The club's future - a proposal

Discussion of the proposed Cashback Investment Club

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richard@imutual
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The club's future - a proposal

Post by richard@imutual » Sat Feb 10 2018 9:19am

I'm sure we'd all like to see our club's investments performing better, and I want to propose a different way of working that I think could help.

Setting up and operating the club has taken quite a lot of effort; by me, garindan, underdog and others. My own justification for the time invested was that I envisaged creating a unique online club with a significant membership, which would help imutual both directly and indirectly.

But in addition to the poor performance of our investments (and perhaps because of it), we haven't attracted many members; in fact, I can't remember the last time a new member joined!

Also, I had great hopes for the "Top tipsters" table, which would help to identify who had the best share-picking skills - and this in turn would be to the benefit of the whole club through better investments. But the way that we've gone about voting on buy/sell decisions has often made it too difficult to incorporate into the Top Tipsters calculations. Consider the example of the Barclays "sell" vote, which was not only incompatible with the Top Tipsters algorithm but also required me to constantly monitor the share price in order to determine when the instruction should be executed. And when, after several weeks, that condition was finally met, we found ourselves locked out of the share trading account :(

For this and other reasons, I propose that in future we operate in the following way:
  • 1. Maintain a fixed number of different investments. We have seven at the moment (excl. Share.com); I'd prefer no more than six.
    2. At regular intervals (I suggest 2 months), we hold two parallel votes; a new stock to buy and one to sell.
    3. Each decision will be a straight choice between 3 stocks. No "If price reaches X" or "None of the above"
    4. Once the voting has closed, we execute the "sell" decision first and then use the proceeds, plus whatever cash is in our account, to invest in the "buy" stock. These actions take place immediately at whatever is the prevailing price
    5. We automatically apply a standard "stop loss" to all purchases e.g. 20% below purchase price.
In addition to being able to resurrect the "Top Tipsters" analysis, I see the benefits of this being as follows:
- SIMPLICITY. A standard process understood by everyone and easy to operate
- DISCIPLINE. It forces us to think about which of our current shares is underperforming, rather than just clinging onto poor investments in the hope of recovery. The stop-loss should also help in this respect.
- PORTFOLIO SIZE: It stops us ending up with too many different investments, so that we can concentrate our attention and analysis on a manageable number
- TIME-SAVING: All key buy/sell decisions will be focused on a short period every 2 months, scheduled in advance. Hence, we can make time to give more detailed consideration of our investments during this period and hopefully make better decisions as a result. This process would also greatly simplify the roles of the club officers

There are further questions we'd need to answer, such as how to decide what the three stocks should be, how the Top Tipsters table should be calculated and what bearing this should have on anything, but I don't want to open up too many topics in the same thread. Also, note that the above suggestion is mainly about our process, and not what our buying/selling strategy should be - that's definitely one for a separate topic but I'd like to get agreement on the above first.

So what does everyone think?

kevinchess1
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Re: The club's future - a proposal

Post by kevinchess1 » Sat Feb 10 2018 10:21am

I would say I ‘Broadly agree’
Will post more later I’m shopping InSaineberrys at the mom :thumbdown:
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Re: The club's future - a proposal

Post by BeautifulSunshine » Sat Feb 10 2018 1:43pm

Worth a try - let's see if our performance improves.
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Re: The club's future - a proposal

Post by Beachboy » Sat Feb 10 2018 4:56pm

I agree that better processes would probably help the running performance of the club and open to ideas. I have various queries regarding the above suggestions and am not immediately convinced but open to be persuaded.

I do not currently have time to fully outline my queries and comments because am just settling down to watch the rugby and then off out for the evening straight afterwards but will post these in the next couple of days when I have more time.

That said I think healthy and constructive discussion is a positive in itself :thumbup:

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Re: The club's future - a proposal

Post by kevinchess1 » Sat Feb 10 2018 5:38pm

The problem i have with the club are 2 fold
This insane belief that we must buy something because we have the money
And our refusal to sell anything at a loss
I suggest we give this a try for a year and then review
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Re: The club's future - a proposal

Post by Derbiean » Sat Feb 10 2018 6:57pm

I like the suggestions you've put forward i believe it will firm up the share club's performance.
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Re: The club's future - a proposal

Post by kevinchess1 » Sun Feb 11 2018 11:23am

The 2 biggest issues I see with this idea are
Persuading the members to sell 3 or 4 loss making shares
And
Stopping them buying something if a Stop/Loss kicks in between votes
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Re: The club's future - a proposal

Post by richard@imutual » Sun Feb 11 2018 12:31pm

kevinchess1 wrote:Persuading the members to sell 3 or 4 loss making shares
Isn't that going to be an issue regardless of process? At least with the above approach, we're forced to sell something every 2 months. Each club member then has to put their case as to what that should be
kevinchess1 wrote:Stopping them buying something if a Stop/Loss kicks in between votes
Yes, I think we should just keep the proceeds as cash when that happens, until its time for the next buy vote

That said, we're a democratic club and so if we ever want to deviate from the agreed process we could do so subject to a majority vote. There will be times when such flexibility is appropriate
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Re: The club's future - a proposal

Post by Chadwick » Mon Feb 12 2018 10:49am

If you only sell/buy at prescribed intervals 6 times a year, is it possible that you will miss good prices at which to sell or buy.
I thought the idea of share dealing is to buy low and sell high. If you can't react to an opportunity because it's not "trading week", surely you'll miss out?

I'm not a member, and haven't traded shares myself, so it's possible I don't understand fully.
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Re: The club's future - a proposal

Post by Beachboy » Mon Feb 12 2018 12:18pm

Chadwick wrote:If you only sell/buy at prescribed intervals 6 times a year, is it possible that you will miss good prices at which to sell or buy.
I thought the idea of share dealing is to buy low and sell high. If you can't react to an opportunity because it's not "trading week", surely you'll miss out?

I'm not a member, and haven't traded shares myself, so it's possible I don't understand fully.
I totally agree and this is a major concern of mine. I haven't had a chance to properly respond to the proposal yet and am currently quickly typing this out on my phone during a short break at work but will hope to do so when I have more time and a laptop to hand so it's easier to type.

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