Another idea for moving forward

Discussion of the proposed Cashback Investment Club

Moderator: CIC officers

I agree to taking the Club forward in this manner

Poll ended at Fri May 04, 2018 4:19 pm

Yes
12
92%
No
1
8%
 
Total votes: 13

garindan
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Another idea for moving forward

Post by garindan » Mon Apr 23, 2018 9:45 pm

I have now moved this forward to a vote - please read the thread below for the discussion we have had before voting. Thanks!



Everyone,

I mentioned I'd have a go at suggesting another possibility for moving forward. I've some ideas below about how we could take things, which I'd welcome your thoughts on.

Principle - two pots of money going forward not one

- as much as previously we had a discussion about having a separate fund some months ago that didn't find much traction, recent events with Carillion seemed to have produced a new appetite for this to actually happen

- I think we should immediately plan for a second fund of money invested on different terms (more risky)

Fund 1 : Less risky

- there is still appetite not to throw everything into risky investments, so we need to consider how we maintain a less risky investment pot of money

- I've grown of the opinion that we should hold all the investments we currently have in a long-term pot and set out our expectation for each and then leave them to get income and exit if and when the expectation is met

- I think we should then consider whether any further money coming into this fund goes towards purchasing completely new shares, further investment in ones we already have or if the money should go into a tracker fund. The options to choose from for a longer-term goal could be:
  • 1 - look to grow the holdings to form our own mixed sector fund
  • 2 - look to consolidate down to our favoured 5 share holdings and only invest further in those
  • 3 - look to exit all our shares and invest in a tracker fund run by professionals
- there is no place in this investment pot for companies paying little to no dividend

- for a trial period 50% of funds invested in the club automatically go into this fund

Fund 2 : More risky

- this fund is for investing in companies with high growth potential

- dividends are irrelevant to considerations

- each purchase vote needs to have three candidate companies

- each purchase needs to have a stop:loss (protect as best you can against loss) AND either an agreed exit sell: (to immediate crystalise a gain) or a tracking stop:loss (to allow for further profitable growth using a margin), all which are the same for all shares purchased seeing there is one goal for this pot of money

- votes happen as soon as we have sufficient funds AND three candidates to vote for

- purchases will be made immediately an officer can see a majority result on the poll, for the price at the time

- we would need to think about whether it was sensible to set a maximum to invest in any one riskier company and what that value was

- if purchases are still held after 3 months they should be reviewed, with a goal of either selling to recoup the funds or holding for another 3 months

- for a trial period 50% of funds invested in the club go into this fund

Trial period

- I suggest we move all the current money available (read a round amount to make the maths easier for the treasurer) into the new riskier fund to start it off

- trial period is one year

- I will look to lead on reforms for the existing pot (1) of investments

- someone else (maybe Rich) needs to lead on the new pot (2) of investments

- at the end of the trial period we assess how things went and what we take from it, in order to move forward accordingly


I like this concept as it is all about learning about investing and trying different things. I think we'll learn from it, it will settle how we need to then progress as a Club and should be exciting. I think there is enough scope, protection and experimentation for it to hopefully please the majority, if not all members. I think we all need to compromise to agree a way forward that isn't too far in the direction of perceived "safety" or "risk". We can give it a year and then the results might take us in a new direction.

Thoughts very much welcome on the above.
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Beachboy
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Re: Another idea for moving forward

Post by Beachboy » Mon Apr 23, 2018 10:22 pm

Thanks for taking the time, which I imagine was considerable, in formulating the proposal. I think it is well reasoned and offers a excellent compromise and hopefully in at least part offers something that appeals to every CIC member.

Also perhaps even more importantly it represents a positive step forward and if agreed would provide clarity of operation to every member from the outset.

In summary I would be happy to support the proposal as outlined.
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kevinchess1
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Re: Another idea for moving forward

Post by kevinchess1 » Mon Apr 23, 2018 10:26 pm

Never really seen the point of 2 funds, I dont think we have enough money to split
But for the sake of moving forwards I would support this idea in theroy
As for you ideas on the safer fund I'm against putting the money in a Tracker, too boring I think too look at reducing it to 5 funds approx and just reinvest in those
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parchedpeas
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Re: Another idea for moving forward

Post by parchedpeas » Tue Apr 24, 2018 3:28 am

kevinchess1 wrote:Never really seen the point of 2 funds, I dont think we have enough money to split
But for the sake of moving forwards I would support this idea in theroy
As for you ideas on the safer fund I'm against putting the money in a Tracker, too boring I think too look at reducing it to 5 funds approx and just reinvest in those
Agreed. Better to have one fund and a 3 safe, 3 risky split. But I'll back anything that breathes some life into the club. The problem will be, as it has been, a lack of ideas: where is the 3rd bid for a buy?

I think some people have joined this in the hope it'll be a cheap tracker fund (badly managed!!) instead of a CLUB where we are all equal. Not sure silent partners are going to work if we're going to be active across two sets of funds.
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garindan
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Re: Another idea for moving forward

Post by garindan » Tue Apr 24, 2018 8:18 am

As with anything - I think we try to make best of what we have and what contributions we get. Giving a combination of things a trial for a year won't do any harm and should not be too onerous to set up. If at the end of the year something we have tried seems to be working then that's good news. If not then we have tried something out and we can draw conclusions from it.
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Re: Another idea for moving forward

Post by Derbiean » Tue Apr 24, 2018 8:43 am

You've put alot of thought into this and I'm 100% behind it :thumbup:
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Re: Another idea for moving forward

Post by AAAlphaThunder » Tue Apr 24, 2018 9:41 am

I agree and I am please to vote for this.

Let's get this show back on the road.
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pieman
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Re: Another idea for moving forward

Post by pieman » Tue Apr 24, 2018 11:09 am

I like the idea of actually doing something ....

Just a couple of queries (maybe i missed the answers)

a) if we go for the trial period of a say a year - does this mean that any existing funds not currently invested and any new money is invested into this pot for that time period?

b) Does this then mean that the value our in our existing portfolio is 'locked' into the safe fund - and we can only use this to buy 'safe' shares ?
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Re: Another idea for moving forward

Post by richard@imutual » Tue Apr 24, 2018 11:36 am

Well I think (and garindan may correct me) that we still effectively have one fund and one monthly valuation, and your payments continue to be treated the same way. It's just that we have a mechanism for introducing some higher-risk small cap shares into our portfolio.

I still favour two separate funds because it allows each individual the freedom to choose their risk profile, along with the other elements of my original proposal, but ...

I think this is a well thought out compromise by our chairman and I'm happy to support it. Great leadership, Sir :)

There are some details that we'll need to iron out. Setting an initial stop loss is a good idea, but I'm slightly concerned about unduly limiting our gains by having predetermined exit prices and cashing in on the winners too early. But that can be the subject of a separate thread
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garindan
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Re: Another idea for moving forward

Post by garindan » Tue Apr 24, 2018 12:29 pm

richard@imutual wrote:Well I think (and garindan may correct me) that we still effectively have one fund and one monthly valuation, and your payments continue to be treated the same way. It's just that we have a mechanism for introducing some higher-risk small cap shares into our portfolio.
You got it. It shouldn't need any major changes to reporting, which is good news I think. The only difference will be dividing up the investment funds into two "pots", if you like, so we know what is available to invest in each.
richard@imutual wrote:I still favour two separate funds because it allows each individual the freedom to choose their risk profile, along with the other elements of my original proposal
I understand this. I think a year of trying our luck in both investment camps without the need for any major reporting changes will give us the confidence to make further decisions in the Club. This of course might be a movement to two funds but then again it might only be one fund and that could be constituted in either of the ways we are going to trial. At least then we'll hopefully have a better idea of where we want to be as a Club :thumbup:
richard@imutual wrote:I think this is a well thought out compromise by our chairman and I'm happy to support it. Great leadership, Sir :)
Why thank you my esteemed fellow :lol:
richard@imutual wrote:There are some details that we'll need to iron out. Setting an initial stop loss is a good idea, but I'm slightly concerned about unduly limiting our gains by having predetermined exit prices and cashing in on the winners too early. But that can be the subject of a separate thread
For sure. The latter part is really the discussion point, as you rightly mention needs to be ironed out. One thing that strikes me in a number of discussions is ensuring we all understand what a "stop:sell" and a "tracking stop:loss" is. Quick definition below:

stop:sell is used to cash in on winners at a predetermined price point. This locks in the gain.

tracking stop:loss is used to track the price of a winner (not a loser as the loss part of the term might suggest) to try and optimise a gain through not selling too early. This is a little more complex! Essentially it works like this:
  • - set a share price (in pence) as a trigger point for the tracker to kick in
  • - the tracker then records the peak price of the share (in pence) from then onward
  • - set a buffer value (in pence) that will be used to control the stop:loss sale, when conditions are met
  • - the buffer is the amount that you are happy for the share price to fall in value from the peak price before a sale is made to lock in a gain and stop a downward trajectory
  • - if the share price falls from the peak price (recorded since triggering) by the buffer value the share is sold
  • - if the share price continues to rise the peak price increases and, therefore, so does the price point for a sale, guarding against an early exit
Hopefully that helps explain the difference. There is nothing to stop a share having both a stop:sell and a tracking stop:loss set. As with most things, there is normally a price someone will sell out for... Missing out on that sale might be a mistake as the share could open 20% lower the next day etc...

So this is what would need to be discussed and a view taken upon :thumbup:
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