I like that Simon. One thing I constantly battle with is the "mental" challenge of "do I stay in the market, ride the bumps and crashes, or do I constantly toggle my portfolio and incur the getting in and out and CGT costs". Which will be better in 15 to 20 years when I plan to retire. My many excel planning spreadsheets are not up to this mental challenge....what is currently clear, albeit with limited time data, is that my investment portfolio is kicking the heck out of my trading portfolio - although that's probably just cause I am a useless trader!
sobering indeed. My investment portfolio costs me R720 a year in OST fees - totally justifying my DIY approach. I have 2 advantages over institutions. 1) I can pick stocks up sometimes 5 or 6% cheaper (sometimes more) than an institution by catching the spread. 2) I don't employ 20 analysts or fund managers or any other high paid individual that needs to be rewarded each time they make a right call
All this - for that matter all investment - presupposes one thing - that the investor will behave rationally. If that is the case then it is hardly surprising to see that lower costs will generally bring their rewards. I have looked into this and over the last 5 years or so I have seen that the average ( + 50thpercentile )"expensive" balanced fund - a proxy for a long term investment position (any other suggestions ?) has delivered something like 2x the inflation rate pa - after all costs -excluding advice fees(if any ?). That is perhaps more a function of index hugging than good management. Either way not bad. What I have found in my straw polls in talking to people is that more people lose money by their ILL CONSIDERED diverting from a sound strategy ( Buffet ( "if its a good company then its a question of when not if .."etc)) and incurring losses and expenses. These losses are magnified if expensive fees have been incurred - and its not rocket science to think where those might arise from -GREEDY FUND MANAGERS AND SHAREHOLDERS( ignoring the poor saps who sell this stuff). But even more disturbing is the repeated "ill-knowledge" around the impacts of lost opportunities and inflation on money i.e. money lost in these "endeavors". When people tell you they lost 30k in the emerging market collapse they still think of it TODAY as "30k" which it sure isn't. Ah well, there is always "the big issue". None of this would apply to traders.
The future value is R480k if money doubles every 5 years (+-14.4%) compounding rate or R960k if you can double money every 4 years (+-18%) compounding rate. These are ball park numbers. I find it helps with investment portfolio to take 5 year views and then to do an annual review and only at this review can you sell and then only 1-2 holdings (10%) max only if major change or possible of capital loss exists (you cannot sell everything). This avoids any emotions during the year. Secondly write down your reasons and thinking when you made investment and refer to this before you decide to sell when you do your annual review. It makes things less emotional.
Talking of costs. I find Standard OST inadequate for my charting, so have been paying for Market Master INDS. Could I spend the INDS money more wisely by getting a broker that provides a charting platform?