Buying Shares

[cisamcgu]

An IT owns shares in other companies who pay them dividends. These are then paid out to the investors in the IT. Income biased investment trusts will have a dividend reserve a rainy day fund. So if the average pay out from the company shares they own fall they can continue to increase their dividends. If the share price of the investment trust falls that doesn't mean the companies paying dividends to the IT will reduce there payments to the Investment Trust. Example The investment trust is trading at £1 and is paying a 6p dividend (equal to 6%). The price of the investment Trust falls to 50p if they continue to pay 6p the dividend is now 12% BUT only if you buy it at 50p. If you owned at 100p you have lost 50% of your capital but you are still getting 6p dividend. My aim was to buy at 50p which gets me 6p dividend equal to 12%. And or if the share price recovers I will have a 100% increase in capital. NOTE the latter is an example only.

Not sure it actually works like that, but I am no expert, and you are, so I will bow to your greater knowledge

 

[Notafettler]

As an aside exchange traded funds (etf) which I dont follow are the way a vast amount of private investors invest, maybe the majority. They are index funds. So when people invest in an index fund the manager buys shares proportionally to the index. When you sell them the reverse happens (ignoring the possibility at times of equilibrium in supply and demand). So we have the present crash and loads of private investors sell out. The underlying shares are sold in proportion to the index. The good the bad and the ugly are all sold proportionally creating anomalies. Tesco and Easyjet are sold of as if they both effected the same. Now this doesn't mean that on the market the price falls by the same percentage as there will be buyers and sellers who are not using etfs but the good will fall when they shouldn't. Something that is a product of this crash.

 

[Archie_tect]

On the other hand the so called hoarders reinvest there surplus into the business to create a bigger surplus to reinvest into the business etc etc. The result is better paid jobs resulting in a surplus for the workers to spend on important things like beer. Dyson would be an example of someone you are envious of.

Oh Notafettler.... you and I are so far apart ideologically, there's no further benefit from discussing it... but I do like the idea that not hoarding billions of £ would make me envious of those that do... that is funny! Thank you .

 

[Eziemnaik]

https://money.cnn.com/2018/02/24/investing/warren-buffett-annual-letter-hedge-fund-bet/index.html
If anybody still invests with their fund manager...
Basically most index funds most of the time outperform individual picks
Plus keep in mind overhead costs ( in case of some etf and platforms less than 1%)

 

[Notafettler]

Big firms that will weather the storm. Oil is a good one right now, over supply and an artificial drop in demand has depressed prices.
Have a play with the plus500 app in demo mode for a while and you'll soon get the hand of it. Returns aren't huge in percentage terms, but it beats going out and working for it.

It should be remembered that oil prices are/were held up artificially by opec and Russia by keeping supplies at a lot less than they were capable of producing. Also when prices rise (when the latter restrict supply) US shale oil becomes profitable for export. It is not at the present oil price. Russia has sufficient foreign currencies reserves to sit out a long oil price recession and Saudi to a lesser degree. Russia would be happy to make US shale oil producers insolvent. Shale oil has not been the bonanza that was expected. Plenty of insolvencies with out the present price drop. Russia is not a friend of the US.
That said Royal Dutch Shell have managed to increase (or at least hold) there dividend since the second world war. BP (ignoring deep water horizon) have also managed to be very reliable dividend payers. (Feel free not to quote me!)
Both are mainstays of income biased investments. Prior to the great recession banks were the mainstay of income investors.

 

[Notafettler]

Have a play with the plus500 app in demo mode for a while and you'll soon get the hand of it. Returns aren't huge in percentage terms, but it beats going out and working for it.

I haven't got the bottle to use the plus 500 app in real mode. Most people make losses on it. Even the experts. More importantly I can't be arsed doing the research. On the other hand plus500 have announced they expect profits to rise significantly this year. As opposed to the previous predictions of a fall. This is because the countries where they sell services are increasing regulations which is impacting there profits. Good option for a short term profit.

