Ann: Ceasing to be a substantial holder, page-7

From the company’s point of view, that is pretty amazing… but luck would have played some significant role.

From the investor’s point of view, that would have been 95% luck and you’re likely to have 1 in 30-40 speculative companies have turn arounds like that. You’ve got to be willing to take that gamble and spread seed capital amongst about 20-30 companies to have just 1 or 2 have major turnarounds - and have the patience to do so. Also, assuming 30x upsides, you’d want to be able to patiently leave about $25k per speculative company for 5-15 years for it to have any meaningful chance of getting there, holding tight while you may see your capital drop by over 80% or 90%.

Multiplied by 30 companies, that’s $750k in pure speculation, with a reasonable chance that they all flop, or stagnate over that 5-15 year period.

$10k seed per speccy = possibility of $300k over ~ 10 years. That’s on a capital of $200k-$400k. The rest will be tits. Assuming you use your losses to offset your capital gains with perfect timing, then that is a profit of 75-150% over 10 years. That’s around 5% compound interest per year, and is well below the ASX benchmark.

My safe dividend portfolio makes between 9-13% per annum, and I literally don’t have to do much besides the initial research on 8-12 companies. Then I sit back, check the reports annually or each half, and decide whether I keep holding and reinvest dividend/pay interest on investment loans, or sell and re-divert capital to better opportunities.

Over 10 years at 8% (conservative outlook), I make 100% returns on just dividends, not including growth. And with nearly an order of magnitude less risk of capital destruction, I can enjoy life and not worry about frequent risk management measures, and I know my money will keep making more money that will keep making even more money.

EZ.

OR…

invest in high risk speculative stocks like Appen with a large risk of total capital collapse, double down each time a “new NADIR” emerges, over capitalise on single falling knives, and risk losing 99% of each investment, for a roughly 20-40% chance that 1 of my 20-30 stocks MAY have an upside that offsets all my other companies losses, and hopefully has enough growth to maybe give me a 150% return over 10 years if I pick which ones to hold and don’t accidentally sell before the run, or worse wait too long and have pumped speccies become dumped speccies (been there done that).

Rather than singing praises of rare stocks that look like easy investments in hindsights having grown 30x over 15 years, we should be instilling a healthy fear and respect of catastrophic capital loss from the 95% of speccies that become insolvent and disappear in the same 15 years. The fact is there is a survivorship bias and a ‘winner’s bias’ in speculative investing. Many punters do not get out alive. Often figuratively, but also sometimes literally.