2023 Returns

[Leemsip]

Yeah thanks Muse. Found that a useful read. Love hearing about how the more experienced folks handle things. Alok , winner, SR or anyone with a decent size portfolio care to share how you are approaching 2024 and how much time you spend, % in the market vs cash, risk tolerance, Nz vs oz vs US allocation? Any individual shares you think have potential for 2024. Do you set goals for the year?

[SailorRob]

Thanks SR for your reply. I do not disagree with what you say but some additional context is required.


Agree 100% except for context we had a series of family homes (not just one) and as I touched on earlier the gains were made in the buying (real estate "D"s include distress, death, divorce etc which present good buying opportunities) as well as the market multiple expansion you touched on. I agree anecdotes do not trump larger data sets, but as you know I was working with my own experience.


Understood. My definition of ownership opex includes house maintenance and this was in my calculations. Early upgrades were captured via 2 x subsequent equity injections in my calculations. Since 2006 realised gains were recycled into the upgrades on the next property so any property capex was self funding. I didn't want to mention this earlier but we released equity on the last 3 sales and purchases, not all of which was recycled into the family home. Actual returns would be significantly higher had I included those equity releases. The values released were enough to buy a freehold property for my son. So yes I am very overweight in property.


Understood. Trouble is I cannot invest in shares outside of my personal investment horizon, so I just kept stepping off one property elevator and onto the next while I had to own a family home. If I was going to have equity tied up in a non-income producing asset, then I wanted to ensure that was not wasted. The opportunity presented itself and the rest is history. Like I said, I was lucky and I learned from my first mistake without losing too much.


Understood and I agree. I'm not talking about a single median house - we had a series of family homes where we stepped off one elevator and onto the next. So I agree a simple buy and hold strategy will not provide an 8% CAGR over the same time period in future for a single property. We will look to release more equity again either 2024 or 2025 and I will put that capital to work elsewhere. We aren't traders by any definition, just lucky (and we can spot a good bargain).


100% concur with the second half but we have not pumped any other funds into property since 2006 as per my comments above.

I don't disagree with any of what you say regarding future potential returns and the relativities of the 2 markets over that time frame. But property (including the dreaded family home) can yield these sort of returns without relying on excessive leverage. I see people I know making dumb decisions on property purchases and they could take decades to get a return, if at all. I watched extended family members buy and hold over the years to only fall behind those that moved every 5-9 years. So I copied that. It was a simple yet effective strategy.

Yes great discussion. You are downplaying it but you have been very shrewd and active in the property market and this shrewdness coupled with skill and massive macro and cultural tail winds have produced incredible results for you, reading between the lines, much better even than you suggest here.

[SailorRob]

Hard for me to calculate as I do an annual wrap up in July. Roughly tho

KiwiSaver 25% of portfolio 5%,gain. Mostly in cash fund till nov.

Cash and bonds 40% of portfolio 5% gain. Bonds locked in for long term at 6% plus in good companies so happy with this. Cash either already deployed or rolling off term deposits Jan to june 24.

Stonks 35% of portfolio on average for the year, 10% gain. Some big winners and loosers here which have netted out. Got some private companies which I haven’t included. My stonk portfolio is up to 50% of total portfolio now as I have put some more risk on since nov. Aiming to get this up to 60% in 2024 if I have the courage.

So overall 7% ish gains maybe. Sounds trash but I’m somewhat happy with this as I took risk off the table early and hid in cash. Also learned a few hard lessons without getting beaten too badly. Goal is a low risk 10% per year. I’ll be in better shape to answer this next year with proper calcs.

Great post Leemsip thanks.

When you say you have some private companies, what do you mean by this exactly?

When you say 'you have put on more risk since Nov' I would counter that you have taken off risk. Unless you have no idea what you are doing then selling cash and bonds to buy businesses is a massive de risking move. A term deposit is an immensely risky investment as you are guaranteed to lose purchasing power over time - it's just less volatile.

