Posted on July 10, 2020 Warning: Undefined variable $byline in /home/u850523449/domains/tandhcricket.com.au/public_html/wp-content/themes/tabarruk/inc/template-tags.php on line 60
People generally use the phrases Bull market and Bear market for the upwards and downwards trends. We recently saw the current market trend referred to as the Kangaroo market.
6000 points seems to be a key zone as the market bounces around in it.
We’re quite happy with the companies and sectors we’re researching. There are still opportunities to be found for long term value investing. Looking for disruptors and companies that can withstand short term turbulence.
CEO quotes
Residential Property
“Whilst we’re seeing a more positive environment currently than we had seen during the height of lockdown, there are two things – it’s off relatively low bases of listings volumes because this is a traditionally slow period of the year, and secondly, it’s a very fluid situation”
Jason Pellegrino, CEO, Domain Holdings Ltd
Workplace
“We have all seen articles suggesting the office is dead, and we will all work from home. Those types of articles were being written 20 years ago, and they were wrong then and they are wrong now. They show up every time there is a new technology like laptops and then high-speed Internet and Wi-Fi and now low-cost videoconferencing platforms. The predictions are always wrong because it’s not about the technology, it’s about the people”
Jim Keane, CEO, Steelcase Inc [world’s largest office furniture manufacturer]
“Almost every company on the planet is and will have to re-imagine their business. And I believe in the next two years, there is going to be more change than in the last 10. Quite simply, different work needs to get done and work needs to get done differently and to get work done differently, companies will need to rethink their org structure, roles and responsibilities”
Gary Burnison, CEO, Korn Ferry Inc [global management consultancy company]
Travel & Leisure
“I will go on the record to say that travel will never, ever go back to the way it was pre-COVID. It just won’t. People will, one day, get back on planes. But one of the things that I do think is a fairly permanent shift is…a redistribution of where travelers go. I think a lot of people are going to realise they don’t need to get on an airplane to have a meeting”
Brian Chesky, CEO, Airbnb Inc
“We are expecting a lot of [holiday] bookings for Queensland out of NSW and South Australia and we are expecting a lot from Victoria when there’s certainty”
Andrew Burnes, CEO, Helloworld Travel Ltd
Food & Beverage
“From a nutritional standpoint our products match the protein quality and content of the animal products that they replace and they are clear winner from a health and nutrition standpoint. This is why I think people are increasingly aware plant-based products are going to completely replace the animal-based products in the food world within the next 15 years”
Patrick Brown, CEO, Impossible Foods Inc
Government
“A full recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities. The path forward will also depend on the policy actions taken at all levels of government to provide relief and to support the recovery for as long as needed”
Jerome Powell, Chairman, US Federal Reserve
Energy
“We think, as far as we can tell, we’re the first ASX 50 company to put carbon goals into our long-term incentive scheme”
Brett Redman, CEO, AGL Energy Ltd
“The worst is behind us. We went from -$40 to +$40 with WTI [West Texas Intermediate oil]. In April we were looking at a demand of about 75-80 million barrels per day with significant supply at that time. Currently, you are looking at almost close to 90 million barrels per day. I’m very optimistic about the second half of this year”
Amin Nasser, CEO, Saudi Aramco [world’s largest oil producer]
Groceries
“I’d say the basket size is significantly higher for home delivery [vs. in-store]. And so far we’re seeing it being very complimentary to our typical patterns [of trading]”
Brian Hannasch, CEO, Alimentation Couche-Tard Inc. [world’s second largest convenience store chain]
Transport & Logistics
“While commercial volumes were down significantly due to business closures across the globe, there were surges in residential deliveries at FedEx Ground and in transpacific and charter flights at FedEx Express”
Frederick W. Smith, CEO, FedEx Corp.
