Tuesday, 23 June 2015 - 20:00
Seed Weekly - Investment Rules
All of the successful investors attribute at least part of their success to a set of investment rules. There is no “one size fits all” when it comes to a set of investment rules, but at a minimum, successful investors try as far as possible not to deviate from a set of rules or their investment process.
Warren Buffett reportedly has 2 rules for investing: Rule no 1 – don’t lose money. Rule no 2 – don’t forget rule no 1. This is often cited more tongue in cheek, but over the years he has freely expressed his investment views in his annual Berkshire Hathaway shareholder letter.
Some of his more important investment rules include things like:
• A stock is a business not a piece of paper;
• Invest with a view not to have to sell;
• Macro opinions and market predictions are a waste of time;
• Focus on the income earning capacity of an investment and not on its prospective price changes.
Dr. Steve Sjuggerud, from investmentu.com lists 12 classic rules that all investors should look at and adopt. These are:
1. An attempt at making a quick buck often leads to losing much of that buck;
2. Don't let a small loss become large;
3. Cut your losers; let your winners ride.
4. A rising tide raises all ships, and vice versa. So assess the tide, not the ships;
5. When a stock hits a new high, it's not time to sell something that is going right;
6. Buy and hold doesn't ALWAYS work;
7. Bear markets begin in good times. Bull markets begin in bad times;
8. If you don't understand the investment, don't buy it;
9. Buy value, and sell hysteria;
10. Investing in what's popular never ends up making you any money;
11. When it's time to act, don't hesitate;
12. Expert investors care about risk; novice investors shop for returns.
The chart below is a depiction of the investment psychology of a typical investor without a set of predefined investment rules. All too often a typical investor is overcome by the emotion of fear and greed. It is in order to limit the effect of these emotions that successful investors define a set of investment rules.
Chart 1: Investment psychology of an investor without a set of defined investment rules
Investing is often more about managing risk that trying to overreach for investment returns. There are many definitions of investment risk – e.g. price volatility, liquidity risk to the risk of capital losses that cannot be recovered.
Most top fund managers adopt investment rules with a focus on risk management. Examples include:
• Top hedge fund manager Seth Klarman from the Baupost Group
“Most investors are primarily oriented toward return, how much they can make and pay little attention to risk, how much they can lose.”
• Jeremy Grantham, chief investment strategist at US fund manager GMO
“You don’t get rewarded for taking risk; you get rewarded for buying cheap assets. And if the assets you bought got pushed up in price simply because they were risky, then you are not going to be rewarded for taking a risk; you are going to be punished for it.”
• Howard Marks – co founder of Oaktree Capital Management
“Rule No. 1: Most things will prove to be cyclical. – Rule No. 2: Some of the greatest opportunities for gain and loss come when other people forget Rule No. 1.”
• James Montier, from firm GMO
"There is a simple, although not easy alternative [to forecasting]... Buy when an asset is cheap, and sell when an asset gets expensive.... Valuation is the primary determinant of long-term returns, and the closest thing we have to a law of gravity in finance."
• George Soros, founder of Soros Fund Management
“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.”
At Seed Investments we have a defined investment philosophy and investment process. This does not guarantee success but it’s an important step in aiming for it.
Ian de Lange
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Tue, 23 Jun 2015
With resource shares leading the JSE upwards, the All Share index ended 0.77% higher on Tuesday with gains across the board. The SARB reported a smaller-than-expected current account deficit for the first quarter, boosting investor confidence.
South Africa's power supply crisis poses the biggest obstacle to growth, while state support to ailing utility Eskom and increased public sector wages may weigh on public finances, the International Monetary Fund said on Tuesday.
The global lending body singled out delays in easing
Greek lawmakers reacted angrily on Tuesday to concessions Athens offered in debt talks and parliament's deputy speaker warned the proposals might be rejected, puncturing optimism that a deal to pull Greece back from the abyss might be sealed quickly.
The heir-apparent of South Korea's massive Samsung Group bowed in apology during a nationally televised address on Tuesday for failing to stop the spread of Middle East Respiratory Syndrome (MERS) at a Seoul hospital run by a group foundation.
A heat wave has killed more than 400 people in Pakistan's southern city of Karachi over the past three days, health officials said on Tuesday, as they set up emergency medical camps in the streets.
