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White-label insurance

You know when you are using a comparison website for your car insurance and you get offered ‘breakdown cover’ for ‘only an extra £30’? Sometimes I add it to the cart  thinking ‘that seems good value’ and I buy it.

The car then breaks down, maybe on the continent, and you realise, after waiting for hours in the sun for a breakdown truck for hours that only materialises after eight hours and ten phone calls later.

With each phone call you are speaking to a different operator and you realise that they are just students earning extra money between lectures. ‘Good value’? Not!

I regard the sell and buy signals that I get that chop me in and out of a non-trending market as insurance. I don’t know which signal will be a ‘false’ signal that will cost me to have got into a trade that then reverses. I don’t know which signal will then turn into a trend that then leads to a profitable trade. All I know is that it is much easier to follow the signals to open or close a trade than it is to try and to decide which signals I am going to ignore.

I have a signal this week to exit a trade that I opened recently. Part of me wants to ignore that signal and stay in the trade. The problem is that if the price keeps dropping and I close the trade at some stage in the future, I will lose money

I have to regard false signals and following a ‘choppy’ market as insurance. It’s just part of the price of trading this way.

Have a look at the video and see which trade I am closing this week!

I’m on holiday for the next couple of weeks so the next few videos that I do will be a very different format, most likely. If you want to ensure that you are up to speed with what I am doing you might like to follow my Facebook page!

Car photo courtesy of Agathe LM (on Flickr) (an Opel GT, I think. Great car! Except if it broke down, of course)

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Everything you need to know about Personal Investing…. According to Dilbert

One of my favourite books: Dilbert and The Way of The Weasel, by Scott Adams. Adams talks about how once he wanted to write a book about financial advice for the young first-time investor, but realised that he could say everything on one page. I like simplicity and minimalism, so here it is:

  • Make a will
  • Pay off your credit card balance
  • Get term insurance if you have a family to support
  • Fund your company 401K (company pension) to the maximum
  • Fund your IRA to the maximum (personal pension)
  • Buy a house if you want to live in a house and can afford it
  • Put six months expenses in a money market account
  • Take whatever is left over and invest 70 percent in a stock index fund and 30 percent in a bond fund through any discount brokerage company and never touch it until retirement
  • If any of this confuses you, or you have something special going on (college planning, tax issues etc), hire a fee-based financial planner, not one who charges a percentage of your portfolio.

Nice and simple and I largely agree with it. I guess the difference with my trend-following strategy is that I am spreading my investments across a greater number of asset classes (stocks, property, gold, commodities and bonds) to spread my risk and return. The other difference is that I am using a rules-based trend-following technique in an attempt to minimise draw-down (the amount by which my investments fall in value at any one time). If I had all of my investments in shares, and there was a 50% drop in the markets, could I stand it and stay in the market? Possibly not. The problem then would be the risk of exiting the market at exactly the worst time (the bottom).

Furthermore, just because the markets have behaved the way they have over the last 80+yrs, does not mean that they will continue to behave in the same way in the future.Will my 5-pot technique with timing approach fare better than Adams 2-pot buy-and-hold technique over the next few decades? No-one knows.

If you are interested in my views of the different asset classes and how they are doing this week, then here is the video:

Like what you are reading? Follow me on Facebook and also make sure you subscribe to my weekly email. Have a great week!

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Bastard lawnmower!

My ‘new’ lawnmower would not start today. I bought it on eBay a couple of weeks ago. ‘Starts well’ was the highlight of the advert, so I placed my bid…. and won! It seems that the spark plug was loose, so there was a lack of compression in the cylinder creating the starting problem…. according to my son! Getting started can be a problem for investors too. We want to know what is best to invest in, and so we agonise over the fine detail, and don’t do anything. The approach that I am using assumes that I do not know what the future holds for any of the asset classes (shares, property, gold, commodities and bonds).

I buy an asset class when it is rising, and exit the asset class when it falls beyond a certain point. Conceptually simple, but it can be difficult to follow the rules, even when the rules are simple, because of the emotions of fear and greed.

This week I have a signal to buy one of the asset classes. Which one is it? You’ll have to watch the video to find out!

Having a simple trading system has enabled me to participate in investing in a variety of different asset classes. I don’t attempt to predict which asset classes are going to do best in the future, I simply follow the trend in each asset class. It makes it easy for me to get started! My Trendfollower Facebook page is here. Please do ‘like’ it and help spread the word. Thanks!

I’ll be making my investment on Tuesday, because of the Bank Holiday. I hope you enjoy the extra day off!

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Market melt-down?

 

Is there going to be a market melt-down? Yes. When? I have no idea! My trend-following trading method involves tracking different asset classes and owning them when they are rising in price, and exiting when they fall in price.The good bit about this approach is that it will keep me out of an extended market melt-down, enabling me to stay in cash until I can re-enter the market, ideally at a more favourable price.  