Technology
“Clearly, certain trends that would have taken 2 to 4 years to develop have been accelerated into months. It is easy to see how these changes will drive higher consumption of memory and storage in the long term. The faster pace of digital transformation in the economy is here to stay. The outlook for calendar 2021 [smartphone sales] is promising, with 5G expected to drive a resumption in smartphone unit sales growth”
Posted on July 2, 2020 Warning: Undefined variable $byline in /home/u850523449/domains/tandhcricket.com.au/public_html/wp-content/themes/tabarruk/inc/template-tags.php on line 60
The ASX continues to be in a sideways trend. Broke the 6000 points support level.
We’re quite happy with the companies and sectors we’re researching. There are still opportunities to be found for long term value investing. Looking for disruptors and companies that can withstand short term turbulence.
We encourage investors to develop the mindset of ignoring the noise, and look at facts. The recession is going to end like every other recession before this.
The focus and market outlook appears linked to the risk of death from COVID, not so much the number of infections. Sentiment seems to be, life must go on, people need to work, children need to study, sport needs to be played.
J.P. Morgan conducted a recent survey of 130 CIOs around the globe (majority US). Here are some key insights from it.
IT budgets taking a big hit, bracing for the unknown, set to shrink around 5%
Pandemic fostering a faster move to the cloud and digital transformations
Some anecdotes form the CIO survey:
“Surprisingly perhaps, as a healthcare organization we are currently realizing a 40-50% reduction in company revenue as services are deferred or patients are staying home. At this point in time, we have cancelled or slowed down capital spend in IT by 60% and furloughed/laid-off approx 20% of IT staff. It remains to be seen what year-end will be like, but it appears Q3 will remain mixed and Q4 could end with a dramatic rise.”
“We have seen an elevated interest and support for advancement of technology, especially around the elements of mobility, data access and remote working. On the flip side, tension in the economy has forced us to rethink priorities – we are not taking things off the list, just shuffling around the order of the list. We will likely reduce our spending through 2020 by 10% – 20% but expect 2021 to increase by more than that.”
“Investment in support and expansion of remote technology to support production workflows will increase. Developing more relationships with larger service providers where we can leverage a cross set of skills to deliver quicker. COVID-19 is costing us on average a 20% impact on budget due to replacement of older technology that does not support a lot of remote platforms or the applications that are more often run in a fat client environment locally on premise.”
“IT will play a strong role in supporting the business during the post COVID-19 era. Technology will become more embedded and automation through robotics will gain focus and push to optimize business spend. IT budget will expand as it will continue to generate more value to the business through advancement of technology. Further expansion of spend will come with introduction of collaborative tools to support a remote workforce.”
“2020 spending will be reduced by about 10% primarily through headcount and travel freezes. We expect 2021 to pick back up to pre-2020 spending levels and expect incremental investments in digital solutions to support COVID-19.”
Posted on June 23, 2020 Warning: Undefined variable $byline in /home/u850523449/domains/tandhcricket.com.au/public_html/wp-content/themes/tabarruk/inc/template-tags.php on line 60
Market appears to be in a sideways trend. Bouncing around the 6000 points support level.
The US market corrected on 11th of June (a dip of 5.5% Nasdaq and almost 7% dow jones) The Australian market tends to follow the US often so we might see the same. Worst case some sectors and stocks will be panic sold. Best case, some selling to take profits and stop losses being hit.
In either case, we expect a lot of investors to see reds in their portfolio today.
Our thinking is, corrections are healthy. They allow the market to return to true value and offer buying opportunities.
With each company in our folio, the strategy to manage things regardless of what is happening in the market is to answer the 5 questions below:
Has anything changed for the companies specifically?
Any negative announcements for any of our holdings?
Has the management changed?
Are the reasons why we bought the stock for the long term still valid?
Would we buy more of this stock now for the long term?
If the answers to the above are yes, we hold, we increase our stop losses or remove them.
Our approach with our entire portfolio will be the same.
Hold.
A loss is not locked in unless you sell.
Further to the above, if we see any of our holdings drop to a value which we feel is a discount and under their true value, we will actually buy more.
