FTSE Tracker or something else.....

FTSE Tracker or something else.....

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Jon39

12,782 posts

142 months

Tuesday 25th July 2017
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sidicks said:
So in fact you hadn't fully invested initially, as you has some money in reserve to add to your equity holding following the crash!

So effectively you did PCA...

If you had been following your own advice - then you would already have been fully invested prior to the crash!!

I am probably giving you information that you already know about, but to give us a better idea, describe the type of investment that you do, if you wish.

You can be fully invested in a portfolio (in the context of not wishing to introduce further outside money), and still make further equity purchases. If that sounds like smoke and mirrors, I can explain. They would not exactly be PCA type purchases, because the buying is not on an agreed regular basis, but only very occasionally such as during market crashes, when certain opportunities become much more obvious.

The purchases were funded by dividends that had built up.

Dividends have always formed a significant part of a shareholders return. It is a debatable topic because as the shareholders own the company, they already own the dividend money being given to them. Anyway, leaving that point aside.

Novice investors probably underestimate the return from dividends over long time periods. A few of my holdings have been regularly paying over 10% dividend increases. One holding returned the whole of the purchase cost in only 8 years. Another has been paying a total of nearly £100,000 every 5 years. Compounding can really gather momentum, over a very long term.

The only difficulty is finding good businesses in the beginning.









NRS

22,078 posts

200 months

Thursday 27th July 2017
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Jon39 said:
sidicks said:
Which is exactly the point when pound cost average will provide a benefit by buying more shares at a lower price....

I know the theory of how it works, but if you refer to my performance bar chart, I would be impressed if you can say what the performance improvement would have been. Just 5 annual negatives in 29 years, is not an average performance.

PCA works well by disciplined buying, when prices are lower.
As it has only happened for me five times, those are the years when buying would have really worked well.
Three of the those five occasions were major market crashes, so every night the BBC news were talking about the stock market disaster. Even an average Joe therefore knew share prices were lower. I obviously increased my holdings heavily during those crashes. It is funny, that when those opportunities become so obvious, doing the opposite to the majority can work very well. You do need a strong will though to be able to do it. The magnitude of the last recession was a really big, so I did wonder if everything might collapse, but did muster enough courage to do buying.

Many novice investors tend to buy, when people start talking about how much they have made after buying their shares.
A market downturn arrives, they then get frightened and sell.
Buying high and selling low. Oh dear.
Those are just the people who certainly would benefit from PCA, because it provides them with a disciplined process.

If serious investors have the experience and ability to have achieved a record of good performance, then they certainly should be able to make their own decisions, about when to increase their holdings.
Out of interest, if you were starting out right now would you at this current moment be investing all at once, or PCA? Given general recession "cycles", current market and Brexit coming up?

Jon39

12,782 posts

142 months

Friday 28th July 2017
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NRS said:
Out of interest, if you were starting out right now would you at this current moment be investing all at once, or PCA? Given general recession "cycles", current market and Brexit coming up?

The only comments that I can make, relate to experience with my own portfolio (buy, hold long-term, shares, mostly in very large global non-cyclical defensive businesses).

Starting again now (we can always convince ourselves that any time is a bad time), I would gradually be buying individual holdings. It obviously takes most people quite a long time to acquire a sensible spread of holdings, in about 25 companies. If all goes well, the buying can then stop if desired, increasing income should flow, and the portfolio can continue as fully invested.

Buying at the end of a market downturn is obviously theoretically ideal, but almost impossible to achieve in practice, so I would not worry about that. It is less important anyway with a long term-fund, if the chosen businesses are steadily growing. After buying there may well be share price falls, but if the businesses are growing, the share price will eventually recover.

I experience the fully invested new start feeling, at the beginning of every year. My performance monitoring starts afresh on each 1st January, so every calendar year can be thought of as separate (as seen in the bar chart that I posted). Starting every new year with the same holdings is always an unknown. I can never predict, which will be the best individual performers by the year end. Just shows the unpredictability of equity investing. On the weekly league table, the aim is to be ahead of the FTSE All-Share Index, even if the numbers happen to be negative. If there were to be a few years of failing to achieve this, the indication is that you are holding some poor businesses.








Edited by Jon39 on Friday 28th July 14:44

Countdown

Original Poster:

39,686 posts

195 months

Saturday 26th August 2017
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So, dynamic impulsive individual that I am, I have narrowed it down to the following 3 funds

Vanguard FTSE100 (VUKE)
Vanguard FTSE250 (VMID)
Vanguard European excl UK (VERX)

At the moment my preference is for VUKE/VERX, 50% in each and then top up at regular intervals. VUKE because of the global exposure and diversification, and VERX because I think the European economies are past the worst, and it allows a bit more diversification. I'm probably going to avoid VMID actually.

Any view/comments/suggestions? Basically I'd be happy with 4% plus a bit of capital growth.....