Forum Topics Your Investment Strategy
a month ago

Plenty of great content here and thought I'd weigh in with my own 2 cents.

A couple of points to start

- 33 years old, good income

- home with mortgage, 10 week old daughter

- work in industry.

To my own detriment sometimes, my philosophy is very much a long term one. I think having a streamlined portfolio approach that makes efficient use of your time/effort/energy/stress is worth a hell of a lot. I'm not interested in short term trading strategies or tactical positions. There's only three things that are going to matter for me long term

- generating sufficient excess income to invest

- allocating that capital efficiently and appropriately

- giving those funds sufficient time to work

When it comes to allocating capital, plenty of people overcomplicate it (especially in the advice industry). For me it's simple - low cost passive ETF in both Aus and Global markets where capital is regularly contributed. If there's a fund manager doing something I think is truly differentiated then I am happy to incorporate, but the focus is on keeping approx 80% of capital allocated this way.

Around the edges, happy to incorporate some direct companies that I am both interested in and on the proviso that I think they can provide market beating returns over a 5 year period. That eliminates a lot of the top end of the market, which is totally fine.

I won't get insane returns like you see from some running concentrated direct positions, but I also don't think that's necessary and I am sure I don't have the time/effort/energy to dedicate.

Nothing wrong with core-sattelites and keeping things simple!

a month ago

Love the comments in all of the posts. The two that stand out to me, probably because Andrew and Scott Phillips also mention them often on the Pod Machine, are know yourself and you don’t want to start again - especially as my portfolio is my SMSF (i.e., if I mess that up, I'll be starting over).

With this in mind, I have three categories that I allocate to as follows. I use the % as guidance only; I don’t mind if the first one goes to 33% or even 35%, but if it stays there for a couple of years, I will do a bit of trimming:

- NASDAQ Focus (30%) - the majority is the Betashares ETF with a few direct-held shares

- What I call 'Investment Giants' (30%) - this is made up of Berkshire, SolPats, and Brickworks. The allocation to the last two reflects the large cross-holding they have.

- Smallcaps (40%) - I am new to being a full member of Strawman but have been 'sniffing around' for a while. I will do more research, but I intend to do a few sell/buys to reflect the knowledge I am getting from having full access - although I won't rush that; there's plenty more reading to do.

The first two have generally taken care of themselves in terms of growth, so I put new money (including dividends) into Smallcaps.


The above works for me because:

- 60% is on automatic pilot (I am lazy by nature)

- Smallcaps allows me to scratch the itch that is investing (I probably need to get a life)

- I sleep very well during the down times (I know myself in that I don’t panic sell - I will try to find more money when the market completely crashes)

- I am highly confident that I will have more money down the road than I do now (no guarantees, but I am confident I won't need to start over).


I know I can’t have more than 100%, and having said all of the above, I also have a significant holding in Bitcoin, which is a total speculative bet - and I do mean bet here, not investment. I don't count it in the above because, from an investing viewpoint, I assume it will go to zero - therefore, I don't factor it into any retirement planning or when estimating (guessing!) how much my total holdings may be in the future. Although, in saying all that, I do think in the next 10-20 years, it will be worth more than the rest of the portfolio, but they call me Billy, not Silly - so I am certainly not counting on that in any way. But… as a wise man once said, the asymmetry here is, in my view, worth it.

Cheers, BigStrawbs.

a month ago

I can relate to what Bob Desmond from Claremont Global said about the process he uses to manage the Claremont Global Fund on Livewire - No secret sauce! The simple process with a proven track record

Here are a few bits that gelled with me:

We endeavour to put together a portfolio of very high-quality businesses with decent organic growth, faster than nominal GDP growth, high margins, high returns on capital and very little debt.”

While there are many successful investment approaches and no single approach is best, I think Bob’s strategy to achieve a good return is similar to my preferred style…buying quality growing businesses at a discount to valuation. There’s definitely no secret sauce in this approach:


“We often get asked are we value or are we growth? 

We say we're both. it sounds cliched, but we are looking to buy growing businesses, and if you actually look at that graph there, if we can buy a business that's growing at 10% per annum and we can buy the 20% discount to value and that value closes, over four years, we'd be looking at a 15% per annum return.

Those are the type of businesses we like to earn. We are not looking to pay big multiples, but by the same token, we are not looking to buy cheap and nasty, and actually, I think that served us well over the last year.”

Sounds to me like a slow and steady approach that won’t shoot the lights out, but hopefully should achieve a good return over on a diverse portfolio over a period of time, if you take the time to research the businesses and get your valuations right. Sometimes you also need a lot of patience to see the growth and value curves ‘close out’ perfectly as they do in Bob’s diagram.