That is our plan, formulated in advance. We execute and avoid reacting with emotion. Our research and hard work have made us successful. We have repeated this year after year and it is the same strategy that led to us doubling our investment in the last correction.
As always, any updates to our portfolio and watchlist will be shared as close to realtime, on the same day, whenever possible.
We are working hard on getting our new articles and videos out soon. Stay tuned.
In addition to in-depth company research and macro-economic trends, we also keep an eye out for CEO and Director comments. Here’s a snapshot of some relevant comments made recently both locally and overseas that reflect on the sentiment and market conditions.
Food and Beverage
“We’re seeing cafes increasing now and other channels. There’s some more confidence out there”
Rolando Schirato, Managing Director, Vittoria Coffee
“History has proven many times over that during a recession…people are much more careful about where they spend their dollars and that just means more meals at home versus away from home”
Steven Spinner, CEO, United Natural Foods [US listed international food wholesaler]
Technology
“The shift to remote work has driven a surge in demand for digital documents, with use of web-based PDF services, up nearly 40% quarter-over-quarter”
Shantanu Narayen, CEO, Adobe Inc
“We’ve all had the internet for years…but now because we’ve all been locked in, people are doing things online they haven’t had to do before”
“Although demand will recover in time, some refineries around the world will no doubt close as a result of the more permanent demand impacts and challenging economic outlooks in their respective markets, the question for us is whether Australian refineries should again fall victim to this rationalisation”
Scott Wyatt, CEO, Viva Energy Australia
Manufacturing
“It’s important that Australia maintains manufacturing capability and provides a level of self-sufficiency for the country. In some sectors lower-priced gas is a key component of that. And in a country that has such a significant natural resource, we should be able to capitalise on that”
Scott Wyatt, CEO, Viva Energy Australia
Aviation, Travel & Leisure
“Quite a lot of [airplane deliveries] will be deferred. We have already notified both Boeing and Airbus that we will not be taking any airplanes this year or next year. All the other aircraft that we have on order that were supposed to be delivered to us within the next two or three years, will now be pushed back to as long as nearly eight to 10 years”
Akbar al-Baker, CEO, Qatar Airways
“The market’s going to be smaller, we’re going to be a lot smaller than we have been”
Graham Turner, CEO, Flight Centre Travel Group Ltd
Health & Wellbeing
“[The fitness industry] will never look the same as it did pre COVID-19. The phased reopening will test the fitness industry as costs are turned back on and members are phased back into gyms and fitness studios. More people than ever will be willing to invest in personal trainers”
Steve Pettit, CEO, Australian Institute of Fitness
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Some companies pay a percentage of their profits as dividends into a bank account you nominate.
Another option some companies offer is for your dividends to be allocated to you as additional shares in the company.
For long term value investors, both are great options. They enable the compounding effect in growing your wealth.
Read on to see the steps to do the same.
Step 1 – Look up the company share registry
You can do this by looking at the welcome letter you would’ve received as a shareholder. The letter will have your SRN/HIN Number and also the name and website of the registry.
A registry is a 3rd party service used by the company in which you own shares, to manage shareholders holdings, personal details, communication preferences and dividend payments / reinvestment plans.
See example below:
Sample welcome letter to shareholders with registry details
Step 2 – Create an account with the registry
There will be a register or sign up section on the registry website for investors. Go ahead and create an account. You will need your SRN/HIN number, and any one of your company holding details (ASX Code or company name) to complete your account creation.
Registering for an account with registry
Step 3 – Update your personal information and bank account details
Update these details and make sure they are correct.
Tip: You can also elect to receive all future communications by email instead of post.
Step 4 – Enrol in Dividend Reinvestment Plan
Check each of your holdings with the registry to see if there is a dividend reinvestment plan option.
