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 Post subject: Re: Ricklee's Wealth Journal
PostPosted: Mon Dec 24, 2012 6:24 pm 
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Samantha wrote:
Congrats on your article today!

Thank you Samantha! Have a great 2013!

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RICKLEE


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 Post subject: Re: Ricklee's Wealth Journal
PostPosted: Wed May 01, 2013 9:26 am 
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Some of you have read my guest post on this blog about my past four years' experience with investing. If you have not, you can read it here.

The experience had spurred me on to ask how my family and friends have fared since the recession of 2008 and the stock market bottom of 2009.

Some of the shocking answers were:

- I pulled out all my retirement savings accounts because somebody told me to do it.
- I don't know, I haven't had any calls from my broker in years.
- My advisor had us go into company XXX and all I know is more than half my money on it is gone.

While I reeled at responses of how their advisors failed them, I am excited at the opportunity to reach a niche area of people with a LOT of money but with VERY LITTLE investment knowledge. Warren Buffett said that he wants three things from every manager that he hires:

1. Integrity
2. Intelligence
3. Hard Work

Without the first, and somebody with #2 and #3 will end you.

I want to let integrity, honesty, transparency, be my guides as I venture into the world of investment counsel and financial advisory services. I want it to be at a personal level. I want to know my client, their family, their hopes and fears. I want to see them reach wealth goals that align with their life purposes and how that purpose should be about more than just themselves.

This first post marks my intention.

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 Post subject: The importance of CONVICTION in investing
PostPosted: Thu May 02, 2013 5:30 pm 
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My wife's has a cousin whose husband is a lawyer. We are Canadian. Two years ago I attended a family meal and our discussion went like this.

him: "I think the US is in financial turmoil and we will soon see hyperinflation, stagnation of the economy, and continued depression in housing prices"

me: "I think the opposite. I believe America will turn the tide. I believe real estate values will go up, that jobs will increase, and that equities of the best companies will reach new highs in the next few years". This was at a time of strong pessimism, the financial crisis was in recent memory, quantitative easing was still a fresh topic, the fiscal cliff was yet to come.

I explained to him the reasons why I was confident America was going to see its best years ahead of it.

He made investment choices based on his convictions, mainly bonds. I made investment decisions to buy JNJ, MCD, PG, and a host of other leading American companies.

I think the evidence and the stock prices have reflected my optimism. I think further gains are to be had for the best in class companies that continue to develop the best products at the greatest efficiencies.

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 Post subject: Re: The importance of CONVICTION in investing
PostPosted: Wed May 15, 2013 10:25 am 

Joined: Fri May 04, 2007 8:14 pm
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RICKLEE wrote:
He made investment choices based on his convictions, mainly bonds. I made investment decisions to buy JNJ, MCD, PG, and a host of other leading American companies.

Over the past 2 year period, PG underperformed the S&P 500 by about 6%, PG outperformed by 6% and MCD pretty much performed at the same level as the S&P 500. If you'd invested the same amount in all 3 stocks 2 years ago, you'd pretty much be in the same place if you put all of that money into the S&P 500. If you put your money into a Total Stock Market fund including mid- and small-caps, you'd have made more money. Why do you do stock picking?


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 Post subject: Re: The importance of CONVICTION in investing
PostPosted: Fri May 24, 2013 3:47 pm 

Joined: Fri May 24, 2013 3:40 pm
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VinTek wrote:
RICKLEE wrote:
He made investment choices based on his convictions, mainly bonds. I made investment decisions to buy JNJ, MCD, PG, and a host of other leading American companies.

Over the past 2 year period, PG underperformed the S&P 500 by about 6%, PG outperformed by 6% and MCD pretty much performed at the same level as the S&P 500. If you'd invested the same amount in all 3 stocks 2 years ago, you'd pretty much be in the same place if you put all of that money into the S&P 500. If you put your money into a Total Stock Market fund including mid- and small-caps, you'd have made more money. Why do you do stock picking?


