What % in equities.

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
kiwidog
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Re: What % in equities.

Post by kiwidog »

Hi flaccid

Seems you and maybe I have kicked off quite the discussion here from the original question.
There are questions, on which investing philosophy to follow. (Buffet is where you eat, WEB's last name is spelled Buffett. )There are lots of ways to get to the end result, certainly some are better than others and some require more work and /or thinking than others. Each to his own. WEB and Charlie has been a great teachers for those who choose to listen and think about what they are saying. They certainly are no trying to become the new Jesus in investing however I think they both find it hard to understand that not many have copied their very successful idea's. There certainly are a few but mostly the old school idea's about investing still prevail. I have found in many things as you learn them you can't go back to the old ways. Kind of like if you understand/ like hot food you can't go back to like un-hot or blander food. Gas welding or even arc welding is like that you mind can't unlearn what you have learned, you have gone through a door and can't go back. Think Hotel California you can check-in but you can't check out. Flaccid had quote form WEB that you either get in a few minutes or you don't get. It is funny but in my experience that has certainly been the case.
My feeling regarding asset allocation are certainly a little different from the standard EFH. I certainly think that fixed income has a a part in most/lots of, portfolios; with rates at there current levels you certainly aren't doing it for the returns, you are probably doing it for the certainty, and maybe don't really understand that is the case. It certainly make sense to a lot of people to have say 4 to 5 years of what they need for income annually in a maturity ladder so they don't have to sell equities under duress to get the annual income they require. The pensions they have and the CPP and OAS can also be looked to cover that certainty in part. I think the thing that many of us fall to comprehend is that the world doesn't end-------------------very often.
Are far as teaching the young the wrong thing,remember it is the perfect time for them to make mistakes and try new and untried things, for they too will grow old and be more set in there ways. "The chains of habit are too light to be felt until they are too heavy to be broken".
I find it requires that you read a lot and Charlie Munger's idea of having a too hard pile really helps in limiting you going astray once you figure out the path that fits you temperament and understanding.
If you aren't interested or lack the smarts them the 90% index fund and 10% short term bond portfolio makes a lot of sense, of course you can adjust the percentages to fit your temperament and understanding.

Thanks jb
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Re: What % in equities.

Post by Flaccidsteele »

Hi kiwidog, a great post. Thanks for sharing.
kiwidog wrote:They certainly are no trying to become the new Jesus in investing however I think they both find it hard to understand that not many have copied their very successful idea's. There certainly are a few but mostly the old school idea's about investing still prevail. I have found in many things as you learn them you can't go back to the old ways. Kind of like if you understand/ like hot food you can't go back to like un-hot or blander food. Gas welding or even arc welding is like that you mind can't unlearn what you have learned, you have gone through a door and can't go back. Think Hotel California you can check-in but you can't check out. Flaccid had quote form WEB that you either get in a few minutes or you don't get. It is funny but in my experience that has certainly been the case.
I didn't believe it when I first read it in high school, but I should have known better. Charlie and WEB's wisdom continues to teach me to this day. It's amazing.
kiwidog wrote:My feeling regarding asset allocation are certainly a little different from the standard EFH. I certainly think that fixed income has a a part in most/lots of, portfolios; with rates at there current levels you certainly aren't doing it for the returns, you are probably doing it for the certainty, and maybe don't really understand that is the case.
I agree. I think most individuals who use bonds as fixed income are doing it for the certainty and perhaps to avoid the emotions that they may experience when confronted with volatility. From my perspective, at current yields and considering what a retiree may need in the future, it definitely doesn't appear to reduce risk. At least not the risk of burning through one's savings in a more fragile retirement.

"Risk and reward are not necessarily correlated. After all, if riskier assets could always be counted on to generate higher returns, then they wouldn’t be riskier. Therefore, volatility can't be "risk." This is why so many academic models of the financial markets end up leading us astray." - Howard Marks
kiwidog wrote:It certainly make sense to a lot of people to have say 4 to 5 years of what they need for income annually in a maturity ladder so they don't have to sell equities under duress to get the annual income they require. The pensions they have and the CPP and OAS can also be looked to cover that certainty in part.
That seems reasonable to me.
kiwidog wrote:I think the thing that many of us fall to comprehend is that the world doesn't end-------------------very often.
That sounds familiar ;)
kiwidog wrote:If you aren't interested or lack the smarts them the 90% index fund and 10% short term bond portfolio makes a lot of sense, of course you can adjust the percentages to fit your temperament and understanding.
I agree.