Posted on June 16, 2020 Warning: Undefined variable $byline in /home/u850523449/domains/tandhcricket.com.au/public_html/wp-content/themes/tabarruk/inc/template-tags.php on line 60
At Tabarruk, we look at investing in great businesses that we can hold as long as possible, while watching our money grow. We’ve talked about how time in the market is what allows compounding and the reason why we always beat short term trading and index funds.
Our intention with the shares we own in quality, ethical companies is to never sell.
Reason 1 – Personal circumstances or emergency
There have been times when personal circumstances have forced us to shave some positions, or sell the whole position in order to have money in the hand for emergencies.
If you read our article ($500 vs $5000), you would know we consider every investment the same way we would consider buying a house. However just like when buying a house, circumstances might arise that would make you consider changing you neighbourhood.
There are also situations that may arise in a company’s life cycle that will make us consider selling it’s shares.
Reason 2 – Company fundamentals have changed
What we mean by this is that, the direction or the journey the company was undertaking has changed. They are no longer able to keep up with competition and stay ahead of the market by being innovative. The moat they have built around their business is no longer able to keep competition out.
Every company changes over time, and the superstars are always changing for the better. The same way you have superstars, you also have companies that sometimes change for the worse.
In today’s economy, where venture capitalism is on steroids and stock markets experience volatility influenced by roid-rage, the number of companies which go bust has gone up exponentially.
Don’t believe us?
Have a look at the below sample from 2019. One can only imagine how many investors (seasoned and beginner alike were sucked in by the hype)
The We Company
Uber
Greenlane Holdings
These companies mentioned above, will never make money. How do I say this with the certainty? We ran it through our screening methodology.
The three companies above make up a total of approximately $55 billion USD. That’s from companies we don’t see ever turning the corner or be able to make a profit.
The reason we’re highlighting the above is because in the past companies used to last for longer than they do today. This is because the world we live in today is smaller, than the ones our parents grew up in. Companies need to be able to not only react to be successful but also adopt and set the trend in order to be relevant.
Here are some of the other things that could happen in a company’s fundamentals, in order for Tabarruk to put them back under the microscope:
New management takes over, they start making mistakes, and the mistakes start costing the profitability.
Company has a new player in the field of expertise. The company is unable to outpace the competition through their innovation and get wiped.
Company no longer operates in an ethical way or in a halal sector
The changes mentioned above are only some of the examples and it is important you keep conducting a reality checks with all your holdings often. Ask yourself the following:
“Is the company I invested in, still the same?”
“Do I still believe in them, have they changed?”
“Is the change for the better or worse?”
The above questions force you to make a decision, if the business you hold is now a better company or worse. If it’s the latter, you know what you will do. At Tabarruk we will do the same, we will part ways with the business.
Reason 3 – A better opportunity elsewhere
This is where you tread with caution. When you sell, the tax man get’s his share. That’s an instantaneous loss on your income, and as my Dad says, if you are selling because there is another opportunity available, write off 40% of your profit as a loss and think hard if this new opportunity can make that 40% or more in growth.
The opportunity has to have a more than solid chance, and there’s high conviction backed by research and analysis, the financials point to you being able to make the 40% back, to recover what you paid in tax to break even and then anything on top of that is a profit.
If you see an opportunity that can do this, knock yourself out.
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The market in some sectors like Energy, Financials and Industrials is showing signs of recovery. Other sectors like Technology and Healthcare, that were stronger in April and May, are now softer. These are short term trends and don’t change our strategy in any way. Still looking for quality companies and also taking on some risk as you can see below in our 2 purchase entries [For members only].
In addition to in-depth company research and macro-economic trends, we also keep an eye out for CEO and Director comments. Here’s a snapshot of some relevant comments made recently both locally and overseas that reflect on the sentiment and market conditions.