The bad bit about this approach is that I will get ‘false’ signals that bounce me in and out of the market inappropriately, costing me trading fees. There is no way round this, other than to use a signalling approach that is so insensitive that it is no help at all. I accept that during times of gentle rises and falls in market prices I would have been better to have stayed invested. The time that my approach will work is when there is a significant market melt-down. So bring it on!

I have been experimenting with some different video styles.  I am using this next one on my Facebook page (please do have a look and ‘like’ it to help spread the word)!

 

Let me know what you think. All constructive feedback welcomed!

Have a great week!

 

 

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How I invest in commodities…

 

Those of you who follow my blog will know that I use the City Natural Resources Investment Trust (CYN) to gain exposure to the commodities sector. Why have I chosen this? Firstly because it is a company that owns shares in other companies, which spreads the risk of the collapse of a single company. So, although it is a single company in itself, it is effectively a ‘fund of funds’. Often, if a company is doing well, it’s performance will be better than the performance of a group of companies, some of whom are, inevitably, underperforming. Glencore is an example. It is a large mining company whose performance has been very good recently, which makes it a tempting buy, but there have been questions about its’ financial situation. The visuals of the relative bankruptcy risk of the two companies can be seen below (thanks to Stockopedia).

Glencore

 

 

City Natural Resources High Yield Trust

 

What about other funds? Blackrock World Mining Trust (BRWM) is a well-known investment trust. It’s a bigger trust with greater turnover on the stockmarket. My understanding is that it does not have exposure to energy, or alternatives, or agriculture. CYN does hold all of these within it’s portfolio, which makes me feel that it is a broader commodity exposure.This may or may not be entirely a good thing, of course, as poor performance of one type of commodity will hold back the performance of the fund as a whole. Here is a graph of CYN versus BRWM over the past 10 years. I suspect that either would have worked satisfactorily for my trend-following model.

 

What about a commodity index ETF like ETFS All Commodities (AGCP)? The main problem with this product is that it is a synthetic ETF, in that it does not actually own the products that it tracks, it just uses financial swaps to track the product. This is fine, as long as all parties in the trades stay in business and there is no financial crisis……

In summary, I think that I’m happy to use CYN as my main commodity exposure. I may, however, make speculative trades in some individual commodities that give out strong buy signals at some point in the future. One that I am keeping a close eye on is corn:

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No choice is best…..

Both of my kids are at university. I have no idea what washing powder they use when they wash their clothes (I think they wash their clothes). I remember the first time that I had to buy washing powder when I left school and went to college – too much choice! I just bought what my Mum had at home… Persil Automatic.

With trading I find that too much choice is bewildering too. That is one of the reason that I like to avoid trying to pick hot shares. It’s easier just to choose whether or not to be in an asset class. Furthermore, it’s also easier to have some simple rules that are simple yes/no. If I get a trading buy or sell signal at the weekend, I simply action it on the Monday after the weekend. I don’t allow myself leave it through the week to see if the signal reverses. A signal is a signal in my rule-book.

This served me well during the last week. My commodities trade, City Natural Resources High Yield Trust (CYN) gave a sell signal. I actioned this at the beginning of the week. Good thing too, because as the week progressed, the price fell further, and the 25% profit that the trade made would have been significantly less if I had waited and watched for a turnaround. You can see this in the video.

If you enjoy these videos and my website, please do look at the Facebook page that I run and please give it a ’like’ and help to spread the word. Thanks.

If you want to know more about my trading technique click here, input your name and email address and I will send you a 25min video about how I go about it. By the way, times have changed, and nowadays I usually use Ecover washing powder! Have a great week!

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Commodities trade closes – for a 25% profit

This morning closed my commodities position in City Natural Resources High Yield Trust – for a 25% profit

This weekend I had a SELL signal from my commodities investment. According to my system, therefore, I have sold the investment and realised a 25% profit. That is not bad – especially as it is tax-free, the way that I trade.

You can see in the picture where the BUY signal occurred last year, which had been preceded by a false buy signal.

What will happen to commodities next? Will they go up, or will they go down? I have no idea! It’s quite possible that I will be buying back into the commodities investment next week if I get a BUY signal. I shall simply follow the trend.

To get access to a 25min video that discusses my trading technique, click here

 

 

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‘It’s all about the money’ – or is it?

The motives for investing and trading are complex and often difficult to understand. Reading articles in the media and speaking to school leavers and university graduates about what they want to do (‘something in the city’) gives us the impression that our society is becoming increasingly driven by the allure of financial enrichment.