Getting back on topic. For better or worse, after the US housing disaster, I found myself with a ~45% allocation of FI in the form of rental property. Before having these rentals, I was content to continue to pile capital into the equity market. Now, after securing a bit of income, I find myself dreaming of getting my equity allocation to 80% or higher. Especially after reading kiwidog's post. :mrgreen:
kiwidog wrote:Age 63
2% cash and pref's
30% canadian equity
68% US equity
Portfolio yield 1.88% Annual income $85000
57% of the equity in 4 individual company positions.
So I calculated how long it would take for my equity portion (compounding at 10% per year) to reach an 80% allocation if I assumed that real estate appreciates at inflation or 2% per year. And assuming no paid-in capital. Apparently it will take 19 years. :(

Of course that depends on how far off my assumed annual rates of compound turn out to be. If my equity portion compounds at 15% per year going forward, then I will hit an 80% allocation in 12 years. Which would be much better as I will still be in my 50s.

I guess I'll see how it all pans out.

Again, thanks for your words of wisdom kiwidog! :thumbsup:
Last edited by Flaccidsteele on 21 Nov 2014 23:11, edited 1 time in total.
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Re: What % in equities.

Post by ig17 »

I found Flaccid's write-up where he clearly explains his investment strategy. The write-up is mostly free of the usual drivel he posts on FWF.

March 8, 2012
http://web.archive.org/web/201203080249 ... nline.com/

I must admit, I am very impressed with his thinking. The strategy boils down to:

Buy successful owner-operator businesses when they go on sale during a general market drop.

The owner-operator part is key. In effect, you become a silent partner with a talented entrepreneur. The strategy does not guarantee success but it tips the odds in your favour. You side-step the principal-agency problem that plagues many large corporations.

I found it interesting that top 4 holdings in Flaccid's portfolio are members of Horizon Kinetics ISE Wealth Index.

Index Methodology:
The Horizon Kinetics ISE Wealth Index provides a benchmark for investors interested in tracking the performance of U.S.-listed, publicly-held companies that are managed by some of the wealthiest individuals in the United States.

These individuals generally have a high degree of management skill and specific industry knowledge, which is manifested through the superior share price performance of their companies. In many cases, these individuals have used their respective companies as the primary means of accumulating substantial personal wealth. By virtue of this vested interest factor, the creation of shareholder value tends to be prioritized over shorter-term considerations of typical corporate managements. The use of wealth as a predictive index variable — rather than traditional index classifications — has been demonstrated to provide meaningful excess returns over time versus the S&P 500.
I have two multibaggers in my portfolio. Both companies are owner-operators.
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Re: What % in equities.

Post by Springbok »

ig17 wrote:
The Horizon Kinetics ISE Wealth Index provides a benchmark for investors interested in tracking the performance of U.S.-listed, publicly-held companies that are managed by some of the wealthiest individuals in the United States.
I have two multibaggers in my portfolio. Both companies are owner-operators.
Is there an ETF that tracks that index?

BTW, I scanned our portfolios - a dozen or more multibaggers since 2003 , mostly Canadian large banks, telecoms etc. I am sure most here do to. I guess it depends on time frame.
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Re: What % in equities.

Post by ig17 »

Springbok wrote:Is there an ETF that tracks that index?
No ETF.

There is an U.S. mutual fund. Canadian investors cannot access it, obviously.
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Re: What % in equities.