I have a number of examples where this has NOT worked for me…YET! Codan is a good example. It had a good track record of growing earnings every year with a solid return on equity. Then came the Russian Interference (Wagner Coorporation) into artisan gold mining in Africa which has crippled gold detector sales for an indefinite period of time. Codan still makes the best metal detectors in the world, and the communications business is growing strongly. However I think a lot of patience will be required for Codan to get back to FY2023 earnings.

Kina Securities was another example that didn’t work. Good return on equity, earnings growing strongly and earnings are expected to be very strong this year. However the PNG government saw a ‘cash cow’ and has drafted legislation to introduce a ‘super profit tax’ for banks of 45%, up from 30%. Given the additional tax burden and no franking credits, I decided to exit a large position in what is still a great business…at a slight loss!

There are plenty of examples where this strategy has worked well for me, including Mader, Acrow Formwork, Lovisa, DDH1 drilling, BHP, Lynas and Laserbond. Knowing when to sell is the tricky bit. I still hold every share in Acrow Formwork, DDH1 and Lynas. However, I have sold all of Mader, Lovisa and Laserbond. These are still all wonderful businesses. I sold because I thought they had reached their full valuation, and some (according to my valuation method).

 I sold Mader after the share price tripled, but then it went on to double again! Did I sell too early? Obviously! But when I look at the growth and ROE performance metrics for Mader now, they don’t look dissimilar to when I bought my first shares at c. 70cps. The biggest difference is the sentiment. The PE ratio has gone from about 7x to 33x in less than 3 years. 

I also think momentum can not be underestimated. This is something I’m still trying to get my head around. Momentum is real and it can impact the share price for much longer than you expect in either direction, up and down! I need to be more patient when buying when sentiment is low, and more patient selling when sentiment is high. Sentiment can drive the share price well beyond valuations in either direction…but where’s the sweet spot? 

I still hold BHP (my largest holding IRL) but I have been reducing each time it is close to $50 per share. It is difficult to see how BHP will grow its FY22 earnings over coming years. However BHP is a very well managed business and it often surprises to the upside.

The jury is out on a few of my current picks which I am still accumulating, ie. Nick Scali and Best & Less. Once again, and for good reason, the sentiment has turned sour for retail. I am taking a long term view on these businesses with the hope they will continue to pay out nearly 10% fully franked dividends while the economy recovers (see my forum straw ‘Get Paid to Play’). Both of these businesses returned investors over 40% on their equity during  FY23, and Best & Less has cash in the bank . I’m hoping there is enough fat in their financials to pull these businesses through a few tough years. I’m hoping I can add them to the list of ‘investments where the strategy has worked!’

That’s enough reflection and rambling for a Sunday! DYOR, and never underestimate how far a little luck can go to make you look like a pro…or how a ‘Black Swan Event’ can make you look like an absolute fool! 

Good Luck and Cheers,


a month ago

Great post Rick and I agree with the logic. And perhaps some metrics might assist the identification of these companies which have two ways to adding to shareholder value (1) consistently generating above market returns on eps, op cash and dividends and (2) a snapback of the marketplace actually recognizing the value that was always there, hidden in plain sight. ROE and ROCE are good indicators of how well a company is run, as is Cash Ops per share which I believe should be 7 or less (my view only).

What may need additional commentary and consideration is the quality of management which is a very subjective matter, and must only be considered as against matters which are within management's control. Two examples: The Codan decline can't really be held against management as the African sales have fallen off because of the disgraceful performance of Putins Chef and the Wagner Group in basically terrorising/frightening the Africans from trying to find gold because they get plundered and murdered for their efforts. A macro event entirely beyond managements to avoid, much less control. Second example is City Chic (CCX). There management (well the CEO, actually) has his finger prints all over a massive over ordering of the wrong kind of merchandise which must now be quit at cents in the dollar.

Then again, there are 'value traps' and I have a reasonable holding in a possible 'trap', though I am happy to hold because I bought at a much lower level and the unfranked dividends are better than deposit rates of today. Its Shine Justice (SHJ). Check their value indicators and you will see they are mouth watering. P/BV 0.59 P/TBV 0.71 ROC 11.6% EPS 3yr compound annual growth 20.95%

So, why a a stagnant SP and complete market apathy? Probably, the market stench of the Slater and Gordon fiasco of a few years back AND the massive shareholding of the two key directors at around 60% or thereabouts. I sometimes feel we are at the tail of the dog which serves the interests of these two people.


6 months ago

Hi Strawpeople.

Wondering if people can poke holes in my theorized strategy, which I have been thinking about for a while and would love all your knowledgeable input and scrutiny.

