So, my last post was in June. Seems longer. I hope that life is being good to you folks
I promised that I would be back towards the end of the year with an update on how I’m doing in my trading. Here’s the scenario for those interested.
I used to be a DTer but now my wife and I have a SMSF with some funds in it which we have decided to trade in the spec stock area. This post is not any sort of recommendation/advice. I’m sure you get enough of that from other peeps on the thread. This is just a story about how my wife and I are doing. Our circumstances will most certainly be different to yours.
We are both in our early 60s, both still working, live in Sydney in a house worth a small fortune but with a mortgage which we will never be able to pay off. Asset rich but cash poor – a familiar story to many. We started a SMSF at the start of 2017 and pooled our combined Super funds into it, and decided that since we are both still working and since the vast majority of our nett worth is tied up in the house, and since we were prepared to accept a high level of risk at this stage (with both of us still working) that we would try an experiment for about 2 years: we’d invest/trade in the spec end of the market and see if we could compete with the fund managers. See if we could perhaps keep up with the ASX200. We put some of our money into a managed fund; some into a self-managed fund, and the rest (the majority) we have been trading in our SMSF. Interesting times!
The first 7 months of this year were the worst trading conditions I’ve seen in my relatively short time trading shares. Almost all stocks I bought fell through what seemed to be solid support, with piddly volume, little interest – death by a thousand cuts. I could pretend that I coped with this downturn stoically, firm in my resolve that I had made the right initial decisions, but that would be BS of the first order. It was not pleasant, looking at the charts/stocks every day and seeing a gradual and what seemed to be an inevitable decline in all of them. At one point I was down 47%.
I was ready to go when we pooled our money and got the word that the SMSF was now set up. I had my stable of about 50 stocks which I follow closely, and knew which ones I wanted to buy. I also put some serious thought into what rules I would follow. Since I work in Aged Care and not in an office, I can’t follow the markets like you peeps can/do. I should have spent a bit of time looking at the macro picture – perhaps I would have gotten a sniff of the drop in volume/interest in the spec area and put most of the funds into cash, but I was keen to get the money in, so that’s what I did.
In the best part of 12 months I have completed 10 trades in 6 stocks. In alphabetical order they are AAJ, AR1, GMV, KRC, SRF and WFE. The average profit for those trades is 46.18%. So, I am obviously some kind of genius, right?
“There are 3 kinds of lies: lies, damn lies, and statistics” – Benjamin Disraeli
Well, perhaps not. What about the ones I’m still holding? Those “bottom drawer” trades which suck and which we try to forget about until – hopefully – they go for a run some years down the road and which we can then sell and pretend that we always knew they would come good eventually. You know the ones.
I am currently holding these: AJC, GMV, GTG, MTH, NAE, NSL, SSN, SYA and WCN. I am currently down about 15%, but the percentages swing wildly from day to day. I am getting used to this. There is really only one stock which I feel unhappy about buying – all the others seemed to make sense at the time – and that is NAE. I watched it have its run some time ago now and set what looked like a good technical entry point and left it there. I didn’t pay attention to the drop in volume and the gradual decline in the price. My order got filled and then the SP just kept heading south. This happened to every single stock I bought initially. Welcome to the market! I am currently down over 60% on NAE and it has found a place at the bottom of my drawer, so look forward to the time – in perhaps 1-2 years – when it goes for a massive run and I’ll tell you how smart I am!
But there is some good news to help balance out NAE and that is SYA. Some of you oldies might remember me talking about SYA. The last time I was on the SYA thread was in March 2017, and it was a very lonely place, populated by disgruntled and disbelieving punters who could not understand why this stock kept being sold off despite a string of positive announcements. I bought some in the SMSF, then bought as many as I could when SYA had its renounceable rights issue a while ago. My profit in SYA more than compensates for the loss in NAE, so that’s good. Of the ones I’m holding now, there are only two which I feel confident will do well in my timeframe of 1-2 years and those are SYA and NSL. The rest I plan to sell when/if they go for a run, although I did miss out on selling MTH when it went bonkers a few days ago. This will happen because I’m working – can’t be helped.
Some slight consolation was that during the terrible months from January to about August, the managed funds we were invested in were also down. Not a single one of the 50 or so stocks I follow had a run during those 8 months, which was quite amazing. It wasn’t just me.
What about stop losses? I thought about this a lot in the months leading up to the start of our SMSF and I couldn’t work out a system which made sense to me. One or two pip moves in a sub-1cent stock is massive when it comes to percentages, so I decided not to have stops. This will most certainly not be the case when we perhaps sell our house, retire, and move a lot of money into the SMSF to generate an income from which we will be living. Then it will be mainly blue chips and franked dividends etc. A much more conservative position, with only a bit of money for us to play with in the spec end.
So, how do the numbers stack up (so far)? We are up about 14% over all. This is more than the managed fund and the self-managed fund, which are now up about 10% each. The ASX200 is up about 6%. So, all 3 investments are beating the index, which is really surprising and nice.
What have I learned? Not much, I think. Seeing the value of our portfolio fall by about half in 8 months was a great experience – in hindsight – in humility. If I did one thing right during that period, it was that I didn’t freak out and react to what I was seeing on a daily basis. If I had used stops it would have crippled my returns. I am very strict when it comes to parcel sizing and left myself some wiggle room when it came to doubling down (which, according to my rules I am allowed to do once with each stock), and this helped a great deal with some of my trades. Having a longer time frame also helps me: I do not have to sell by any particular time and I’m not a DTer, so less pressure. Having lived for a while now, I know without a doubt that I am not nearly as clever as I’d like to think I am. All those clichés about the market always being right, are right.
The experiment continues. We will see how we go in 2018.
I can only offer one thought to all of you, regardless of whether you are a DTer or a STer, and that is if there is a significant other in your life, and if you are gambling/investing/trading on the market with your combined money, then make absolutely certain that you are engaging the other person in what is happening. Do not hide in your room when the market seems to hate you and pretend that all is well. This will not end well for either of you. I am very fortunate. My wife encouraged me to trade shares initially, and she is confident that I will try my best to do well. When we had our horror months this year, she knew full well what was going on but kept quiet about it. She has been encouraging and supportive – priceless.
On the personal front, we are talking more and more about retiring. What’s the point of continuing to work when you know that the mortgage will never be paid off and that even if it could be, 90% of our assets would be tied up in the house in which you are living? We are thinking about selling, buying a caravan and more powerful car, doing the grey nomad thing, and looking around for somewhere nice to live (outside Sydney). Maybe Tassie. We have a lot of choices and we are stuck in a rut. Interesting times ahead.
I thought I had lung cancer a few months ago. That certainly sharpens your focus. After smoking for 45 years, I gave up the fags about one year ago and went to my GP to get some tests done. Turns out I have 7 nodules in my lungs. Not necessarily bad, depends on whether they are growing or not. A follow up scan 4 months later indicated that 2 of them had doubled in size. Oh dear. Off to the lung specialist, pronto, who wasn’t happy with the quality of the scans and wanted me to get them redone at another facility. Turns out that the nodules hadn’t grown at all. Someone had “incorrectly measured” them. So, I will have a scan every 6 months or so for the next few years to keep an eye on those nodules, but nothing to worry about for now. Take away message: if you get some bad news on a scan, might be worthwhile to get the same scan done at another facility just to confirm the original one. Apart from that, we are both pretty tired most of the time. Might be time for a change of lifestyle.
I would like to wish all you regulars all the very best for the upcoming Silly Season and 2018. I’ll report back in June 2018 with another update. We might be tidying up the house, getting it ready to go on the market in September. You never know