Post by kiwidog »

Hi Ig17,

That's what makes the whole investing thing interesting, its a little bit like religion once you have some sunk cost in it, you think everyone else should understand how/why you think the way you and it it is very hard to change because you defend your ideas till the end. There are a lot of different ways to invest maybe they are all not wrong but maybe some are more right than others. If you have any emotional attachment to the idea it becomes more embedded in your psychic it is harder to get new /different idea's in. As it has been said before some of the ideas have to go to the grave before we find some new ways to think and to replace the old ways. The more closed minded we become as we age the less likely we are to accept the new idea.
There are certainly more ways than the way Flaccidsteel and I seem to think about how to invest.I have found if you put in a little work in trying to understand the world and how it will fool with your mind you have a better chance than the rest at getting what you want without leaving the less fortunate in the dust. I think that is what Flaccid is trying to say when he talks about luck having a lot to do with it. We take a lot for granted in Canada and the US , the rest of the world is a much harder place to make our way in. There certainly are some countries that have it as good as we have, but there are a lot that don't. I realize that some may think the others have it better than we do and we use too much of the world's resources and all that goes with that argument.
The conventional thinking with investment is largely wrong if you sit and really think about it for a while. A long walk or quiet room to think seems to work best for me. WEB has really distilled the idea's of Graham,Fisher, Munger and his own over his lifetime and has been generous in letting us understand them in his lifetime. None of them had it exactly right and it is an ongoing pursuit for any one of his students to try and get it right ( good luck with that). Investing is simple but not easy. We lay money out now, to get more money in the future. This exactly what most businesses try to do. Some are better at it than others and some have there partners in mind (shareholders) and some don't. If we attach ourselves to the ones that think about the world the way we do we have a far better chance of doing well than with the others.
The conventional rules don't foster this kind thinking, they just say if you do this you will get "this result" and a lot of the time you don't get "this result" then they say that not my fault it just the system or the economy or some other reason. This is the reason the conventional rules say you must diversify, largely because it is a coup-out so if things go wrong you won't shout at the person responsible for giving you that advice.
Certainly some diversification is a plus but most of the time we carry it way to far because we won't accept the responsibility if things don't go exactly as we had planned. It is not too hard to pick good businesses to buy and think like owners. When we buy a company we are buying the collective intellect of all the people who work at that business. (This not my thought, my college put me on to this thought)
It is exactly correct but you will probably never hear it mentioned in any investment research you read.
Like Flaccid has mentioned if you don't have the interest/ intellect/or interest in doing the homework necessary for good results them the index fund route is probably your best bet. Individual investors have a huge advantage over the conventional investment advisor relationship and they can either use that advantage or they can get sucked into thinking it is too hard and to the 80% of investment advisors who are wealth destroyers or eveners, rather than wealth riders.

Thanks jb
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Re: What % in equities.

Post by Flaccidsteele »

kiwidog wrote:Hi Ig17,

That's what makes the whole investing thing interesting, its a little bit like religion once you have some sunk cost in it, you think everyone else should understand how/why you think the way you and it it is very hard to change because you defend your ideas till the end. There are a lot of different ways to invest maybe they are all not wrong but maybe some are more right than others. If you have any emotional attachment to the idea it becomes more embedded in your psychic it is harder to get new /different idea's in. As it has been said before some of the ideas have to go to the grave before we find some new ways to think and to replace the old ways. The more closed minded we become as we age the less likely we are to accept the new idea.

There are certainly more ways than the way Flaccidsteel and I seem to think about how to invest.I have found if you put in a little work in trying to understand the world and how it will fool with your mind you have a better chance than the rest at getting what you want without leaving the less fortunate in the dust. I think that is what Flaccid is trying to say when he talks about luck having a lot to do with it. We take a lot for granted in Canada and the US , the rest of the world is a much harder place to make our way in. There certainly are some countries that have it as good as we have, but there are a lot that don't. I realize that some may think the others have it better than we do and we use too much of the world's resources and all that goes with that argument.

The conventional thinking with investment is largely wrong if you sit and really think about it for a while. A long walk or quiet room to think seems to work best for me. WEB has really distilled the idea's of Graham,Fisher, Munger and his own over his lifetime and has been generous in letting us understand them in his lifetime. None of them had it exactly right and it is an ongoing pursuit for any one of his students to try and get it right ( good luck with that). Investing is simple but not easy. We lay money out now, to get more money in the future. This exactly what most businesses try to do. Some are better at it than others and some have there partners in mind (shareholders) and some don't. If we attach ourselves to the ones that think about the world the way we do we have a far better chance of doing well than with the others.