Commercial Property
I think it’ll [COVID-19] definitely cut down on building and construction for offices
Stephen Schwarzman, CEO, The Blackstone Group
Domestic Property
We believe that the construction and housing sectors will emerge as one of the stronger and more resilient sectors within the economy. Housing has always been under-supplied, or at best, at equal demand
The unit market is going to be knocked around. Rental vacancies will climb because all of these [international] workers and students who come and live in apartments for a few years just aren’t coming anymore
Lindsay Partridge, CEO, Brickworks Ltd
Aviation
I am not optimistic that some of the [airlines] that are here today, and have already been significantly bailed out, will get through the next few months. A lot of the current fleet today is geared with debt through all sorts of financial structures. The notion that you will simply ground them and say that is OK, it is not
Tim Clark, CEO, Emirates Airlines
While there are glimmers of good news in our July schedule — we expect to be down about 75% versus 90% right now — travel demand is still a very long way from where it was at the end of last year and the financial impact on our business remains severe
Scott Kirby, CEO, United Airlines Inc
Retail & Shopping
Tenants have generally seen higher conversion rates and basket sizes than expected, with visitors returning for specific shopping objectives, resulting in better than anticipated sales impact relative to footfall
Market Announcement, Unibail-Rodamco-Westfield
There has been an absolute step-change in online consumer behaviour during COVID. Some are asking: is it temporary or permanent? My view is absolutely it is permanent. We are seeing all e-commerce companies in Australia and worldwide reporting a surge in online shopping
Mark Kehoe, Managing Director, Gumtree Australia
Technology
Every single CEO and every single CIO [chief investment officer] I talk to has the same message, which is whatever digital transformation they have left has just accelerated thanks to COVID-19
Bret Taylor, COO, Salesforce.com Inc
Video is going to change everything about the communication, the way for us to work, live and play has completely changed
Eric Yuan, CEO, Zoom Video Communications
The COVID-19 pandemic has created a breeding ground for cybercrime. The past couple of months have represented one of the most active threat environments we have ever seen
George Kurtz, CEO, Crowdstrike Holdings Inc [global cyber-security software company]
Healthcare
We are really encouraged by the things [demand pickup] that we have seen in the month of May
Karen Parkhill, CFO, Medtronic PLC [world’s largest medical device company]
I would say this time, one of the things we see clearly is that countries around the world are really thinking about their [future] pandemic preparedness and how they might do things differently
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If anyone is looking to try out the share market for a little while or start short term trading in the stock market this article is especially for you.
Long term investing is the approach we grew up watching our fathers take. We learnt how to invest by osmosis.
Fahd traded for 6 months during his university days and decided it wasn’t for him, before returning to it when he changed careers to investment banking. Why? He now understood that patience was required. 6 months wasn’t enough.
For the last 15 years, we have taken a long term approach to invest money in all facets of our lives including the stock market.
This strategy is also called ‘buy and hold’, where you buy stocks, index funds or REITs and hold them for an indefinite amount of time.
REIT – Real Estate Investment Trust; a company that owns, operates, or finances income producing properties.
In this article, we highlight why the long term investing approach is always the safest and best way to invest in the market.
Reason 1 – Compounding
The difference between trading and investing is that trading is typically based on knee jerk reactions whereas investing allows your money the time to make a profit and accumulate wealth over time.
This is where you can see the 8th wonder of the world take effect.
8th wonder of the world?
E = mc2 pales in comparison to compounding.
“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”
Albert Einstein
Interest to us isn’t the modern concept of interest. Rather it’s the ‘interest’ in the company in the form of our capital invested in it.
The reason this strategy will never be beaten by traders is that long term investing allows your capital to accumulate and gain profits over time.
Over time the capital you invested is going to earn compounding returns (a.k.a. compounding interests) and the money experiences exponential and accumulative growth.
That right there is the key reason we beat short term trading. Compounding is really only possible with time.
Over time the capital you invested is going to earn compounding returns (a.k.a. compounding interests) and the money experiences exponential and accumulative growth in comparison to short term trades. Or something like that.