Rustenburg Platinum Mines Ltd., a wholly owned subsidiary of Amplats, (˘RPM÷) has issued a Section 189 (3) notice to relevant parties in terms of Section 189A of the Labour Relations Act, 66 of 1995, for the commencement of a consultation process on the proposed redesign of RPMĂs organisational support structure that envisages a reduction of up to 420 mainly managerial and supervisory positions.
The proposed redesign takes into account the financial difficulties in the PGM industry an. . .
World Markets (Spot Prices)
|JSE Top 40||17:00||47002.30||409.30||0.88%|
|JSE Indust 25||17:00||67289.56||463.31||0.69%|
|USD / ZAR||19:59||12.1837||0.0853||0.71%|
|GBP / ZAR||19:55||19.1058||-0.0013||-0.01%|
|AUD / ZAR||19:55||9.4138||0.0598||0.64%|
|USD / JPY||19:59||123.8650||0.5110||0.41%|
|EUR / USD||19:59||1.1163||-0.0177||-1.56%|
|GBP / USD||19:59||1.5713||-0.0112||-0.71%|
Click here for the Sharenet Spot Price page
The JSE Today
* Includes all listed instruments on the JSE
|Index Name||RP||Move||% Move|
|Financial & Ind. 30||72,016.08||567.13||0.79%|
|Oil & Gas ||62,644.80||-846.55||-1.33%|
|Oil & Gas Producers ||33,682.95||-455.18||-1.33%|
|Basic Materials ||23,815.90||280.00||1.19%|
|Forestry & Paper ||44,876.83||59.89||0.13%|
|Industrial Metals ||8,742.18||-32.95||-0.38%|
|General Industrials ||156.34||1.73||1.12%|
|Consumer Goods ||66,128.54||376.16||0.57%|
|Automobiles & Parts ||8,149.79||-2.26||-0.03%|
|Health Care ||9,831.91||41.98||0.43%|
|Index Name||RP||Move||% Move|
|Food Producers ||8,237.67||48.38||0.59%|
|Personal Goods ||1,028.73||4.70||0.46%|
|Consumer Services ||16,812.24||91.62||0.55%|
|General Retailers ||85,126.78||969.69||1.15%|
|Travel & Leisure ||5,953.24||13.83||0.23%|
|Support Services ||3,393.62||-6.51||-0.19%|
|Non-life Insurance ||55,536.32||-45.94||-0.08%|
|Life Insurance ||40,740.16||222.18||0.55%|
|General Financial ||4,439.17||6.98||0.16%|
|SHARIAH TOP40 ||3,683.07||46||1.26%|
|FTSE/JSE SHARIAH ALL||3,876.28||39||1.03%|
|FTSE JSE Fledgling ||6,776.37||-63||-0.93%|
|FTSE/JSE Alt X ||1,321.47||2||0.16%|
|SA LISTED PROPERTY ||610.52||0.60%|
|CAPPED PROPERTY ||534.39||0.60%|
|FTSE/JSE RAFI 40||9,794.93||86||0.88%|
|Capped Top 40||25,073.80||223||0.90%|
|Capped All Share||26,675.62||204||0.77%|
|JSE TABACO ||8,789.26||25||0.28%|
Click here for the Sharenet Index Summary page
Latest Consensus Changes**
|MTN||MTN GROUP LIMITED||HOLD||17/06/2015|
|VOD||VODACOM GROUP LIMITED||HOLD||17/06/2015|
|SGL||SIBANYE GOLD LIMITED||SELL||15/06/2015|
|Expected||Company Name||Fin. Date|
|24/06/2015||KEATON||March 2015 (Final)|
|24/06/2015||OMNIA||March 2015 (Final)|
|24/06/2015||OMNIACP||March 2015 (Final)|
|24/06/2015||PRESCIENT||March 2015 (Final)|
|24/06/2015||SAFARI||March 2015 (Final)|
|NAMPAK 6.5||22/06/15||17/07/15||27/07/15||ZAR 0.0650|
|NAMPAK 6%P||22/06/15||17/07/15||27/07/15||ZAR 0.0600|
|BRAIT PREF||01/06/15||19/06/15||29/06/15||ZAR 4.7968|
|BSR||Basil Read Holdings Ltd.||23/06/2015||Confirmed|
|ISA||ISA Holdings Ltd.||24/06/2015||Confirmed|
|ISB||Insimbi Refractory and Alloy Supplies Lt...||25/06/2015||Confirmed|
|GIY||Giyani Gold Corporation||25/06/2015||Confirmed||
Stock Exchange News Service
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