New share club process - please vote

Discussion of the proposed Cashback Investment Club

Moderator: CIC officers

Should the cashback investment club adopt the process outlined below?

Poll ended at Tue Mar 20 2018 8:49am

Yes
5
50%
No
5
50%
 
Total votes: 10

Beachboy
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Re: New share club process - please vote

Post by Beachboy » Fri Mar 09 2018 12:05pm

an6ypan6y wrote:Here's my feedback:

1. Set a maximum number of different investments that the club should aim to hold. (to be agreed separately)
Agreed - how about setting a minimum as well

2. At regular, fixed intervals (to be agreed separately), we hold two parallel votes; a new stock to buy and one to sell (unless at that time we hold less than the maximum agreed above, in which case no sell vote is necessary).
Do not agree - if at the given fixed interval there are no attractive shares to buy then the club would be steamrollered in to buying unsuitable share(s). That rule also assumes funds will be available to make a purchase. Better surely to operate more closely to the current method of 'when funds are available' and to always have a 'none of the above' option available. This rule also puts us in the potential position of selling a share at the wrong time.


3. Each decision will be a straight choice between 3 stocks. No "If price reaches X" or "None of the above"
On the fence on this one, A purchase should surely be based upon an agreeable purchase price, the value of shares can move rapidly either way and with the speed we come to agreement a purchase decision could easily become off-target. Do not get rid of none of the above option because that assumes there will always be a share we want to buy and sell.


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
Do not agree, it is impractical to marry up buy and sell deals just because a club rule stipulates this action, this puts us in the potential position of selling a share at the wrong time.


5. We automatically apply a standard "stop loss" to all purchases e.g. 20% below purchase price.
Agree in principal, discussion needed on the amount we are prepared to use as the trigger.

I agree fully with the above comments by an6ypan6y, they are pretty much word for word the feedback I would have wanted to write myself for each of the sections above.
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Re: New share club process - please vote

Post by kevinchess1 » Sat Mar 10 2018 11:54am

an6ypan6y wrote: 3. Each decision will be a straight choice between 3 stocks. No "If price reaches X" or "None of the above"
On the fence on this one, A purchase should surely be based upon an agreeable purchase price, the value of shares can move rapidly either way and with the speed we come to agreement a purchase decision could easily become off-target.
So, we set an 'Agreeable price' of say £2 per sahre.
After the vote goes though it's £2.05 so we dont buy it. And then what?
Is Someone expected to keep a close eye on this share to see when it drops? Who exactly?
Say it takes off and rises and rises what happen then?
We cant used the funds for anything else without ANOTHER vote which could leave us in a similar, farcical situation

I have no issue with a 'None of the above' option
It's never gets more than a couple of votes ever
Last edited by kevinchess1 on Sun Mar 11 2018 9:26pm, edited 1 time in total.
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richard@imutual
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Re: New share club process - please vote

Post by richard@imutual » Sun Mar 11 2018 2:48pm

I agree fully with the above comments by an6ypan6y, they are pretty much word for word the feedback I would have wanted to write myself for each of the sections above.
Thanks both, that's useful :thumbup:

I'm certainly open to compromise, but I am concerned that the only alternative being proposed seems to be "more of the same", so it would be useful to keep discussing some of these points.
if at the given fixed interval there are no attractive shares to buy then the club would be steamrollered in to buying unsuitable share(s)....
There's a popular saying about successful investing which goes "It's not about timing the market, but time in the market". In other words, even the experts struggle to tell when the general stockmarket is about to rise or fall. So you're better off not trying to second guess the market, and dripfeed regular investments over a long period. Which is exactly what our club does.