The conventional rules don't foster this kind thinking, they just say if you do this you will get "this result" and a lot of the time you don't get "this result" then they say that not my fault it just the system or the economy or some other reason. This is the reason the conventional rules say you must diversify, largely because it is a coup-out so if things go wrong you won't shout at the person responsible for giving you that advice.

Certainly some diversification is a plus but most of the time we carry it way to far because we won't accept the responsibility if things don't go exactly as we had planned. It is not too hard to pick good businesses to buy and think like owners. When we buy a company we are buying the collective intellect of all the people who work at that business. (This not my thought, my college put me on to this thought)
It is exactly correct but you will probably never hear it mentioned in any investment research you read.
Like Flaccid has mentioned if you don't have the interest/ intellect/or interest in doing the homework necessary for good results them the index fund route is probably your best bet.

Individual investors have a huge advantage over the conventional investment advisor relationship and they can either use that advantage or they can get sucked into thinking it is too hard and to the 80% of investment advisors who are wealth destroyers or eveners, rather than wealth riders.

Thanks jb
A fantastic post. I enjoyed reading it. Well done. :thumbsup:

PS: I just bolded some of the ideas that I agree with. jb articulated it better than I ever could.
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Re: What % in equities.

Post by zinfit »

Flaccidsteele wrote:
kiwidog wrote:Hi Ig17,

That's what makes the whole investing thing interesting, its a little bit like religion once you have some sunk cost in it, you think everyone else should understand how/why you think the way you and it it is very hard to change because you defend your ideas till the end. There are a lot of different ways to invest maybe they are all not wrong but maybe some are more right than others. If you have any emotional attachment to the idea it becomes more embedded in your psychic it is harder to get new /different idea's in. As it has been said before some of the ideas have to go to the grave before we find some new ways to think and to replace the old ways. The more closed minded we become as we age the less likely we are to accept the new idea.

There are certainly more ways than the way Flaccidsteel and I seem to think about how to invest.I have found if you put in a little work in trying to understand the world and how it will fool with your mind you have a better chance than the rest at getting what you want without leaving the less fortunate in the dust. I think that is what Flaccid is trying to say when he talks about luck having a lot to do with it. We take a lot for granted in Canada and the US , the rest of the world is a much harder place to make our way in. There certainly are some countries that have it as good as we have, but there are a lot that don't. I realize that some may think the others have it better than we do and we use too much of the world's resources and all that goes with that argument.

The conventional thinking with investment is largely wrong if you sit and really think about it for a while. A long walk or quiet room to think seems to work best for me. WEB has really distilled the idea's of Graham,Fisher, Munger and his own over his lifetime and has been generous in letting us understand them in his lifetime. None of them had it exactly right and it is an ongoing pursuit for any one of his students to try and get it right ( good luck with that). Investing is simple but not easy. We lay money out now, to get more money in the future. This exactly what most businesses try to do. Some are better at it than others and some have there partners in mind (shareholders) and some don't. If we attach ourselves to the ones that think about the world the way we do we have a far better chance of doing well than with the others.

The conventional rules don't foster this kind thinking, they just say if you do this you will get "this result" and a lot of the time you don't get "this result" then they say that not my fault it just the system or the economy or some other reason. This is the reason the conventional rules say you must diversify, largely because it is a coup-out so if things go wrong you won't shout at the person responsible for giving you that advice.

Certainly some diversification is a plus but most of the time we carry it way to far because we won't accept the responsibility if things don't go exactly as we had planned. It is not too hard to pick good businesses to buy and think like owners. When we buy a company we are buying the collective intellect of all the people who work at that business. (This not my thought, my college put me on to this thought)
It is exactly correct but you will probably never hear it mentioned in any investment research you read.
Like Flaccid has mentioned if you don't have the interest/ intellect/or interest in doing the homework necessary for good results them the index fund route is probably your best bet.

Individual investors have a huge advantage over the conventional investment advisor relationship and they can either use that advantage or they can get sucked into thinking it is too hard and to the 80% of investment advisors who are wealth destroyers or eveners, rather than wealth riders.