All the evidence points to best performance over the long run is to be fully invested all the time. At the moment I use 60% of my investment capital (which i add to fortnightly with my pay cycle) allocated DCA into my core ETFs. The remainder 40% goes to my investment account to use for stocks. The money I use for stocks generally sits in the account until opportunities present themselves. Do you think it would be better to just use all money to buy core ETFs, so that all money is fully invested, and then just draw down on the ETF when opportunities in a stock is presented? And possibly I can put an arbitrary rule like only allowing draw down a certain amount each month (to keep the ratio of core ETFs and stocks in balance).

I realize this is probably nickel and diming at this point but would love people to poke holes.


6 months ago

Hi @VandelayThats a very good question! I think the answer is different for everyone and it is very much depends on your risk appetite and circumstances.

If it were me, It would depend on where I thought we were on the ‘Emotional Investment Cycle’.


If I thought we had reached the peak of ‘Euphoria’ and it looks like most businesses are overvalued I would be aiming to have some cash on hand.

If I thought we had reached ‘despondency’ I would be aiming to be fully invested, plus some!

I have until recently leveraged in a down cycle to boost investments, but I’ll have to review this strategy now we are totally reliant on property and share investments for income, and interest rates are getting too high to leverage against shares.

In the past I have also done covered and uncovered options trading, so you you could say I had a high appetite for calculated risk which is rapidly becoming less each year! :)


6 months ago

Thanks for the detailed response Rick. I agree it is dependent on risk appetite. Being fully invested eliminates the need for timing the market. Whereas your theory about calculating where we are on the ‘Emotional Investment Cycle’ essentially relies on trying to time the market. So to take the risk and believe I could beat the fully invested strategy, it would most likely require me to:

  1. Be fully invested throughout the bull cycle
  2. Identify point of Euphoria and sell (some or all)
  3. Identify point of despondency
  4. Have conviction and emotional fortitude to deploy fully at despondency and
  5. Most importantly be correct (or generally correct) at all those points.

This seems like too much hard work and probably not realistic that I am capable to do that consistently in all cycles throughout my investment life.

What's the old Peter Lynch saying:- “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”


6 months ago

Good point @Vandelay I must admit that’s the aim. However, I find it hard to do in reality as I always seem to find a another business which I believe is undervalued! Resisting a good investment at any time is my weakness :)


6 months ago

My strategy is all about mastering my behaviour. 

  • In the time since I started investing, I’ve noticed that even when the market gets bad I never panic about ETFs and I never get bored of them. 
  • I distribute fairly evenly between NDQ, VAS, and VGS. I don’t bother with IVV as I feel like I get the exposure I want through VGS and NDQ. My aim is about 50-60% allocation to these ETFs and at the moment I’m sitting at around 50%.  
  • My remainder is mainly stocks from a shortlist I have with target prices in a spreadsheet using google finance commands - whoever is the best value to those target prices when I go to invest is my chosen investment, except if I’m particularly overweight in that stock, then I’ll pick something else. 
  • If an ETF is within 5% of its 52 low (because valuing an ETF is really hard for me I use relative valuation) I’ll generally buy more of it regardless of how much weight it is in the portfolio.
  • I tend to avoid companies that I’m overexposed to in the ETFs, at least the top end of the VAS ETF.
  • I don’t sell down stock just because they’re overweight, instead I just buy more of other stuff to balance it.
  • I get major FOMO about investing, I’m hoping I’ll get over it when I get more mature as an investor, this is just something I know about myself, it sucks - and you’ll probably think my way of dealing with this is a terrible idea and laughable. When I get major FOMO I just buy a minimum parcel size of that stock and then just forget about it unless I get time to go really deep with research about it. It ends up not being a material loss or gain either way but helps me deal with my own personal stupidity.
  • I get paid every 2 weeks, I used to invest every 2 weeks - I’ve recently switched to doing this every month - partly because of brokerage and partly because by giving myself a bit of buffer it lets me jump on opportunities more easily. If I can only invest on the 14th and the 1st of every month then if the market goes to crap on the 11th and recovers by the 14th I’ve missed out. Also it gives me more time to research and build more conviction around those I might purchase, part of my shortlist is stuff I’ve researched but also ones from paid service recommendations which I’d like to do more research on.
  • Under normal circumstances I’d be investing around 50% of my salary, at the moment I’m trying to hit up 70% for as long as I can.
  • I’ve tended to go for stocks lately that pay a small dividend (around 2-3%) with growth prospects, again as a behaviour management thing - if my entire portfolio is going red and I’m getting paid for having my money somewhere it helps me not want to sell. I realise this means those companies aren’t going to grow as much as they might have without paying the dividend but my strategy is mostly around trying to get me to not sell stuff and stay invested. 


a month ago

As I understand it, a portfolio of stocks and bonds will perform better and with less volatility than stocks alone.