'Aiming to get this up to 60% in 2024 if I have the courage'. I would counter that you need immense courage to be sitting in cash or bonds which are going to do f all for you over time and that it is an implicit market timing call - which needs huge courage. Currently with so much value to be found outside the Mag 7, you need courage NOT to be buying.

Your last sentence where you 'took risk off the table' well in hindsight you put risk on the table perhaps.

If your goal is a low risk 10%, that is very easy to achieve right now.

[SailorRob]

Ha I probably spend the same amount of time on the portfolio as many people here do, on most days. Typical day spend ~30m drinking coffee and reading announcements at ~9.30am, after school run. Am semi retired so go about my day with whatever work projects I have on, otherwise work on the property, chores and a bit of exercise. Browse through some aussie announcements quickly at lunch. That's it for the day unless I go down the rabbit hole researching a company which I don't usually get to till late after family commitments, and not common. It helps to have an investor mindset with a number of my shares held long term, so I'm totally unbothered by day to day fluctuations in price, and I probably only execute a fraction of the buy/sell orders that most here will do. Fairly familiar w/ the portfolio companies as been in most for a while but I have a little folder on my computer for each one where I save bits of research and BOE analysis i've done on them over the years so I can quickly revisit.

For reasons very specific to me it's not efficient for me to own NZ/AU ETFs, so I invest directly. NZ market is tiny so not hard to stay across, aussie is relatively large with a lot of under researched small caps, and I enjoy looking at companies. I am in effect just trying to make my own diversified Australasian ETF. Offshore markets are staggering large and my hit rate on picking direct investments there was mixed so I just have two ETFs now.

Portfolio a bit smaller by # of companies vs last 2 years as I did a bit of tidy up, and still more to do. I don't pay equal care and attention to all the stocks. Sometimes that's served me well as it let me let a few runners run. But has bitten me in the bum a few times. Case in point early 2020 I invested into Afterpay after I saw first hand how it turbocharged sales for those who started offering it. I invested on that basis and then in early 2022 it was merged/acquired by Block. It was a big return so I sold the excess capital gain on market and left my original $ investment in shares, which were acquired by Block who issued me shares in themselves as consideration. I thought just leave it and not watch. The SP plummeted into one of the most vicious downtrends ever. I obviously see that on the graph but reminded myself it was just my initial capital and to just let it do its thing over the years, and I was in effect trying to emulate an Australasian ETF which has individual shares go up and down all the time. Finally it started to really bother me so I opened some financial statements for the first time and I sickened - horrified I hadn't looked at the books once over the last 18 months while all this was going on. Got pretty close to selling on a few occasions and it really tested my resolve to accept large capital losses on individual shares even if it didn't really move the dial on what my portfolio was doing. Fortunately the founder stepped back into the business and started cutting costs and improving profitability. That coupled with the recent tech run set the SP up nearly 90% to where I had considered selling. I will probably retire that investment and roll into an ETF or something more blue chip that offers less surprises in the new year. It was a good learning experience for me and the strengths and weaknesses of my investment style.

From a time commitment perspective I've done a lot of work on companies and not gone on to invest in them, which can feel like a waste (but still a worthwhile thing if that was the right call). And others where I dived into the detail a bit much and it tanked...harmoney for instance I wasted a lot of time back in what early 2022 for a loss (so bad time investment and bad financial investment). I reflect on that as part of my learning experience and how to balance time, effort and reward.

sharesight has been a godsend for tracking the dividends and the investments.

Great post, what did you do professionally before you semi retired?

[SailorRob]

Thanks, but I really don't care what the NZX50 returns. The opportunity cost of picking stocks is owning some SP500 index fund, as I have no doubt the long term returns of the SP500 will outperform the NZX50 in real terms.

Well said. It might sound odd at first, not indexing to NZX50 when we live here, but what difference does that make? You may as well index to Denmark or something.

We are a 2 crop agrarian state with a penchant for culture and policy that to me look an awful lot like the former USSR.

You should benchmark to something that is the most sensible easy opportunity cost for you, which has nothing to do at all with where you live.

The industry standard the world over is and always has been the S&P500.

[SailorRob]

Yeah thanks Muse. Found that a useful read. Love hearing about how the more experienced folks handle things. Alok , winner, SR or anyone with a decent size portfolio care to share how you are approaching 2024 and how much time you spend, % in the market vs cash, risk tolerance, Nz vs oz vs US allocation? Any individual shares you think have potential for 2024. Do you set goals for the year?

how you are approaching 2024

Exactly as every other year - Truly believing that I have absolutely ZERO ability to predict anything at all in the Macro economy, I have no idea if rates will go up or down, no idea what the market will do, no idea about recession or not, no idea about inflation, nothing. This is the most liberating thing ever in investing and the f'd up thing is that everyone would be like me if they spent 5 minutes thinking back to all their prior thoughts about these matters over time. Or at least from now on writing down all your thoughts about 2024 so you can see for yourself how wrong you were and will continue to be. Think about it, of any of us had any ability to forecast any of those things I brought up... We would be able to print our own money...

How much time you spend

Currently I'm in the middle of a refit on an offshore yacht and this is taking up a massive amount of time, working all day every day. Still probably finding 10 - 15 hours a week, that includes reading books, fund letters, quarterly reports/annual reports, articles, talking to people, doing research etc... but usually that would all be 40 hours a week or more depending what else I have on. I have a number of close friends who have identical portfolios to me and most of them large in relation to their net worth, so essentially I manage their equity portfolios. So have to take it seriously and keep them up to date etc..

% in the market vs cash

The only time you should ever hold cash is if you need to spend money sometime in the next couple of years that you cant get from elsewhere (working etc). For us managing less than 100 million there is always opportunity no matter what the general market level is, holding cash means you are waiting for an opportunity to buy but that's BS as the opportunity is always there. But right now there is opportunity everywhere.

Nz vs oz vs US allocation?

I just go where the value and opportunity is.

[Leemsip]

Thanks SR.

Private companies I mean non listed investments early stage Nz companies.

My large cash anmd bond allocation has been due to expectations of a recession in 2023. I was 110-120% invested in 2020 and 2021 (took out mortgage), so I’m not always filled with caution. I continue to expect recession in 2024, I can see it playing out now and will be exacerbated by govt pulling back spending, construction down etc all very pro cyclical for a deeper recession than most expect. Bonds should perform pretty well in this environment and I will take capital gains if they are decent.

Have resolved this year to remain much more invested throughout the cycle and just pick either different countries or recession proof stocks eg SCL which exports most products or bond proxies eg Spk. Agree with your sentiments on holding cash for too long.

Appreciate the details and the advice. You can see I’m not taking some of it lol, as I can’t get away from forecasting macro.

Let’s hear from some other veterans….

[Bjauck]

Well said. It might sound odd at first, not indexing to NZX50 when we live here, but what difference does that make? You may as well index to Denmark or something.

We are a 2 crop agrarian state with a penchant for culture and policy that to me look an awful lot like the former USSR.

You should benchmark to something that is the most sensible easy opportunity cost for you, which has nothing to do at all with where you live.

The industry standard the world over is and always has been the S&P500.

Why put the thread in the NZX category then? Sure, NZ government policies have made the NZ listed stock exchange into a small defensive enclave. However a significant proportion of potential NZ investors would not want to invest in foreign exchanges given the different tax regime for foreign investments and currencies. Hence the relevance of the NZX indices to a post in the NZX threads.

[Leemsip]

Would love to hear if others forecast macro and use this for portfolio selection. Seems like a key point from SR and a habit I can’t seem to kick.

[mistaTea]

What would happen if you just picked 10 - 20 high quality businesses that you understand, dollar cost averaged into them and then just held then forever, never looking up the quoted value (because it is of no interest given you are holding forever) or measuring ‘progress’ over arbitrary timeframes against arbitrary benchmarks (or indeed against other people’s portfolios).