Thanks jb
A fantastic post. I enjoyed reading it. Well done. :thumbsup:

PS: I just bolded some of the ideas that I agree with. jb articulated it better than I ever could.
Your such a smart guy Chuong. Just give us all a chance to drive up the value of your four stocks on Monday. I know how brilliant you are just give me name of those stocks. Come on mr Gigar Butt .
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Re: What % in equities.

Post by ig17 »

zinfit wrote:Your such a smart guy Chuong. Just give us all a chance to drive up the value of your four stocks on Monday. I know how brilliant you are just give me name of those stocks. Come on mr Gigar Butt .
As of Mar 2012:
Fossil, Buckle, Columbia Sportswear, American Eagle, Berkshire Hathaway
http://web.archive.org/web/201203080249 ... nline.com/
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Re: What % in equities.

Post by SQRT »

Quite an attention hound. I have always wondered why people feel the need to spread their religion. If ever there was a good reason for the "ignore function" I sometimes see in these type of forums, this would be it.
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Re: What % in equities.

Post by Spidey »

If Flaccidsteele is Rickson9, I have to admit that I have a grudging admiration for his strategy. As I understand it (and hopefully he corrects me if I am wrong), he only invests in severely distressed markets when the shares of the companies he follows become grossly undervalued. At those times he jumps in with both feet but at any other time he sits on his hands and allows cash to accumulate. He chooses companies with little or no debt and ones where there is heavy inside ownership. From what I gather, he almost totally disregards macro-economic factors and concentrates on balance sheets, inside-ownership and profit. For example, I wouldn't have the guts to place such a large weighting in a company like Fossil because almost none of the young people I know wear a watch (they use their cell-phones). But given the profits, obviously someone is still buying watches. Except for Berkshire Hathaway (if he still owns it) his entire portfolio is in retail type stocks which wouldn't be enough diversification for my blood but it is hard to argue with success.

As for myself, I'm at a boring 62% equity and 38% FI.
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Re: What % in equities.

Post by George$ »

kiwidog wrote:Age 63
2% cash and pref's
30% canadian equity
68% US equity
Portfolio yield 1.88% Annual income $85000
57% of the equity in 4 individual company positions.
In my case -
- ignoring value of house and DB pension plan and CPP - thus leaving liquid portfolio -

Age 74
25% - cash estimate
3% - or less for bonds
31% - about for Canadian equity
41% - about for US equity

Sure appreciate reading "kiwidog". :thumbsup:
My main concern these days is how to handle our estate and how to do some low cost but effective "good" with our assets.

We on FWF have a wide range of ages, of attitudes, of interests, of success or luck, or ... it goes on

To get some sense of my investment background and reading - go to
http://www.georgeluste.com/DEV/sites/de ... %20-cz.pdf
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Re: What % in equities.

Post by Arby »

SQRT wrote:Quite an attention hound. I have always wondered why people feel the need to spread their religion.
Some people may have others reasons for posting, besides just being an attention hound. Follow through the links identified in the post upthread by gsp for some background on this issue. It seems that a certain person has posted extensively on other Canadian investment forums, and he has been banned from one of those forums. See this item from another popular Canadian investment forum. Following are a few quotes from the administrator of that forum:
I'm interested in finding out if any posters have any information or know anyone who invested with Jim Chuong (aka Rickson9). The reason I ask is because I was recently told that Mr. Chuong isn't simply a private investor. Despite a disclaimer that "all information is for entertainment purposes only", Mr. Chuong apparently invests money on behalf of clients.
I have since learned that Rickson9 is possibly trolling for clients for his "investment partnership" and poster's concerns were not entirely unfounded.
IIRC, Falaccid has suggested to some of the newer posters on this forum to contact him privately via Personal Message so he can chat with them.
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Re: What % in equities.

Post by ig17 »

Arby wrote:IIRC, Falaccid has suggested to some of the newer posters on this forum to contact him privately via Personal Message so he can chat with them.
Here's one recent example:
http://www.financialwisdomforum.org/for ... 75#p537078
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Re: What % in equities.

Post by CROCKD »

SQRT wrote: If ever there was a good reason for the "ignore function"
+1 List updated. Thankfully most of those on list have disappeared.
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Re: What % in equities.

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