Reply to: LF Equity Income (Woodford)

[Cirrus]

Keep up with the times!

some pretty heroic assumptions

The growth rate would be 19.5%. However I'm concerned you are doing this old-fashioned facts thing. People didn't vote in Don Trump or Boris Johnson because of facts. People didn't vote for Brexit and Sovereignty because of facts. My story sounds good, That's all that matters nowadays.

[jamesbrown]

I don't think Warren Buffet has ever said he is a superstar investor. His mantra has always been the marvel of compound interest. In simple terms, if you invest in American Equities and stay in (don't jump about) then after a number of decades you will be a multi-billionaire. It's this belief that accounts for the huge share of tracker investment.

I don't think anyone accused him of saying that(?)

That's some might impressive compound interest though. The IPO for Berkshire Hathaway A class shares was $19 in 1964. They're now worth $335,720.00, 55 years later. Compound interest of, say 5%, each year would put the expected investment at 19*1.05^55=$278.

Also the "you invest" for a "number of decades" and "multi-billionaire" makes some pretty heroic assumptions about your starting pot.

[Cirrus]

I think you'd have a tough time arguing that Warren Buffett wasn't a superstart investor,

I don't think Warren Buffet has ever said he is a superstar investor. His mantra has always been the marvel of compound interest. In simple terms, if you invest in American Equities and stay in (don't jump about) then after a number of decades you will be a multi-billionaire. It's this belief that accounts for the huge share of tracker investment.

Neil Woodford did two things wrong. Firstly he flouted the regulations and sold a hedge-fund-like play as an everyman retail product. The investments were specially risky and wouldn't sensibly support on-demand withdrawals. Secondly he tried to pick really promising stocks. It looks as though he just got those plain wrong. It may be he didn't probe enough or wasn't clever enough or it may just be your chances of out-thinking the market are vanishingly small.

[WordIsBond]

I was driving at liquid assets generally being low growth investments. Cash being the most liquid.

Anything in the FTSE 100 or 250 is highly liquid. Don't confuse liquidity with low-risk. Low-risk investments are low growth, cash being the lowest risk. But gilts or US Treasuries are effectively as liquid as cash. And honestly, so are BP and Shell and Microsoft and whatever. You can sell them at the going market price on any business day.

Woodford's problem was he had a lot of stuff that wasn't publicly traded, so he couldn't necessarily sell them in a hurry even if he cut the price. The companies might have been valuable, but he couldn't get cash when he needed it for what he owned.

[jamesbrown]

So quite why the superstar investors exist is beyond me.

I think you'd have a tough time arguing that Warren Buffett wasn't a superstart investor, but he invests with good principles. Some of us are stupid enough to know good principles (actively managed funds = pap) and yet to ignore them every now and then

[Lance]

Unless they have more yield because they have fewer bad bets. Last sentence is dubious, you know.

I was driving at liquid assets generally being low growth investments. Cash being the most liquid.

My point being that anything that claims more growth than you get in a high interest savings account comes with risks. And the higher growth that's claimed the greater the risk.

As for Woodford.... Is has been proven time and time again that past performance is no indictaor of future performance. So quite why the superstar investors exist is beyond me.

[WordIsBond]

It was a very illiquid fund where the customers were able to get their money back same day. One run on the fund and it's dead as a dodo.

What's likely to happen is a change in the regulation around funds that can be withdrawn from quickly, having to have a lot more liquid assets. They'll then have less yield.

Unless they have more yield because they have fewer bad bets. Last sentence is dubious, you know.

Everything else you said is right. If someone wants a fund like this it should be an investment trust, not an OEIC.

[Lance]

I was under the impression he has too many long term assets and was unlucky to have too many people wanting redemptions at once?

That is my understanding too.

It was a very illiquid fund where the customers were able to get their money back same day. One run on the fund and it's dead as a dodo.

What's likely to happen is a change in the regulation around funds that can be withdrawn from quickly, having to have a lot more liquid assets. They'll then have less yield.

Golden rule.... if anything offers more than 5% growth there are risks (correct at time of writing).

[jamesbrown]

He was also betting heavily on Brexit and the Brexit delay pretty much sealed his fate. Probably wouldn't have recovered anyway, but that was the final nail in the coffin.

Among others, the Eddie Stobart thing was a disaster. Every stock picker gets some wrong. He just saved all of his wrong choices up and got them all in during a 3-4 year period. By not having any of them earlier, he looked spectacularly good. By stringing them all together, he looks spectacularly bad. By continuing to take his fees while his investors were locked in, he looks immoral.

Aye, the joys of a random walk (with high fees).

[WordIsBond]

He had too many punts in risky and/or illiquid companies, particularly small companies, and it got riskier over time. It was mismanaged or, at least, not as advertised. I feel bad for those who invested a lot and thought it was a comparatively safe bet.

He was also betting heavily on Brexit and the Brexit delay pretty much sealed his fate. Probably wouldn't have recovered anyway, but that was the final nail in the coffin.

Among others, the Eddie Stobart thing was a disaster. Every stock picker gets some wrong. He just saved all of his wrong choices up and got them all in during a 3-4 year period. By not having any of them earlier, he looked spectacularly good. By stringing them all together, he looks spectacularly bad. By continuing to take his fees while his investors were locked in, he looks immoral.

[Fred Bloggs]

Just had an email off my pals at HL about this.

You would do very well to recognise those people are most definately NOT your friend. You are a source of revenue to be exploited to maximum effect. No more, no less.

[jamesbrown]

I was under the impression he has too many long term assets and was unlucky to have too many people wanting redemptions at once?

He had too many punts in risky and/or illiquid companies, particularly small companies, and it got riskier over time. It was mismanaged or, at least, not as advertised. I feel bad for those who invested a lot and thought it was a comparatively safe bet.

[BrilloPad]

I was under the impression he has too many long term assets and was unlucky to have too many people wanting redemptions at once?

[Lockhouse]

Had about 25K. Ah well, lesson learned.

I manage the Father-in-Law's portfolio and he had about the same. Pants really.

[wattaj]

It's like changing the name of the fund will have actually done him a favour then?

I doubt it. This stink will follow him to the grave. Hopefully beyond.