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  1. #1211
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    I agree with you Phaedrus, especially with respect to your largest investment being your best by 'natural selection'. Always cut your losers.

    I note that RBD is respecting its long-term trendline linearly on your chart rather than the oft-drawn logarithmic trendline. This indicates to me that the trendline is falling at a greater average percentage from one year to the next.

    If it was a log chart...am I correct in thinking (because I haven't checked for myself yet) that the price action is even further away from the trendline than it appears on the chart above? Why would anybody bother with it.

    All this talk about Pizza Hut, KFC, blah blah blah is a waste of time when one look at a chart like this tells you all you need to know about whether it is a good investment.

    NO.

  2. #1212
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    Some people on this site are long term investors and tend to hold a share once bought. Others buy and sell actively and are traders.

    People compare the results obtained like they are comparing apples with apples.

    The one thing none of the traders mention is that they are liable to pay tax on their gains. Liable is the key word here. If they don't declare the income then they won't pay it. But if the IRD look at their earnings then they will end up paying it plus plenty more in penalties.

    Remember, the buyers intention is what matters to the IRD, not how long you hold a share. If you bought a share with the intention of trading it, then even if you hold it for five years the IRD expects tax to be paid on any gain.

    It would be good to see more accurate comparisions being made by the participants of these forums.

  3. #1213
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    Quote Originally Posted by emearg View Post
    Some people on this site are long term investors and tend to hold a share once bought. Others buy and sell actively and are traders.

    People compare the results obtained like they are comparing apples with apples.

    The one thing none of the traders mention is that they are liable to pay tax on their gains. Liable is the key word here. If they don't declare the income then they won't pay it. But if the IRD look at their earnings then they will end up paying it plus plenty more in penalties.

    Remember, the buyers intention is what matters to the IRD, not how long you hold a share. If you bought a share with the intention of trading it, then even if you hold it for five years the IRD expects tax to be paid on any gain.

    It would be good to see more accurate comparisions being made by the participants of these forums.
    Never worry about other peoples TAX payments just worry about your OWN..

  4. #1214
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    Quote Originally Posted by Phaedrus View Post
    Well, there it is again Snoopy. Another 10 - 12 year "investment" for zero capital gain - this, in spite of RBD having risen over 70% recently. It is painfully obvious that you are doing something wrong.

    Failed is such a strong word Snoopy. I would prefer to categorize it as a very poor investment. Especially when you compare it to the average market gains of about 100%, over this period.
    Phaedrus the NZX50 is a gross index that includes dividends. You have to add on the dividends to get a comparable result. So my gains have actually been 94% (or 100% in round figures). More or less the same as the index. Not 'zero' as you claim.

    'Fraid not. RBD has been in a long-term downtrend for the last 8 years, and has a confirmed trendline in place. Over this extended period of time it has fallen an average of 15 cents/year - notwithstanding the recent 70% rise! A dividend of around 8 cents/year is not enough compensation for such capital destruction.
    You have set up a straw man Phaedrus. The capital loss of buying twelve years ago while just waiting and collecting dividends is not a sufficient reward - Quite right. But that is not what I would recommend. And that is not what I did.

    People, read that statement carefully. This is PRECISELY what happens when you "average down" and it is the other reason for Snoopy's woeful underperformance. This undesirable state of affairs is the logical consequence of continually adding to a losing investment, of buying more of a downtrending stock as the price progressively falls. YOUR WORST INVESTMENT BECOMES YOUR BIGGEST INVESTMENT. This is the exact opposite of what you want. Your largest investment should be your BEST. This occurs quite naturally as a logical result of following the old rule "Cut your losers and let your winners run".
    "Your largest investment should be your BEST." Sorry I can't agree with that Phaedrus. As a long term investor I am always working towards a balanced position, not a skewed one.
    So I am always looking to add to my worst investment before topping up my best.

    I notice you are speaking as though there are only 'good' and 'bad' investments Phaedrus. For a long term investor this distinction is not the way investments are defined. There are plenty of good investments out there that I wouldn't touch because they are poor value. Likewise there are 'bad' investments out there that I seek because the market has discounted them out of all proportion to their actual 'badness'. If my biggest investment is also my best, then this is a potentially dangerous situation. Such an investment becomes vulnerable to the double investment risk of earnings reduction and earnings multiple reduction. Long term investment is all about balancing relative value. Not seeking out the 'good' and the 'bad'.

    When your biggest investment has returned zero capital growth in 12 years, something is FUNDAMENTALLY wrong.
    It is not all about capital growth Phaedrus, it is about total returns. You can't just continue to ignore dividends. As shown in this case this has lead you to a massive error of judgement. Your view is that I have made nothing in the last twelve years, when simply adding up the dividend returns means that the sum of dividend returns has actually been 94%. A huge difference which you refuse to acknowledge.

    The main reason for the lack of market capital growth of RBD Phaedrus is that:

    1/when the company listed in 1997 is because it was floated with a puffed up PE multiple.
    2/ when a company pays out almost all of its operational earnings as dividends (as RBD did until two years ago) you would not expect the price to rise.

    There has been no significant underperformance here Phaedrus.