This may indeed be true for some of us, or even all of us, some of the time. Look at the deal made between green ethical guru Anita Roddick and L’Oreal, to whom she sold The Body Shop in 2006, for £652m. Who knew at the time what the motives were behind the sale? Sadly, Anita Roddick died in 2007. She did say in an interview with the Guardian: ‘I think it’s an obscenity dying rich, and I don’t want to be defined by business; after all, we’re only remembered for what we do in civil society’.

I think this is a great comment, and it seems that she managed to die with a net worth of nil, having given her £51m fortune away to charity before she died. With hindsight, her motives seem clearer. What a lady – respect!

Through her hard work Anita Roddick ended up with the ‘problem’ of too much money, but managed to solve that. Many people have problem of too little money (in 2013, half of the world’s population lived on less than $2.50 per day). Many of us fall somewhere in the middle, probably thinking that ‘a bit more’ is what we need, ideally a bit more than our neighbour (!).

To that end we might work overtime, or start a business, or attempt to invest cannily (like me). It seems, though, that there is a downside to this, and it was highlighted by Park et al in their article: It’s all about the money (for some): Consequences of Financially Contingent Self-Worth ,The bottom line of their research is that financial success is an important goal, but striving for it is often associated with negative outcomes, many of them emotional. You will, no doubt, know a good number of friends for whom this is the case.

I certainly don’t want to spoil my life by becoming obsessed by money, yet I do have an obligation to plan for my financial future. I hope that my investment system allows me to do this in a way that helps me focus most of my time and energy into endeavours other than finance! It only takes me 5 minutes per week. If you would like to know more details about how I go about my investing, do sign up here to get access to my detailed information video and to join my mailing list. It’s free! Do let me know your thoughts!

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Panic now: the housing bull’s turning bearish…or is it?

‘Panic now: the housing bull’s turning bearish’ is the headline in last week’s Money Week magazine. I enjoy reading Money Week and have learned a lot from their articles over the years. You can find out more about the magazine here:  www.moneyweek.com

But what am I to do? Should I follow the advice of Jonathan Compton, who wrote the article, and try and short the housing market? Perhaps I should simply exit any investments that I have in the UK property market? This is a tough one, especially in the light of their advice back in December to buy Real Estate Investors PLC (Ticker: RLE), a real estate investment trust with exposure primarily to property in the Midlands.

Interestingly, the graph of the share price of RLE is almost identical to that of the iShares ETF IUKP. You can see it by clicking here. IUKP is an ETF that gives the investor exposure to the UK property market by being a ‘fund of funds’. The advantage of this is that it reduces the risk of being exposed to a single share tanking because of poor management. The number of IUKP ETFs being traded is approximately 100 times greater than that of RLE, so the liquidity is much greater too.

Mainly because of the above two reasons, I think it makes sense to trade IUKP rather than RLE. But should I own it at all? What will happen in the weeks and months ahead? Will it rise or will it fall? Well, have a look at this week’s video (below) to see what my opinions are about whether I should continue to own it, or indeed the other property fund, the TR Property Investment Trust (Ticker: TRY), that I follow. The other asset classes that I monitor weekly are also discussed in the 4min video.

If you want to understand more about how I trade the different asset classes, click here to get access to a 25min video (it’s free)!

Have a great week!

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Black Range Rover or Gold?

Today is a bank holiday and unfortunately you may be sitting in a traffic jam. Take a look at the cars around you and estimate what they might be worth, or at least what they might have cost new. It will probably be a big number!

A friend of mine sold his Range Rover recently. He estimated that it had cost him about £1000 per month in depreciation since the day he bought it. For most people, that is a serious amount of money. Yet buying expensive cars is evidently quite popular when I look at what is on the roads alongside me. Why is this so?

Well, it seems that last year, because savings interest rate is so low, consumers in the UK borrowed a record £31.6 billion to finance the purchase of cars. Will that money increase in value? I don’t think so! Most of this £31.6 billion will vanish in depreciation. Many car buyers would have been way better to have invested their money in an asset that is appreciating, rather than buying a depreciating vehicle. Which assets will increase in value? Property? Shares? Gold? Bonds? Commodities? I don’t know, but I do know that Range Rovers are not an asset class. Quite the opposite, in fact.

Not knowing is fine. Of course, no-one knows what the future holds, although many financial writers and journals try to give the impression that they do. This is why I like to look at all of the above asset classes and decide whether I want to be invested in them, or whether I want to keep my money in cash. If the asset class is rising in price I like to own it. I will continue to own the asset class until I get a signal to exit that asset class. If it falls in price then I don’t want to own it any more, and I sell it. This is trend-following, and it is a simple concept, but sometimes quite difficult to implement.  

Have a look at this video and see how the various asset classes are doing, and find out what I am currently invested in: