Proposal for our way forward

Discussion of the proposed Cashback Investment Club

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garindan
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Re: Proposal for our way forward

Post by garindan » Fri Mar 22, 2019 2:34 pm

an6ypan6y wrote:
Fri Mar 22, 2019 1:55 pm
Would it not be possible to hold occasional conference call type meetings to thrash out key decisions or simply to draw members closer and encourage cooperative thinking.
I totally understand your point but the practicality of setting this up and ensuring many can attend the conference is even more difficult than trying to get members to vote in a short time window of a day. One of the aims of the Club was to have good discussion on imutual, so this is why I am trying to get us to use this forum platform more than we have. However, it is certainly something we can contemplate if we still have trouble.
an6ypan6y wrote:Just a thought on the selling process: "This would mean a monthly poll for each share to decide if we hold or sell."
Would you plan to only sell the most popular (or un-popular) share in this vote -else we could end up flogging the entire portfolio in a single month.
This is exactly what I am suggesting. So I'm talking about a poll for Medica at the moment and additional polls for other new shares we buy. All these shares are going to be ones for us to try and make money on, all more risky like Medica, so we will not be considering buying a long-term share and then having polls each month about whether to sell or not. If we have £1000 invested in each share then we'll only be having 5 polls max, maybe less.
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Re: Proposal for our way forward

Post by hiswitzend » Sat Mar 23, 2019 6:22 am

I have read the proposal and in theory it does make sense, however i still think we should a core of long stay shares. As we know shares go up and down and this would give a long term holding and would stabilize some of the up and downs.
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Re: Proposal for our way forward

Post by Beachboy » Mon Mar 25, 2019 8:57 am

Garindan massive thanks for the time and effort you have put into the proposal.

I am very supportive and think we should put the plan into action. My only comments slight areas where I would possibly like some further discussion (although this does not have to stop the proposal be implemented and the discussion taking place in parallel):

* There has been various previous discussions about having a cap on the number of shares we hold. I can see from a practical management perspective we do not want loads that we have no clear strategy for. However one of our failings to date seems to be that we have held a limited number of shares (often doubling up) which have underperformed and we have not had a diverse and large enough portfolio to absorb these. I noted in the article that Richard highlighted a little while ago of an investor who wrote about his winners and losers mentioned he had a portfolio of over 50 shares. I am not saying we want anything like that number but I am not sure limiting ourselves to such a small number is wise.

* More an observation than anything else picking up on hiswitzend's point. I agree that having some longer term shares in the portflio with a clear strategy and way of deciding if they are performing or not is a good idea. The danger that we need to avoid is judging a long-term income generating share on its short-term performance. That said there will be times when an income generating share is not performing and is not likely to do so and should not be held indefinitely just because it is categorised as a long-term option.

Thanks :thumbup:
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Re: Proposal for our way forward

Post by garindan » Mon Mar 25, 2019 10:32 am

In reply to both "hiswitzend" and "Beachboy" - points taken. If we were going to hold any of the long-term shares, my preferred option would be as follows:

- We should look to pick a couple of our long-term shares and go with them exclusively if we are also progressing the other new process. Trying to keep a diverse long-term portfolio as well as deliver the new process will be difficult and not allow us to see how a new approach works.

- I'm keen we don't produce something that is unmanageable for the future. That's why the limit has been proposed. To be honest - I don't think the limit of 5 would be breached in the next year, as that would require 5k of funds. Even if we manage to exit two or three of the long-term shares we currently hold we'll still struggle to break the sum of money needed, so for the moment it is a moot point. We can review this of course, as and when we look towards hitting the target and we'll have the benefit of having seen the process running for a while.

- One alternative suggestion would be that we build a 5k investment pot for the new strategy and only ever reinvest in 1k lots, with any extra produced by good performance and further member investment into the Club being positioned for the two long-term shares. Again this is another moot point for the moment as we need to get the new process fully funded first!

If we were to go with two long-term shares I'd only hold GSK and ITV, and put to bed discussions about current price on them. I would choose these two as, to me, they represent the greatest opportunities out of the ones we have over the long-term. GSK has the potential for large growth in the future through the drug market, whilst ITV still produces great TV, has such a strong back catalogue of media and is undoubtedly blighted by BREXIT. It is also quite possible to see either or both acquired sometime in the future, which adds to their appeal.

There are various ways we could do things but in the end we need to be pragmatic and not complicate our position by convoluting the process. Therefore I think our best bet for the moment is to give the new proposed process the best starting position so we can have a clear experiment. My gut feeling is that will need us to gracefully exit from long-term positions that we currently hold as and when the time is right - which it looks to be for two of them at the moment.
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Re: Proposal for our way forward

Post by richard@imutual » Mon Mar 25, 2019 10:44 am

Let me add my thanks to garindan for putting time and thought into this. Seeing the responses so far, I think we need to approach this in stages; firstly agreeing the principles of the new process before worrying about certain details e.g. how many stocks we hold, where we source tips from

I think your proposal moves us in the right direction, but I am concerned that it might not, in reality, resolve some of the issues we've had to date
garindan wrote:
Fri Mar 22, 2019 2:34 pm
This is exactly what I am suggesting. So I'm talking about a poll for Medica at the moment and additional polls for other new shares we buy. All these shares are going to be ones for us to try and make money on, all more risky like Medica, so we will not be considering buying a long-term share and then having polls each month about whether to sell or not. If we have £1000 invested in each share then we'll only be having 5 polls max, maybe less.
I haven't quite followed that. Perhaps if I re-post my original suggestion on this aspect of the process, and we can explore how your suggestion differs from this and why
1. Maintain a fixed number of different investments. (number to be agreed)
2. At regular intervals (timescale to be agreed), we hold two parallel votes; a new stock to buy and one to sell.
3. Each decision will be a straight choice (Do we buy /sell now at current market price?) between a set number of stocks (number to be agreed). 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
It seems to me that we shouldn't need 5+ polls re: selling - just one. And had we adopted the proposed approach in the past, I suspect the outcome would have been "Don't sell" in all cases and we end up repeating the same mistakes i.e. too many stocks and unwilling to crystallise losses in order to release funds for new investments with greater prospects

But I may have misunderstood?

And I am very strongly against continuing to classify shares as either "long term" or "other". There is nothing to stop members putting the case for not selling a particular share, using "long term prospects" as the reason, but you need to persuade the rest of us. What has happened to date is that it's been decided the certain stocks (most of them!) are deemed "long term" and hence they get automatically excluded from consideration when we look to sell something. IMO all shares should have equal status and be potentially subject to a sell vote when the time comes
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Re: Proposal for our way forward

Post by garindan » Mon Mar 25, 2019 11:34 am

richard@imutual wrote:
Mon Mar 25, 2019 10:44 am
Let me add my thanks to garindan for putting time and thought into this. Seeing the responses so far, I think we need to approach this in stages; firstly agreeing the principles of the new process before worrying about certain details e.g. how many stocks we hold, where we source tips from
Definitely.
richard@imutual wrote:
Mon Mar 25, 2019 10:44 am
Perhaps if I re-post my original suggestion on this aspect of the process, and we can explore how your suggestion differs from this and why
1. Maintain a fixed number of different investments. (number to be agreed)
2. At regular intervals (timescale to be agreed), we hold two parallel votes; a new stock to buy and one to sell.
3. Each decision will be a straight choice (Do we buy /sell now at current market price?) between a set number of stocks (number to be agreed). 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
It seems to me that we shouldn't need 5+ polls re: selling - just one. And had we adopted the proposed approach in the past, I suspect the outcome would have been "Don't sell" in all cases and we end up repeating the same mistakes i.e. too many stocks and unwilling to crystallise losses in order to release funds for new investments with greater prospects
So why does my proposal differ from yours?