Reason 2 – Fees and taxes
If you’re a long term trader you will only ever pay one fee (brokerage or transaction cost) for the life of your purchase if you buy and forget like us.
When I say forget, we have absolute confidence in the long term future of every company we own shares in and therefore we are mostly immune to the herd mindset the market is rife with.
You also pay fewer taxes in Australia as a long term investor. The Capital Gains Tax (CGT) only applies to capital gains on shares or units when a CGT event happens, such as when you sell them (unless you acquired them before CGT started on 20 September 1985).
However, if you’re a trader, you have to pay your broker fees every time you buy and sell shares. Also if you’re selling your shares to make a profit, you pay more taxes on that profit as a short term trader.
These fees and charges that you pay is money that could otherwise have been accumulating a return of 5-12% every year.
These fees and taxes equal money that could otherwise have been accumulating at a rate of 5-12% or more and compounding. Money that you pay in fees and taxes is money that you cannot put to work for you.
If you’re a trader, you are also extremely vulnerable to short term corrections and recessions, especially if you are are new to investing.
However, if you apply a buy and hold strategy, short term turbulence doesn’t really matter because you can hold the vision you had when you invested in the company.
When a company we own shares in swings downward, and all our analysis and research still aligns with a bright future, we buy more shares of that company at a cheaper price. We cover this in more detail in our secret to buying at the bottom article.
This long term mindset allows us to sleep well at night and ignore the noise that is generated by the market.
Reason 3 – What history tells us
As a rule of thumb if you hold your money over ten years in an index fund or blue-chip stock, historically there is almost ZERO chance of you losing money. This is true, despite share market crashes, financial crises and world events.
From 1988 (that’s when Fahd was born) to 2020 the S&P/ASX 200 Index has risen from 1200 points to 5755 points.
That’s what happened over 32 years. Fahd and I have only been investing for less than half that time, 15 years.
Over 3 decades, the world has witnessed over 8 financial crises.
That’s 1 every 4 years on average.
Despite the crises, in the melting pot of human ingenuity, hope, greed and fear the S&P/ASX 200 index continued to rise from 1251 points to 5755 points.
The reason the current COVID crisis is affecting us is because we are smack bang in the middle of it and a lot of us have transitioned from being dependents and having food put on our tables to being the breadwinners ourselves and providing food for our dependents.
Below is a list of the most prominent crises that we remember and how the S&P/ASX 200 was affected.
1994 - Global Bond Crisis
2008 - Global Financial Crisis
2011 - 9/11
2015 - Chinese Market Crash
COVID 19 (2020)
High
2311
6754
3490
5891
7017
Low
1920
3582
2800
4881
5077
Loss
+16.92%
-46.96%
-19.77%
-17.14%
-27.65%
What we can observe from the above table, is that even though the market has experienced some crashes in the long term, the market always corrects itself and we establish new highs and new lows.
Let us take for example a popular ETF (ASX: VAS), I am only using them as an example as I would not invest in them due to them not passing our framework for ethical screening.
ETFs are defined as exchange-traded funds, they are traded on major stock exchanges, like the New York Stock Exchange, Nasdaq and ASX. You can buy and sell shares in an ETF through your brokerage account. An ETF is a collection of tens, hundreds, or sometimes thousands of stocks and bonds in a single fund. It’s targeted for people who want less risk and don’t want to spend time researching stocks to select.
Let us also take a company we have researched, Medical Developments International Limited, ASX:MVP.
Story time. It’s 2010. We have two investors, Amina and Zara. Both have a $1000 to invest and were told that once invested, they couldn’t touch it again for 10 years.
Amina is fresh out of high school and chose to put the $1000 in ASX:VAS (Vanguard ETF) after learning that an index is less risk and she doesn’t need to do any further research.
Zara is a single mother who did her research through various sources and put her $1000 in ASX: MVP (Medical Developments International).
They purchase the shares through NABtrade and pay a broker transaction fee of $14.95 on the 31st May 2010.