Because the index funds, while having low fees, are still higher than those of owning stocks, the fees of which are zero after you buy and before you sell (and with a discount broker even those are ridiculously low). And because the dividend yield on all three of those stocks is higher. And because, while it is true that in the poster's holding period, those stocks have tracked the S&P 500, if you look at longer periods, those three have trounced the index, and since they are household names with no signs of giving up their competitive advantage, look to do so for a long time.

Of course, I'm speculating; I'm not the poster, I'm just a dedicated stock picker. Yes, most investors not disciplined enough for picking individual stocks, but if you have the temperament, and the long term view, you can do just fine.


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 Post subject: Re: The importance of CONVICTION in investing
PostPosted: Fri May 24, 2013 5:02 pm 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1951
mangeybear wrote:
VinTek wrote:
RICKLEE wrote:
He made investment choices based on his convictions, mainly bonds. I made investment decisions to buy JNJ, MCD, PG, and a host of other leading American companies.

Over the past 2 year period, JNJ underperformed the S&P 500 by about 6%, PG outperformed by 6% and MCD pretty much performed at the same level as the S&P 500. If you'd invested the same amount in all 3 stocks 2 years ago, you'd pretty much be in the same place if you put all of that money into the S&P 500. If you put your money into a Total Stock Market fund including mid- and small-caps, you'd have made more money. Why do you do stock picking?


Because the index funds, while having low fees, are still higher than those of owning stocks, the fees of which are zero after you buy and before you sell (and with a discount broker even those are ridiculously low). And because the dividend yield on all three of those stocks is higher. And because, while it is true that in the poster's holding period, those stocks have tracked the S&P 500, if you look at longer periods, those three have trounced the index, and since they are household names with no signs of giving up their competitive advantage, look to do so for a long time.


So for the 10-year period ending last month (1May2003 - 30Apr2013), only MCD outperformed the S&P500. PG performed about the same and JNJ underperformed. What's your point? This is not cherry-picking of time periods. It's just a 10-year look with the end at the completion of last month.


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 Post subject: Re: The importance of CONVICTION in investing
PostPosted: Fri May 24, 2013 5:18 pm 

Joined: Fri May 24, 2013 3:40 pm
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Quote:
So for the 10-year period ending last month (1May2003 - 30Apr2013), only MCD outperformed the S&P500. PG performed about the same and JNJ underperformed. What's your point? This is not cherry-picking of time periods. It's just a 10-year look with the end at the completion of last month.


Incorrect. All three beat, handily, because of yield. Assuming re-invested dividends, the total returns were:

S&P 500: 5.56
JNJ: 7.83
PG: 8.78
MCD: 22.13

(source: http://www.buyupside.com/stockreturncalculator/stockreturncalcinput.php)

Even without considering dividends, those three together trounced based on the performance of one. Keep score of your portfolio using total return, not number of outperformers/laggards.

Care to pick another period? My point is that those three are wise investments. Most people don't have the temperament for individual stock picking, but careful investors can, over the long term, beat the markets. Warren Buffet, Peter Lynch, and most of the mutual fund managers at reputable brokers (like T. Rowe Price) do it consistently.


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 Post subject: Re: The importance of CONVICTION in investing
PostPosted: Fri May 24, 2013 9:29 pm 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1951
mangeybear wrote:
Quote:
So for the 10-year period ending last month (1May2003 - 30Apr2013), only MCD outperformed the S&P500. PG performed about the same and JNJ underperformed. What's your point? This is not cherry-picking of time periods. It's just a 10-year look with the end at the completion of last month.


Incorrect. All three beat, handily, because of yield. Assuming re-invested dividends, the total returns were:

S&P 500: 5.56
JNJ: 7.83
PG: 8.78
MCD: 22.13

(source: http://www.buyupside.com/stockreturncalculator/stockreturncalcinput.php)

Even without considering dividends, those three together trounced based on the performance of one. Keep score of your portfolio using total return, not number of outperformers/laggards.