    A return of 5.7% after tax compounding return will turn $1000 into

    1000(1+0.057)^12= $1945 after twelve years, such is the power of compounding

    On average that equates to an annual return of $1945/12= $162.08 per year.

    That means that if you wanted to get that same return at the bank, you would have to look for a bank blackboard one year return rate of 16.2% -after tax. Or 24% before tax (assuming a tax rate of 33%). How many banks do you know year in year out that have offered a return like that?

    My investment in RBD has done exactly what I went into it for. It has paid a good regular income over twelve years and outperformed the banks *significantly*. Sure my capital has not grown, but neither has it shrunk. This is exactly what you would expect from an analagous bank term deposit in fact. You need to look at your measuring stick Phaedrus, if you think a performance like that is poor.

    SNOOPY
    Investment Portfolio Truth: "Betting against the ACC is an accident waiting to happen."

  5. #1215
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    Quote Originally Posted by Snoopy View Post
    There has been no significant underperformance here Phaedrus.

    A return of 5.7% after tax compounding return will turn $1000 into

    1000(1+0.057)^12= $1945 after twelve years, such is the power of compounding

    On average that equates to an annual return of $1945/12= $162.08 per year.

    That means that if you wanted to get that same return at the bank, you would have to look for a bank blackboard one year return rate of 16.2% -after tax. Or 24% before tax (assuming a tax rate of 33%). How many banks do you know year in year out that have offered a return like that?
    Before anyone else picks me up on these calculations, I should point out that in my attempt to simplify the maths in calculating my returns, the figures above do not tell the correct story.

    Income investors in RBD at any one time are considering what the yield is at the time they make their investment. This is not the same working out an average yield by summing the income over the whole investment period and dividing by the time of the whole investment period as I have done above. The instantaneous yield changes both with the prevailing share price and the actual dividend paid out. If we now look at an investor who invested on 30th September each year, the actal yield achieved over the subsequent twelve months was as follows:

    Year, RBD Share Price 30th Sept, Dividend, Net Yield, Gross yield, Typical Bank rate

    1997: $2.37, 3c, 1.3%, 1.9%, 6.5%
    1998: $0.80, 7.5c, 9.4%, 14.0%, 6.5%
    1999: $1.30, 10.25c, 8.0%, 11.9%, 5.5%
    2000: $1.14, 9.0c, 7.9%, 11.8%, 7.0%
    2001: $1.56, 8.0c, 5.1%, 7.7%, 5.5%
    2002: $1.72, 9.0c, 5.2%, 7.8%, 5.2%
    2003: $1.25, 9.0c, 7.2%, 10.7%, 4.9%
    2004: $1.29, 9.0c, 7.0%, 10.4%, 5.6%
    2005: $1.40, 9.0c, 6.4%, 9.6%, 6.25%
    2006: $1.08, 5.5c, 5.1%, 7.6%, 7.0%
    2007: $0.87, 6.5c, 7.5%, 11.1%, 8.0%
    2008: $0.65, 7.0c, 10.8%, 16.0%, 7.75%

    The second to last figure in each row is the return that should be compared to prevailing term deposits, the last figure in each row. As you can see in all years bar the first (1997), there has been a big advantage in investing in RBD instead of in the bank. (Forget that 24% equivalent figure in my last post).

    The numbers are different but the conclusion is not altered. If you can invest in RBD using whatever method you choose - and retain your capital as I have done-, this has been a very successful investment over the years.

    SNOOPY
    Last edited by Snoopy; 17-08-2009 at 12:10 PM.
    Investment Portfolio Truth: "Betting against the ACC is an accident waiting to happen."

  6. #1216
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    Hi Snoopy,

    Any idea what inflation has averaged at over your 12 year time frame.?

    cheers
    Moi.

  7. #1217
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    I'm not going near this argument, but Snoopy will also have enjoyed tax advantages from not having his capital gains taxed.

  8. #1218
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    The point that is often missed is that using technical entry/exit points does not necessarily a trader make.

    It is quite possible to use TA and be a long-term holder of a stock in much the same way that Snoopy has with RBD. Just because you use TA to time your entry and exit points does not mean that you are automatically tax liable. You could have held FBU continuously for 4 years using TA entry and exit from 2003-2007, collecting both dividends and capital gain along the way.

  9. #1219
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    Quote Originally Posted by moimoi View Post
    Hi Snoopy,

    Any idea what inflation has averaged at over your 12 year time frame.?

    cheers
    Moi.
    Yes. Exactly the same amount as if I had just put my RBD money in the bank. :-P

    SNOOPY
    Investment Portfolio Truth: "Betting against the ACC is an accident waiting to happen."

  10. #1220
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    Quote Originally Posted by Yankiwi View Post
    Well I can say the FA/TA debate has now come in to perspective for me. :o

    Am I correct in thinking the following?

    Snoopy & the other FA crowd compare their earnings to a bank deposit.
    I don't speak for the 'other FA crowd' Yankiwi, only myself.

    Generally I would compare my New Zealand sharemarket investment performance to an NZX index. However, that part of my portfolio they I have invested in for 'income' I would tend to compare to a bank term deposit. RBD has always been an 'income investment' for me.

    SNOOPY
    Investment Portfolio Truth: "Betting against the ACC is an accident waiting to happen."

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