 

[Notafettler]

https://money.cnn.com/2018/02/24/investing/warren-buffett-annual-letter-hedge-fund-bet/index.html
If anybody still invests with their fund manager...
Basically most index funds most of the time outperform individual picks
Plus keep in mind overhead costs ( in case of some etf and platforms less than 1%)

Investment Trust rarely have charges above 1%. Correct index funds do on average beat fund managers but there is plenty of fund managers that do beat indexs. In fact there is no other way!! Woodford was one? Until he decided he could just simply become an expert on start ups which he certainly wasn't. Anthony Bolton who was considered one great fund managers, another that thought he could become an expert at something that wasn't part of his comfort zone on Chinese growth companies again a failure.
On the other hand train (of lindsay train) sticks with what he knows. I put a bit into Smithson investment trust, run by highly rated manager who is sticking to his comfort zone. Lucky me put in a very low limit order which got me them sooo cheap. The emphasis is on luck.

 

[Notafettler]

In insurance Cos generally? Because they are going to be hit with enormous bills which I expect will not do their business any good - this just comes from an observation. I have no knowledge (I did have a shares ISA until the shoot hit the fan a couple of weeks ago, I've chopped it in before it lost any more and I'll open a new shares ISA on 6 April).

You appear to have more experience than someone like me who has virtually none (I did make a few quid from Royal Mail shares, although probably sold before they hit their peak)

Annoying my answer has gone missing.
So again.
Legal and general have life insurance AND a travel insurance business. Both of which are reinsured as required. This puts a limit to there losses.
The death rate from covid19 is unlikely to effect there profits from life insurance anyway.
Should that be wrong then Legal and general will end up with a significant increase in profits albeit short term. Legal and General have a huge annuity business.

 

[Eziemnaik]

While investment trusts may have rarely higher initial cost than 1% there is plenty of ongoing extra charges that may elevate it well above. Performance tax, transaction tax, interes tax etc etc,
I think very few trusts available to common people will compete long term (talking decades) with for example vanguard sp500 etf or LS80 after all costs are included.

 

[Notafettler]

While investment trusts may have rarely higher initial cost than 1% there is plenty of ongoing extra charges that may elevate it well above. Performance tax, transaction tax, interes tax etc etc,
I think very few trusts available to common people will compete long term (talking decades) with for example vanguard sp500 etf or LS80 after all costs are included.

Ongoing charges at City of London investment Trust are
Annual management charge: 0.33% of Net Assets
Performance fee: No
Ongoing charge: 0.39%
Reasonable I think you will agree?
Not sure what you mean "trusts available to common people" all Investment trusts are on the stockmarket and therefore available to us peasants!!

 

[Notafettler]

Just had a look at two investment trusts.
City of London down -2.25p (-0.71%)
Scottish mortgage up 15.30p (2.87%)
The divergence between growth IT and income biased ITs continues . The ultimate proof that you can't predict the market.

 

[Eziemnaik]

Ongoing charges at City of London investment Trust are
Annual management charge: 0.33% of Net Assets
Performance fee: No
Ongoing charge: 0.39%
Reasonable I think you will agree?
Not sure what you mean "trusts available to common people" all Investment trusts are on the stockmarket and therefore available to us peasants!!

I stand corrected regarding charges ( my rule of a thumb anything below 1 sounds good)
I thought there is plenty of trusts with high minmum investment though
As for CTY the yields from last years are not very exciting ( and I am not talking about last month)
You mentioned Scottish Mortgage which looks to my untrained eye like a much better proposition

 

[Notafettler]

Definitely, (SM) based on past performance! But it hasn't fallen anything worth talking about so not much to recover (trough to peak). Look at the high for the year on city of London. That's the possible recovery. With dividends to boot. Note it's rule of thumb that as you get closer to retirement you should be investing for dividends not growth. As a growth shares tend to be more volatile. Oops not this time!
Size of trust and where they invest dictates costs. So my example is not an average.

 

[Notafettler]

CTY
Open:
319.50p
Year high:
448.50p
roughly a 40% gain to be had.
not a brilliant example as there is fair bit more around with bigger falls.

it is 25% for Scottish mortgage. But as I said CTY as is not great example of falls.

 

[Notafettler]

I thought there is plenty of trusts with high minmum investment though

not sure what you mean. The minimum investment is one share in all investment trusts. They are companies on the stock market.