Fast forward. Current day 2020. Actual prices for ASX:VAS and ASX:MVP used in the table below.
Amina (VAS)
Zara (MVP)
Purchase price
$57.11
$0.235
Units purchased
17
4,191
Total Cost
$1,000
$1,000
Price 10 years later
$73.22
$7.88
Value 10 years later
$1,244.77
$33,025.08
Total Profit
24.47%
3,202.51%
Zara made a profit of 3,200 %. That’s 33 times her initial investment!
If an example of 3,200% return doesn’t convince you of the benefits of long term value investing, nothing will.
Granted, not every company will perform like the one used here. It takes experience, skill and painstaking research to find gems such as this.
Our current portfolio has companies that have already done 100% to 300% returns in a few months.
At Tabarruk, we never invest in Index Funds or ETFs. We aim to make sure our money is working as hard as Zara made hers work. Money compounding in quality companies that we pick across sectors will always beat the net averaging out effect in ETFs or index funds.
Every stock we purchase has to pass through the Tabarruk Framework and Screening™ process.
It is extremely important to know that in the last 10 years, the market has come out of a recession, and also undergone corrections (small dips).
Today we’re smack bang in the middle of a recession due to #covid.
But quality always prevails and corrects over time, every time.
If Australia were to go through a deep depression, we’re all going to be just fine if we hold quality company shares.
The question to ask yourself is, what quality of your stocks would you rather own?
A portfolio is only made up of two types of stocks:
Value
Junk
I could also compare the above scenario of Zara and Amina by adding the short term day trader, Tarek.
Let’s say Tarek trades every other day for 10 years.
Half of his transactions are buys and the other half are sells.
That’s 255 working days for 5 years = 1,275 days
2 trades a day is 1,275 x 2 = 2,550 trades
Let’s use SelfWealth as the broker, where transaction fees are $10 per trade.
2,550 x $10 = $ 25,000 in fees.
Transaction fees alone! The cost of being a short term trader.
Even if we say Tarek traded half as often, 2-3 times a week, you’re looking at $10,000 – $12,000 in fees.
You can also safely assume that Tarek would have sold plenty of his shares within 12 months of owning them. Capital gains tax will eat a chunk of any profits.
I’m not going to bother with guesstimating what Tarek would actually pocket after all expenses over 10 years.
I will tell you one thing. The time needed to watch the market during open times, 10am – 4pm means he’s not doing much else, let alone a day job.
Also consider adding in the following:
Company selection
Volatility of market
Initial investment of $1000
Fear, greed, probability of success
Time to research number of different companies on any given day
How many companies and transactions do you think Tarek would have got right? Even with some MVP’s sprinkled in there, Tarek isn’t buying and holding shares for 10 years hence no compounding of profits.
The stress, the control of emotions and self-awareness of one’s own psychology needed to be consistently successful, is something very few could learn to be masters at.
Even then, I seriously doubt any of them would do a profit of 3,200% over 10 years.
Some of the best short term traders we know, have a win rate (the number of times they make any profit) is just over 50%. Even with a win rate of 50-55%, smaller wins may not make up for a few big losses. Breaking even might be an outside chance.
So, if you’re going to start investing, do it in a way that makes your gains accumulate.
Bonus Wins
If your company offers you shares for your dividends, sign up for it by checking if the company has a dividend reinvestment plan. If you are wondering how to do this, feel free to contact us and we can help you out.
A dividend is the distribution of a portion of the company’s earnings, decided and managed by the company’s board of directors, and paid to a class of its shareholders. Common shareholders of dividend-paying companies are typically eligible as long as they own the stock by the ex-dividend date. Dividends may be paid out as cash or in the form of additional stock.
Accumulative and exponential growth is the best thing about investing. It’s not about just a fixed flat 5-7% every year but the accumulation effect because it grows at a certain percentage. The more money you have (in the form of returns) the more money it grows by every year.