Care to pick another period? My point is that those three are wise investments. Most people don't have the temperament for individual stock picking, but careful investors can, over the long term, beat the markets. Warren Buffet, Peter Lynch, and most of the mutual fund managers at reputable brokers (like T. Rowe Price) do it consistently.

You're new here, aren't you? Peter Lynch basically quit while he was ahead. And Warren steps in and guides companies if he has to. And name me a few other managers at T Rowe who have consistently beat the market after expenses when adjusted for risk.

Besides, why are you answering for Ricklee? I'm asking about his rationale, not yours. After all, the OP is inordinately proud of his performance during this particular 2-year period. Start your own thread and we'll discuss your methods there. It's bad form to hijack threads.


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 Post subject: Re: The importance of CONVICTION in investing
PostPosted: Sat May 25, 2013 4:42 pm 
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VinTek wrote:
And Warren steps in and guides companies if he has to. And name me a few other managers at T Rowe who have consistently beat the market after expenses when adjusted for risk.

Warren advocates buying index funds. Most of his investments were in companies not in stocks. If you don't understand the distinction then you've got a lot to learn.

T. Rowe Price is one of my favorite low fee mutual fund companies. Most of my money is with them - primarily in INDEX funds. I am very familiar with that company. I would also like to hear which of their managers/funds have beaten the market consistently over a long period of time after adjusting for risk and fees. Please back up your statement.


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 Post subject: Re: The importance of CONVICTION in investing
PostPosted: Fri Aug 02, 2013 4:45 am 
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VinTek wrote:
RICKLEE wrote:
He made investment choices based on his convictions, mainly bonds. I made investment decisions to buy JNJ, MCD, PG, and a host of other leading American companies.

Over the past 2 year period, PG underperformed the S&P 500 by about 6%, PG outperformed by 6% and MCD pretty much performed at the same level as the S&P 500. If you'd invested the same amount in all 3 stocks 2 years ago, you'd pretty much be in the same place if you put all of that money into the S&P 500. If you put your money into a Total Stock Market fund including mid- and small-caps, you'd have made more money. Why do you do stock picking?

Hi, VinTek:

I apologize for not being on this board for a long time.

To your question, 'Why do you do stock picking?', it's because a stock is a discrete business whose competitive advantage and management performance I can assess quantitatively and qualitatively and gain conviction upon. I want to make an investment decision like I would a business decision.

By comparison, an index by Standard & Poor's does not give me that level of confidence, because of the sheer number of companies the index holds, and removing or adding to the group can happen without my understanding or consultation. For me, index investing does not give me a good business "handle" to grasp.

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 Post subject: Re: The importance of CONVICTION in investing
PostPosted: Fri Aug 02, 2013 4:49 am 
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mangeybear wrote:
Quote:
So for the 10-year period ending last month (1May2003 - 30Apr2013), only MCD outperformed the S&P500. PG performed about the same and JNJ underperformed. What's your point? This is not cherry-picking of time periods. It's just a 10-year look with the end at the completion of last month.


Incorrect. All three beat, handily, because of yield. Assuming re-invested dividends, the total returns were:

S&P 500: 5.56
JNJ: 7.83
PG: 8.78
MCD: 22.13

(source: http://www.buyupside.com/stockreturncalculator/stockreturncalcinput.php)

Even without considering dividends, those three together trounced based on the performance of one. Keep score of your portfolio using total return, not number of outperformers/laggards.

Care to pick another period? My point is that those three are wise investments. Most people don't have the temperament for individual stock picking, but careful investors can, over the long term, beat the markets. Warren Buffet, Peter Lynch, and most of the mutual fund managers at reputable brokers (like T. Rowe Price) do it consistently.


Hi, mangeybear,

Welcome to the board, and I hope you continue to contribute. Thanks for your input to my threads. I wish you success in your investing.

