Last month the Saltydog Investor completed its fifth year, and as I said in my last blog, they were not easy times. Still to coin a phrase, we mustn`t grumble, it could have been worse, but how much worse, who is to know? Let us hope that we do not find that out in the months and years to come.
I know that we in the West live in a “democracy”, but somehow I feel helpless to influence the way my life and future is being organised. The political parties are all similar to each other, they trundle along and somehow do not seem to need or heed the wishes of the people who vote for them. They just want our money for their wars and pet projects. I liken our present democracy to three wolves and one sheep voting as to what to eat for dinner. It is all pre-ordained and the sheep is in for a rough time. The wolves are the major players in Politics, Industry and the Banking world, and we are the sheep!
Nevertheless, having said the above, our cautious Tugboat portfolio managed a gain of 52% over that five year period. If this performance was to continue for twenty years, our original £40k would turn into £214K. Under these economic conditions I would suggest this to be a satisfactory outcome. The question is can, and should we have done better? Of course with the benefit of hindsight the answer is yes. We did make a couple of fairly fundamental mistakes from which we must learn from for the future.
As momentum investors we are reliant on the weekly numbers for our instructions as to which IA sector and fund to invest our money. In 2014 the numbers shouted out that we should be invested in UK Gilts and Index-linked Gilts, but we knew better. We had listened to the broadcasters and pen-pushers who said that Q.E. was coming to an end and that would be “bye-bye” to value in Gilts and Bonds. Today Q.E. has still not ended and in 2014 guess what was the best performing sector – UK Index-linked gilts, up 18% . A lesson learnt. Do not act and invest on the strength of media noise, it is usually short on facts and long on sugar.
Our second mistake was generally not to act early enough when entering or exiting a sector or fund. Perhaps we should have stepped in or out with smaller sums of money, whilst establishing with more certainty the direction of its movement. Like they say in the Army “take small steps quickly” and any mistake is likely to be less painful. This is not a big deal, it simply comes down to being more regimented in our approach.
What does this coming year hold for us? Probably more of the same, with the world`s markets remaining volatile and unpredictable. So at Saltydog we will stick firmly to our risk pie-chart whilst trying to make the improvements to our operating procedures and thus endeavour to claw back towards a 10% annual return. We will also spend less time listening to the financial press who, like show magicians, appear to be able to pour white and red wine from the same bottle!