If I had the option of leaving you with only one sentence to remember out of this whole article it would be the following:
“You can’t time the market, but you can spend time in the market.”
The longer the time your money spends in the market, the bigger the potential scale of your return.
I get that it is sometimes hard to buy and hold on, to weather turbulence. You may get frustrated, nervous or scared.
The successful investors often do the opposite of what the ‘herd’ does, they let their money work over long periods and the accumulation and dividends will more or less guarantee growth.
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The approach to investing with a small sum of money and a large sum of money is always the same. In the long run, you are looking to buy good businesses at a discount, with a promising outlook for the future.
The problem is that too many people chase quick, easy money. They want someone else to do all the work, which absolves them of all responsibility if they make a loss. And it’s easy to take all the credit when they make a profit.
The unique opportunity we have today
When working with a smaller amount of money, especially today, the universe of opportunity for a diligent investor has never been larger. The reason is, we have access to expert research and analysis on companies, at our fingertips. This arms us with the knowledge to make the best, educated guesses on which company we should invest money into.
Whether you are investing $500, $1000 or even $100,000, you should treat that decision-making process the same way you if you were purchasing a house.
To experience significant returns on your investment, you need to look no further than the success of Tabarruk’s subscribers, our goal is to ensure we educate members about the exciting companies out there.
With knowledge and education, we equip ourselves to make informed decisions. By knowing exactly why we are investing in a company, we take the uncertainty out of the equation. This helps regulate our fear and anxiety better when the market, at times, goes up and down like a roller coaster.
How do you end up with a $100,000 portfolio?
Simple. You take the first step.
You arm yourself with knowledge.
You choose companies from a list of ones that have been carefully researched and analysed.
You learn from the success of others when they share it openly.
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Before buying shares in any company and investing in the stock market, it is extremely critical to understand things.
Not your typical market
The stock market is completely different from a normal market, where buyers and sellers meet up to conduct trade. These trades happen in a manner which is mutually beneficial and results in synergy.
The stock market, however, doesn’t operate the same way. New investors, should never lose sight of this fact.
In the world of investment, buying and selling shares happens in a melting pot. A chunk of people who do it have incredibly high IQs and some have average IQs.
What they both have in common is, they’re all trying to out-think each other. This is why the market behaves erratically. Often a result of overthinking.
Sometimes all you need for a good cup of tea is a tea bag and hot water.
Business and investment schools are teaching the younger generation about ways to get an advantage over the competition. Consequently, you come across extremely hard-working individuals who put in the time and hours required to understand market and business trends.
Doing less means you don’t follow the herd
What ends up happening though, is that the system, like an assembly line, produces ‘drone investors’, the new age version of alchemists who want to turn lead into gold.
With the advent of the information age, being calm, rational and objective on something simple like the stock market is getting harder and harder.
Why only a few people successfully invest and grow wealth?
The key to being successful on the stock market is to do less.
This is why I have never been a trader.
I believe in doing less and removing the complications out of decisions.
If I do not understand the business model and am not comfortable with the risk, I don’t take any part in it.
Doing less is not panicking
Truly successful investors do not have the fear of missing out. They don’t panic and attempt to jump a train to nowhere because everyone is getting on it.
They know there are plenty of opportunities out there and if you’re someone who diligently invests over time (I invest every month for example), you are bound to come across some real gems.
At tabarruk, we’ve been successful over a long periods of time because we know every company we own shares in, like the backs of our hands. Because we know that opportunities are important and the more crowded a cafe, the harder it is to find a seat at a table.
We don’t try to overthink and take it upon ourselves to conduct in-depth research. If we don’t have the time to research, we find multiple reliable sources of research and analyse the work already done to form insights.
Tabarruk set out to be one of the best resources of ethical investment education on the ASX sharemarket, and has achieved it through:
75 combined years of experience between Moin, myself and our fathers
Our combined experience across sectors in Australia
The refining of the Tabarruk framework for analysing, researching and rating companies