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RICKLEE


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 Post subject: Managing Family Money
PostPosted: Fri Aug 02, 2013 5:01 am 
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One of my goals is to manage family money. Yesterday I took my parents-in-law to a discount broker to transfer their assets from a full-service broker. I will act as their Power of Attorney.

By doing this, they will avoid full-service fees:
$119 RRSP fee annually
$40 Spousal RRSP fee annually
$125 per stock trade

The full-service broker has committed the following gross errors:

1. Investing with a high risk tolerance assumption (they are retired and low risk)
2. Incurring investment losses associated with #2
3. Not providing their clients with annual reports of their invested companies
4. Not communicating with their clients, for 6 years.


I will provide the following services for my in-laws:

1. I will keep all investments within their risk tolerance
2. I will communicate all trades and gain their understanding and agreement beforehand
3. I will provide annual and quarterly reports of invested companies
4. I will review their investment performance at least quarterly.
5. Ensure all fees are kept to a minimum

My new goal is to manage the investments of 4 families by 2015.

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 Post subject: Re: The importance of CONVICTION in investing
PostPosted: Fri Aug 02, 2013 7:35 am 

Joined: Fri May 04, 2007 8:14 pm
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RICKLEE wrote:
I apologize for not being on this board for a long time.

To your question, 'Why do you do stock picking?', it's because a stock is a discrete business whose competitive advantage and management performance I can assess quantitatively and qualitatively and gain conviction upon. I want to make an investment decision like I would a business decision.

By comparison, an index by Standard & Poor's does not give me that level of confidence, because of the sheer number of companies the index holds, and removing or adding to the group can happen without my understanding or consultation. For me, index investing does not give me a good business "handle" to grasp.

No need for apologies. Real life takes precedent over life in a virtual forum.

But back to the point of investing. If you only have access to data that everyone else has, doesn't the market already price that information into its prices? In other words, what information do you have that the index hasn't accounted for?


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 Post subject: Re: The importance of CONVICTION in investing
PostPosted: Sat Aug 03, 2013 8:26 am 
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Quote:
If you only have access to data that everyone else has, doesn't the market already price that information into its prices? In other words, what information do you have that the index hasn't accounted for?


I do NOT believe the market prices individual companies efficiently at all times with all available info. The market has shown itself to be excessively fearful or exuberant for individual securities with no information bearing directly on those specific companies.

I do not have info that the index missed. But i can have conviction about a company's intrinsic value that may exceed the market's current bid price, and that conviction persuades me not to sell, but perhaps to buy at the market's current offer price.

I respect that the Efficient Market Theory has a large following. But I follow Benjamin Graham's view that the market is like a voting machine in the short run, and a weighing machine in the long run.

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 Post subject: Re: The importance of CONVICTION in investing
PostPosted: Sat Aug 03, 2013 1:39 pm 

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RICKLEE wrote:
I respect that the Efficient Market Theory has a large following. But I follow Benjamin Graham's view that the market is like a voting machine in the short run, and a weighing machine in the long run.

Oh, you mean the same Benjamin Graham who said the following in before he died in 1976:
Quote:
I am no longer an advocate of elaborate techniques of security analysis in order to find superior value opportunities. This was a rewarding activity, say, 40 years ago, when our textbook "Graham and Dodd" was first published; but the situation has changed a great deal since then. In the old days any well-trained security analyst could do a good professional job of selecting undervalued issues through detailed studies; but in the light of the enormous amount of research now being carried on, I doubt whether in most cases such extensive efforts will generate sufficiently superior selections to justify their cost. To that very limited extent I'm on the side of the "efficient market" school of thought now generally accepted by the professors.

That Benjamin Graham? You can read the interview with him http://www.bylo.org/bgraham76.html.

You should also read his book, Benjamin Graham: The Memoirs of the Dean of Wall Street, where he says the following:
Quote:
I have little confidence even in the ability of analysts, let alone untrained investors, to select common stocks that will give better than average results. Consequently, I feel that the standard portfolio should be to duplicate, more or less, the DJIA.

It was the last book he wrote.


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