE 100 companies can differ from the index.
I have just done my figures for this week.
Week = +5.59%
Year = +1.80%
Current Yield = 4.1%
FTSE 100
Week = +3.11%
Year = -2.54%
One industry sector had a particularly good week. I will leave it for you to work that out. Yet another illustration of the unpredictability of stock market movements, both upward and downward. We never see this newspaper headline though, 'Billions Were Added To Company Values This Week'.
15 or so years ago it was just 7 stocks that fundamentally defined the ftse. 2 oils, 2 banks, 2 pharmas and Vod.
The FTSE wasn't going to move without more than one of these 'Magnificent 7' constituents being the control.
I built a trading system that drew in the streaming data (not easy back then and somewhat expensive!) and used a formula in excel to calculate when all 7 stocks were in uptick and with volume increases above the one hour background. I used it to predict when the ftse100 future would move and in which direction. Back then there wasn't really any algo trading so the arbitrage opportunities between different markets were larger and longer lasting. The only issue with the system was that back then there were only 5 spread bet firms so once you'd been shut down for scalping 5 times there was only the liquidity in the futures market left to exploit.
But then the tech boom got under way and the money to be made arbitraging bulletin board data dwarfed this system.
The FTSE wasn't going to move without more than one of these 'Magnificent 7' constituents being the control.
I built a trading system that drew in the streaming data (not easy back then and somewhat expensive!) and used a formula in excel to calculate when all 7 stocks were in uptick and with volume increases above the one hour background. I used it to predict when the ftse100 future would move and in which direction. Back then there wasn't really any algo trading so the arbitrage opportunities between different markets were larger and longer lasting. The only issue with the system was that back then there were only 5 spread bet firms so once you'd been shut down for scalping 5 times there was only the liquidity in the futures market left to exploit.
But then the tech boom got under way and the money to be made arbitraging bulletin board data dwarfed this system.
DonkeyApple said:
15 or so years ago it was just 7 stocks that fundamentally defined the ftse. 2 oils, 2 banks, 2 pharmas and Vod.
The FTSE wasn't going to move without more than one of these 'Magnificent 7' constituents being the control.
I built a trading system that drew in the streaming data (not easy back then and somewhat expensive!) and used a formula in excel to calculate when all 7 stocks were in uptick and with volume increases above the one hour background. I used it to predict when the ftse100 future would move and in which direction. Back then there wasn't really any algo trading so the arbitrage opportunities between different markets were larger and longer lasting. The only issue with the system was that back then there were only 5 spread bet firms so once you'd been shut down for scalping 5 times there was only the liquidity in the futures market left to exploit.
But then the tech boom got under way and the money to be made arbitraging bulletin board data dwarfed this system.
The bulletin board data concept sounds interesting, what do you mean?The FTSE wasn't going to move without more than one of these 'Magnificent 7' constituents being the control.
I built a trading system that drew in the streaming data (not easy back then and somewhat expensive!) and used a formula in excel to calculate when all 7 stocks were in uptick and with volume increases above the one hour background. I used it to predict when the ftse100 future would move and in which direction. Back then there wasn't really any algo trading so the arbitrage opportunities between different markets were larger and longer lasting. The only issue with the system was that back then there were only 5 spread bet firms so once you'd been shut down for scalping 5 times there was only the liquidity in the futures market left to exploit.
But then the tech boom got under way and the money to be made arbitraging bulletin board data dwarfed this system.
Are there any opportunities around at the moment ?
DonkeyApple,
I assume that we must be using completely different investment strategies. I have never used futures or derivatives, so have hardly any knowledge.
Having been very fortunate to beat the market over a long period, with an almost unchanged fund, I do appreciate it not being time consuming. Fifteen minutes at the end of each business week, to do a valuation is fine. After reading your last post, I expect you would even want to automate that process, but I do need to have some involvement!
If you are happy to do so, I would be interested to know what are the real long-term returns (percentages not money), that are achievable by participants of the futures and derivatives market.
Using the measurement system that I use, and looking just look at 2015 (I know one year may not be representative). Starting the year equities + cash for use. Ending the year, equities + cash + dividends.
With derivatives I presume it would be; Starting the year with contracts open + cash for use. Ending the year, Contracts open + cash + dividends (would there be any?).
My story of 2015 is shown in the chart further up this page.
Fund = + 7.56%
FTSE All-Share = -2.50%
What result would the average derivatives trader have obtained in comparison?
Thank you.
I assume that we must be using completely different investment strategies. I have never used futures or derivatives, so have hardly any knowledge.
Having been very fortunate to beat the market over a long period, with an almost unchanged fund, I do appreciate it not being time consuming. Fifteen minutes at the end of each business week, to do a valuation is fine. After reading your last post, I expect you would even want to automate that process, but I do need to have some involvement!
If you are happy to do so, I would be interested to know what are the real long-term returns (percentages not money), that are achievable by participants of the futures and derivatives market.
Using the measurement system that I use, and looking just look at 2015 (I know one year may not be representative). Starting the year equities + cash for use. Ending the year, equities + cash + dividends.
With derivatives I presume it would be; Starting the year with contracts open + cash for use. Ending the year, Contracts open + cash + dividends (would there be any?).
My story of 2015 is shown in the chart further up this page.
Fund = + 7.56%
FTSE All-Share = -2.50%
What result would the average derivatives trader have obtained in comparison?
Thank you.
Edited by Jon39 on Saturday 30th January 16:36
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