Firstly, I want us to ignore all the other shares we hold other than Medica. My suggestion is we only court investment in shares like Medica. I don't see your method working for shares in the FTSE market, as we'll probably be drawn towards more well known ones and we have seen the value of buying and selling FTSE shares over a small period of time, say a month, is not going to produce anything exciting/interesting for members. However, with Medica we have seen much bigger changes in share price, which would be suited to your process and mine. However, the key differences are:

- your process does not really work until we have at least 3 shares in the portfolio like Medica, as the default of one share will be to sell it every time. Two we'd have a choice but not that varied. With my process we start now in the same method as we would when we have 1, 3 or 5 shares.

- your process of one vote for a sale will probably mean members will plump for the easiest option and not really look at each share in any detail. It would also only allow one sale per period. I've thought about this and think we should have a vote per share, so we have the opportunity to sell more than one per period and encourage members to look at every share we hold with a bit more interest. This approach may take more polls but I hope member interaction will also be improved because a thread of discussion can be opened for each share every month, knowing we'll be voting on it come the agreed date. There is a risk that we might not be prepared to sell some stocks every month but the comparison to the kind of shares we have held votes against selling in the past is not really a fair one. The new shares we will be buying are geared towards us making money on share price and income is not on the agenda at all. Therefore our decision making should be a lot more straightforward.

- the purchase process is not particularly different but mine is designed for us to know what funds are available and then give a bit of time for members to then review the purchase options. We'll also be able to buy more than one share if money is available. Putting a time gap between selling and buying will help as we'll all know the latter half of the month is geared towards reviewing our own stocks and the first half towards looking at stocks to purchase. As we'll know what stocks are on the purchase option list it may well make members think about selling up current stocks to get the opportunity to buy into ones they prefer the look of on the purchase list.
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Re: Proposal for our way forward

Post by garindan » Mon Mar 25, 2019 11:49 am

I've been thinking about whether there is another way we could manage polls for shares we hold. I've just had this as an idea:

- we have a pinned thread for Medica and all shares we buy in the new process
- this thread is where we discuss everything about that particular share
- there is a permanent poll open (no closing date)
- there are two options on the poll to either hold or sell
- members MUST allocate their preference for each share and if their view changes update the poll accordingly
- if a poll shows a majority to sell a share we just sell then rather than wait for an "official" poll end date
- this cycle just continues and admin overhead will be greatly reduced, as well as all members knowing the poll exists and that it needs reviewing regularly. Reminders to review will be sent via Private Message to all members.
- members should be signed-up to receive notifications on these threads, so they can review and respond accordingly

I think this might be really practical and helpful for us to do.
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Re: Proposal for our way forward

Post by richard@imutual » Tue Mar 26, 2019 3:17 pm

Well it seems that the above covers two distinct topics:

1) The mechanics of our regular buy/sell decisions
2) Which (type of) shares are included in this

I have thoughts on both, but perhaps they should be in separate threads? For the moment, I'll restrict myself to thoughts on (2) ....
Firstly, I want us to ignore all the other shares we hold other than Medica. My suggestion is we only court investment in shares like Medica.
As you know, I'm also keen for us to look at "racier" stocks than we have done in the past. But I am fundamentally against this segregation of different types, and different processes depending on whether a stock is considered "long term". This split of "long term" and "other" is what we've just tried over the past 12 months (though I accept that you've proposed selling some "long term" shares to free up more funds).

To get greater engagement of members, we need a simple, predictable process that allows thoughtful decisions without being too time-consuming. Your proposal is definitely a step in that direction, but what if, for example, I want us to sell ITV? Is there a separate process for that? It all seems a bit complicated to me

"Buy and hold" is generally good advice for those investing for the long term, but I think this online share club needs a different approach. It's an experiment and an opportunity to learn, and for that we need to feel that we're in control of our fortunes. If the portfolio isn't performing, we should have regular opportunities to dump any of current stocks - if that's what members vote for.
I don't see your method working for shares in the FTSE market, as we'll probably be drawn towards more well known ones
I think we need to trust members to make the right decisions, rather than design a process that excludes certain options from the outset. In any one voting decision, I will argue my own corner (i.e. for more adventurous stocks) but if I get out-voted then so be it.
we have seen the value of buying and selling FTSE shares over a small period of time, say a month, is not going to produce anything exciting/interesting for members. However, with Medica we have seen much bigger changes in share price, which would be suited to your process and mine.
Swings and roundabouts. Yes, smaller stocks are more volatile. But they also have much wider buy/sell spreads so in that way it's actually harder to realise gains over a short period. Medica Group looks like a good long-term hold to me, where as with FTSE stocks they seem to fall in-and-out of favour, presenting opportunities for short-medium term 'punts'.

