I’m not sure about him applying a cap rate of 11-13% though, but interesting nevertheless.

Someone wrote something to me interesting today :
“…that’s a contradiction. Value investors are the BIGGEST market timers. sorry buying low and selling high is doing market timing.”

I suppose there are various permutations possible and I apply value investing to the index to try to get a higher return than the index. Thanks for your site and comments which are both much appreciated !

I think my only edge is that I can choose to be not fully invested. I tinker with the asset allocation in super but don’t try to time the market with that. Currently with my super I’m 100% australian equities. I think I might shift to a more international exposure at some stage in the next year.

I have about 500k in super and about 500k in a discretionary account which I attempt to invest with. With my discretionary investing, I reentered the market when it was about 3800 and increased the exposure until I was fully invested by 4600. I mainly have STW. I did get some SLF also but realised the yield is not franked and 50% of it is WDC which I felt increasingly queasy about how long it will take to turn around. So I sold the SLF. Then when the market got to 4900, I also sold out of the STW and RIO as they had run pretty hard. I actually thought it might keep going but it’s pulled back.

As you guessed I’m in my mid 30’s (34) and as my taxable income has gone up, I’ve found my investments have not been as tax effective as would have been if I had thought about it a bit more. I should hold things for a year for CGT reasons and invest in lower yielding core stocks.

I haven’t ever thought much about buying individual stocks other than blue chips. The majority of my investment is in index trackers and the individual stocks are a bit of a gamble. I think I’ve been good at market timing and asset allocation but below average at stock selection. I hope at some stage I’ll improve the stock selection part of my game.

Your idea of investing in potential 10 baggers is interesting. I’ve never been able to do that. Probably because I sell out too early and as I have very little confidence in my individual stock selection. My only outperformance has been in the market timing and asset allocation area. Recently I missed the first 20% of the rally but I also missed the decline prior to that.

With what I have bought recently I expect to hold for a year. My investing strategy, which is not that well thought out is this currently :
1. I think the market has put in a low at 3200 or whatever it was.
2. With my discretionary investment, I’ll be about 40% invested at 4600. I am thinking of increasing this to 80% at 4200. I suppose if it gets to 3800 I’ll be 100% invested.
3. I intend to exit the sharemarket completely if it gets to be overvalued by more than 20% by what I guesstemate to be fair value.
4. If it gets to be overvalued by 10% I sell all noncore holdings (currently TLS and WOW) and wait for a retracement. I may have to rethink this last part in view of CGT implications on my current marginal rate of tax. The tax implications make 4. marginal return for the effort of attmpting micro timing which is more likely to be incorrect than assesment 3.

I haven’t found it possible to not refrain from buying things if I continue to follow the market, so what I do is sell everything discretionary and have a break for at least a year when it reaches major overvalued territory.

The problem is when you return in a few years, things have changed significantly.

One thing I should do in the future is to follow the market for 10mins a week when I am out of the market to have some sense of continuity. But then I worry I would buy into it again.

Another idea I was thinking of trying out is to just reading the business section of the paper for 10mins a week and scan for good stocks that are temporarily being hammered (eg QBE after terrorist thing), which are still fundamentally sound. I’m not sure how effective I would be at that so would try it out on a very small scale.

I’m not very confident of my stock selection skills at all in fact. At some stage I might become an average or even good stock picker but I’m not at the moment. So my investments in the individual stocks are pretty small compared to the index. In my discretionary account currently it’s 10% core stocks (TLS, WOW), 80% index, 10% other individual (punt/gamble – RIO, BHP, soon to be WPL).

While I admire Soros he is prone to flimsy reasoning (like most of us) and I would not make any decisions on what he was saying publicly.

When investing in trends I like investing early in the trend. I totally missed the commodity boom and though it could go on for many more years for someone like me without and edge in the area, there is too much risk. Is buying RIO or BHP a no brainer? Are they the best pitch I’m going to get this year? I don’t think so, though freely admit that really I don’t know.

Sean, I’m not sure how long you’ve been investing, but you seem to swinging at a lot of pitches in a lot of different sectors and even countries. Unless you’re backed by an analytical team I have no idea how you can have an edge in all those. You bought four stocks in one day the other day. Why? Or should I say why not spread those purchases out? Could all fours been such great pitches? I’m really simply trying to be helpful here and hope you don’t take any of this as an attack. You may have an edge in all those stocks, sectors and countries.

As I said I am not a value investor. I’m a growth investor who has folded value in and continues to learn and try to improve. I miss a lot of opportunities, but don’t care as there are always plenty of other opportunities coming along.

If you are 35-36 and have a high paying job, then you might consider swinging for the fences with some of your investments. BHP and RIO are likes bunts in the hope of getting to first base. In your mid thirties, earning capacity is usually a lot more important than investing returns, but if you get a few multi bagger picks right then suddenly your investing returns are more important.

Of course all this is just my opinion and even if I’m right there is little doubt that you’ll need to learn it all for yourself anyway, that’s why we keep making the same mistakes others have made before us.

Sean, thanks for you comments, I hope you keep them coming and that one day I’ll be able to add something of value. A quick look at Woodside makes me think it is worth looking at if you’re into energy.

As Soros said in an interview recently, if they wanted to reduce inflation, they could do it quite easily by allowing the Yuan to appreciate. They have plenty of bullets left at this stage anyway.

In terms of an overvalued housing sector, I can’t see too much of a bubble there currently. The price of land in some areas has appreciated a lot, 1000% in some areas in the last 5 years. But this has occurred in other developing nations. It’s a function of industrialisation and urbanisation.

In terms of a housing bubble or Dubai or US type debt problem, there isn’t the capacity there (yet). Only 25% of homebuyers actually have loans. Housing expenditure is less than 10% of total consumption. Aggregate mortgage servicing cost was less than 2% of national disposable income in 2008.

I’ve put my discretionary investing portfolio back to 40% invested and I think I’ll buy some more if things correct further. In the medium term (next 7 years) I still think the world will be short resources, particularly oil.

Dean, what are your thoughts on resource stocks ? And don’t say Buffet wouldn’t buy them because he has (eg. Conoco Phillips at the peak) and I notice that you’ve invested in tech stocks which Buffet wouldn’t so why not resources ?

The last time I waded in that area was about 2004 when I bought a Japanese unhedged index type fund. Unfortunately it went nowhere for 2 years and I eventually sold out break even. I suppose if I had held it would be lower now than it was then.

I’m not sure when Japanese stocks will reach a bottom. There is also the problem of currency risk with the yen likely to devalue with the amount of sovereign debt. The currency risk devalues the investment if unhedged but makes the company more profitable if it is an exporter.

Small caps are supposedly good value at the moment in Japan. The main problem is that they are competitors to Chinese companies which do not have to turn much of a profit. From my limited experience, it’s been better to invest in lower cost base countries such as Vietnam in the last 5 years than China or Japan.

Still there must be a price at which they are worth a small punt again. What are your thoughts on Japanese small caps Dan ?