So one of the principles behind my proposal is that we remain as fully invested as is practical, and we don't just sit on cash earning zero interest. At any one time, there ought to be at least one share that we think is worth investing in. That said, if retaining a "buy nothing" option makes you more comfortable then let's keep it.
That rule also assumes funds will be available to make a purchase
Funds will always be available because, unless we're below our target number of investments, we'll be selling one at the same time. Bear in mind that, with all these proposals, we can always decide as a club to make exceptions where common sense suggests it.
Beachboy wrote:if at the given fixed interval there are no attractive shares to buy then the club would be steamrollered in to buying unsuitable share(s). ...This rule also puts us in the potential position of selling a share at the wrong time.
In the alternative scenario. who decides that it IS a good time to buy and how?

I'm worried about an approach that attempts to take advantage of short term share movements. I don't think an online club can be flexible enough while also giving careful consideration to what we buy and sell.
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Re: New share club process - please vote

Post by an6ypan6y » Mon Mar 12 2018 8:20am

So, we set an 'Agreeable price' of say £2 per sahre.
After the vote goes though it's £2.05 so we dont buy it. And then what?
Is Someone expected to keep a close eye on this share to see when it drops? Who exactly?
Say it takes off and rises and rises what happen then?
For this question it would be necessary to know what functionality is on offer from Share in their dealing platform. It is common (and I would suggest expected) to be able to place a 'limit order' this should be valid for a decent timeframe of between a week and a month where the customer can say I want to either buy or sell when this price is breached, so the idea of someone having to hover over a dealing screen ready to pounce does not factor.

Do we have this basic functionality with Share?
In the alternative scenario. who decides that it IS a good time to buy and how?
We decide as a club that above a ceiling the share is not a value buy - if you went to buy a car and the dealer raised the price by £2k from when you viewed it you would walk away unless you had so much money it was of no consequence - that goes for any commodity, specially shares.
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Re: New share club process - please vote

Post by richard@imutual » Mon Mar 12 2018 4:58pm

Yes, we can place limit orders with Share.com as you describe. The question is whether we should. My concern is that the condition is never met, making the whole decision process a waste of time

I agree that we wouldn't want to buy something at a substantially different price than we were expecting to, but in practice this shouldn't be a big issue. There are three key stages:
1. The price at the time a share is nominated
2. The price when voting begins
3. The price at the time voting closes
4. The price at the time we come to trade

The price certainly could vary significantly between (1) and (3). But we are all free to change our vote accordingly during that period; it would be good practice for members to visit the voting thread on the last day, check the latest prices and confirm their decision (I can make this easier with some automation). Ultimately we should all be responsible for our vote as per the market price when voting closes.

It could also vary between (3) and (4) but that should be a rare occurrence so long as the club officers get organised and ensure that the trade is made as soon after the closing vote as possible.

Here's an example to illustrate my concern with this...
Someone nominates Widgets PLC when the price is £1 a share. When voting opens it has risen to £1.02 and by the time voting closes it is £1.04 a share. By the time we come to make the trade it is £1.05 a share. Given that it's only risen less than 1% from the price when voting closed, I would argue that we still proceed and buy the share at the current market price (£1.05).


The alternative would be to say "Only buy at £1.04 (or less)". But we could miss out on a share that is beginning to rise strongly

And how long do we wait? All the time we would be sitting on uninvested cash. In the event of a big rise in price before we buy, it might be better to just hold another vote
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Re: New share club process - please vote

Post by garindan » Mon Mar 12 2018 5:25pm

richard@imutual wrote:What would help is if those who have voted against could summarise which of the items 1-5 are they opposed to, and what alternative proposal they'd like to see in each case (I know garindan and beachboy have already commented at length, but summarising in the above form would be helpful)

This will help to draft an amended proposal if necessary
Been a bit delayed - apologies :thumbdown:

So as I said - I'm not necessarily against all points but my personal view is you are proposing to:

- change the process of how we buy and sell shares through altering how polls are formatted, when they run and for what reason

This is not the problem as far as I see it. The problem we have had has primarily been caused by:

- picking the wrong shares beyond what we previously agreed (NCC was not FTSE250 for example)
- picking substantially shorted shares (Carillion, ITV, Greene King)
- irregular, at best, review of trading for shares held and general "lack of ownership" from the club
- difficulty in selecting shares to purchase, which have often been suggested by officers and only a couple others when there are 16 members of the club
- we have also been misled by both NCC's board and Carillion's board but we'll see no joy from following this particular line of inquiry further, as it is a take it on the chin kind of situation for the small investor

To your proposal:
1. Set a maximum number of different investments that the club should aim to hold. (to be agreed separately)
So the way we had originally intended to run things was having a number of longer-term investments, and a smaller number of shorter-term investments. Setting numbers for both, as we had originally intended would be my favoured choice. A blanket number, without thought to the composition of the portfolio seems a regressional step to me. Also - how do we deal with adding to existing shares? Is that against the rules? The "Carillion effect" has tarnished investing further in the same share but in the process outlined in the proposal we could have as much money in the club kitty to invest in a single go as two separate purchases at a previous time.
2. At regular, fixed intervals (to be agreed separately), we hold two parallel votes; a new stock to buy and one to sell (unless at that time we hold less than the maximum agreed above, in which case no sell vote is necessary).
Firstly, I know why you want to do this, so I appreciate where you are coming from with the sentiment. However, there are other means to achieve it, in my opinion. My big concern is we end up selling shares we have bought for the long-term and lose sight of any kind of share portfolio plan. This could well turn the club towards more fruity quick gain shares, to look at moving on for the next vote etc... I see this as more effort for the officers rather than less. If we control sales using limits agreed before purchase then we can do away with voting to sell, unless some event has happened that should make us re-consider something we had agreed, like we did with Carillion, for instance. The result of the poll is immaterial in that case, it was the calling of it that is the example.

My preferred route would be to look at why shares were bought again - for long-term income or shorter-term gain. In some cases we might find a share has potential for both. Set targets for each that will automatically kick in if prices hit the right point and determine what our threshold of pain is for each short-term investment. We need to have a separate discussion about how we look at long-term investments really. It is not the same animal.
3. Each decision will be a straight choice between 3 stocks. No "If price reaches X" or "None of the above"
I don't have a problem with three stock choices for votes. I am in two minds about a none of the above option. See next point for price...
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
Price to buy is more down to picking sensible shares to begin with, but if they are for shorter-term gain I would suggest some kind of price fluctuation threshold need to be put in place to stop us buying a share that has done its money before we buy. If they are longer-term for income it is not so much of a concern, in my opinion.
5. We automatically apply a standard "stop loss" to all purchases e.g. 20% below purchase price.
The stop:loss point is covered in point 2 above.

To finish - I feel we can change processes for voting and put dates in calendars all we want but unless we tackle the core problems we have the results will most likely be "more of the same" as has been suggested sticking with the old would do. We do need change but we need to change the parts that will have a direct result in changing how we work as a club to produce more positive results.
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Re: New share club process - please vote

Post by garindan » Mon Mar 12 2018 5:31pm

richard@imutual wrote:Yes, we can place limit orders with Share.com as you describe. The question is whether we should. My concern is that the condition is never met, making the whole decision process a waste of time
We have done that in the past the the automated purchase has happened :thumbup:
richard@imutual wrote:...we are all free to change our vote accordingly during that period; it would be good practice for members to visit the voting thread on the last day, check the latest prices and confirm their decision (I can make this easier with some automation). Ultimately we should all be responsible for our vote as per the market price when voting closes.
It has been difficult getting everyone to vote quickly once, so to ask them all to come back and check their vote for a second time might be something we cannot rely on. :?:
richard@imutual wrote:The alternative would be to say "Only buy at £1.04 (or less)". But we could miss out on a share that is beginning to rise strongly
I think this is the way forward and essentially the vote closes and action should be taken as soon as the majority of votes are in favour of the purchase. Again, we have done this in the past with votes and it worked. Whether the share choice or the price was right is another matter entirely!
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