Hope that's helpful!
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Re: Proposal for our way forward

Post by garindan » Tue Mar 26, 2019 4:57 pm

richard@imutual wrote:
Tue Mar 26, 2019 3:17 pm
As you know, I'm also keen for us to look at "racier" stocks than we have done in the past. But I am fundamentally against this segregation of different types, and different processes depending on whether a stock is considered "long term". This split of "long term" and "other" is what we've just tried over the past 12 months (though I accept that you've proposed selling some "long term" shares to free up more funds).
I think the fact is we currently have sufficient funds to experiment with a new process, irrespective of the current shares we hold. I consider that we bought Medica in the same vein as what I am now proposing, so that's why I have put it in with the new process. I am happy for us to draw a line under the shares we bought as "long-term" if we are in profit and can free that money up. That will give us ~£3k to play with, if we can make the decision to go with it. We can still hold the remaining long-term shares and exit them gracefully in due course. For instance Greene King is pushing towards being in profit, so again we could consider selling that one too as and when. We have invested in the others for a reason and selling them now, just because we have a new process doesn't seem to make a whole load of sense, especially as we'll have sufficient funds for at least a few months to move forward.

I'm happy to move away from the idea of "long-term" and "other" in the new process, building our new portfolio, but I just want us to consider the current portfolio shares separately until we reach a point where it is sensible to do otherwise.
richard@imutual wrote:
Tue Mar 26, 2019 3:17 pm
To get greater engagement of members, we need a simple, predictable process that allows thoughtful decisions without being too time-consuming. Your proposal is definitely a step in that direction, but what if, for example, I want us to sell ITV? Is there a separate process for that? It all seems a bit complicated to me
What I am saying is at this point we really don't need to be focusing on the shares we hold like ITV. We need to focus on what we are going to do going forward and how to invest the cash that is just sitting around doing nothing at all. Once we have that sorted then we can review where we are.
richard@imutual wrote:
Tue Mar 26, 2019 3:17 pm
"Buy and hold" is generally good advice for those investing for the long term, but I think this online share club needs a different approach. It's an experiment and an opportunity to learn, and for that we need to feel that we're in control of our fortunes. If the portfolio isn't performing, we should have regular opportunities to dump any of current stocks - if that's what members vote for.
I think the "mechanics" idea I put above does exactly what you point out and in a far more efficient manner than having regular polls. The polls are ALWAYS open and thus members can decide it is time to sell a share they previously wanted to keep hold of. In fact we could sell the entire portfolio of new shares if members decided so.
richard@imutual wrote:
Tue Mar 26, 2019 3:17 pm
I think we need to trust members to make the right decisions, rather than design a process that excludes certain options from the outset. In any one voting decision, I will argue my own corner (i.e. for more adventurous stocks) but if I get out-voted then so be it.
OK - so I'm happy to concede this matter - though I'd really like us to look at investing in stuff that's not all household names. I think we've done enough of that over the past years. Stocks like Medica have been much more exciting to see price movement. It would seem there is a desire from multiple members to keep the options open, so let's do that.
richard@imutual wrote:
Tue Mar 26, 2019 3:17 pm
Hope that's helpful!
It's good to discuss! It would be nice to hear a few more voices though....
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Re: Proposal for our way forward

Post by richard@imutual » Tue Mar 26, 2019 5:23 pm

Yes, indeed. Input from others required

I'd be keen for a separate thread on the buying / selling polls though, so I can share some further thoughts and then see what others think?

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