The Rate Debate - Ep35

Is the RBA setting monetary policy in the rear-view mirror?

Yarra Capital Management

February 2023

Funds operated by this manager:

Pull the Weeds

Marcus Today

February 2023

The life of a trader is not what most of us might imagine it to be - ie. glamourous, exciting and paved with gold. More likely it is solitary, private, a bit boring and when done right, provides a living.

We could all be traders.

We could all be Arnold Schwarzenegger too. Go to the gym every day, lift heavy weights, drink protein shakes, avoid chocolate, and talk in a vague middle-European accent. But the reality is, who can be bothered?

We could all be traders. We could all be Arnold Schwarzenegger too.

And who can be bothered to be a trader because to do it properly is pretty much a full-time job, and most of us already have one of those, and those of us who don't probably don't want one.

But that doesn't mean we can't adopt some of the core principles of the job, principles that apply not just to traders but to investors as well, principles like "preserve your capital" and "cut your losses". Clichés all, but as any trader will tell you, no trading system will succeed without them and no long-term investor will either.

The big mistake for long-term investors is that they see things as being part of a portfolio in which the winners make up for the losers.

With that mindset long-term portfolio investors "excuse" the losers and do nothing about them. But if you really want performance the losers are just as important as the winners and you need to protect against them. To do that you have to pull the weeds and plant flowers in their place. And if flowers turn into weeds, pull them and plant some more. Do this relentlessly and you will end up with a garden full of blooming flowers.

How do you pull weeds? Simple. Use stop losses. How? Let's cut to the substance.

What are they: An order that automatically closes your trade at a predetermined price, thus limiting your loss. A stop loss is a mechanism that short circuits debate and emotion and provides certainty.

Requirements: Forget the concept of "portfolio". Think of every stock you hold as a separate trade. Preset a stop loss for each individual holding, preferably when you are unemotional and in possession of a clear mind. The time of purchase would be good, but any time will do.

The mechanism: It is impossible to set a rule for everyone. For those of us without trading systems, you can use a number of different methods to set stop loss levels.

• The most obvious is a flat percentage. If it falls by five per cent, sell it. But that's very basic and most of us struggle doing that in practice. The market is so volatile these days.

• Most (hardcore) traders use "The 2% rule". The 2% rule means you are prepared to risk a maximum of 2% of your trading capital on any one trade. In other words, on $100,000 of capital (a portfolio of $100,000) they would cut a trade that makes a $2,000 loss. Notably, this is not the same as a 2% drop in share price. If they have put $10,000 of the $100,000 portfolio in the trade it could be a 20% loss on that one trade ($2000 of the $10,000).

• Another way to set stop loss levels is by reference to a chart rather than a percentage. For instance, if you are trading price breakouts (buying stocks that break a resistance level) the stop loss can be set at the price at which it breaks out and so the resistance level that was broken serves as the stop loss level if it reverses again.

• Then there are rolling stop losses. As prices rise you raise the stop loss to guarantee a profit if the price then falls from its new high.

• Once in profit, some people use "partial stops", they continue to identify levels or technical sell signals and either sell all or part of the position depending on what level or signal is hit.

• Others set stop-loss levels with reference to the volatility of the stock. Setting stop losses at a level that allows the trade to develop without being stopped out by a normal fluctuation. The way to avoid this is to learn about volatility and the average true range (ATR). Simply put this means accounting for how volatile a stock is when setting a stop loss. Volatile stocks need more room to move. If you don't understand volatility you are trading every stock as if it has the same risk, and clearly, there is a big difference between trading Telstra (ASX: TLS) and trading Zip Co (ASX: Z1P). It's easier than it sounds.

Ultimately there are a lot of ways of setting stop loss levels. As noted, a flat percentage is very basic. But the core to it is to make the decision to use them rather than rely on guts, to set your stop loss levels early, to set them for each individual stock and stop thinking in terms of "the greater portfolio".

I suggest you read some trading books - the foundation stuff that takes you ahead of the average punter in terms of trading discipline. Most good trading books are very hard work (dull) and full of theory. And they often, interestingly, have nothing to do with picking stocks but are about risk management.

But the early realisation will be that "It's not what you buy, it's all about what you do after you buy".

Managing the investment, not making it. Most high (low) brow investors working off Buffett quotes have been brainwashed to think it's all about choosing what to buy. For a trader its all about what you do after you buy. That's the bit that needs a plan and discipline and vigilance and where almost everyone goes wrong and doesn't bother.

If you are one of those "Set & Forget", Buffett quoting, ineffective "Invest as if they are going to shut the market for ten years" investors, shut your eyes, exercise your first stop loss, and see what happens. You will instantly move from confused, indecisive and unfit to invest, to something…better.

Forever.

It's not hard. Try it.

Author: Marcus Padley, Founder of Marcus Today

Funds operated by this manager:

Marcus Today Equity Income SMA, Marcus Today Growth SMA

New Funds on FundMonitors.com

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Chris Gosselin, CEO of FundMonitors.com, speaks with Daniel Porter, Portfolio Manager at PURE Asset Management. 

The PURE Resources Fund is a specialist hybrid equity fund with an absolute return focus, investing in Australian emerging resource companies. Since inception in April 2021, the fund has returned +9.13% per annum with an annualised volatility of 8.09%.

Funds operated by this manager: PURE Resources Fund

The Rate Debate - Ep35

Is the RBA setting monetary policy in the rear-view mirror?

Yarra Capital Management

February 2023

Funds operated by this manager:

Chris Gosselin, CEO of FundMonitors.com, speaks with Daniel Porter, Portfolio Manager at PURE Asset Management. 

The PURE Resources Fund is a specialist hybrid equity fund with an absolute return focus, investing in Australian emerging resource companies. Since inception in April 2021, the fund has returned +9.13% per annum with an annualised volatility of 8.09%.

Funds operated by this manager: PURE Resources Fund

Magellan Infrastructure Strategy Update

Magellan Asset Management

January 2023

Magellan's Deputy CIO, Head of Infrastructure and Portfolio Manager, Gerald Stack, mentions the challenges that the Infrastructure portfolio faced in 2022. Gerald describes how the portfolio is positioned now to take advantage of growth trends such as the re-opening of the global economy and the transition to renewable energy. 

Funds operated by this manager:

Magellan Global Fund (Hedged), Magellan Global Fund (Open Class Units) ASX:MGOC, Magellan High Conviction Fund, Magellan Infrastructure Fund, Magellan Infrastructure Fund (Unhedged), MFG Core Infrastructure Fund

Important Information: This material has been delivered to you by Magellan Asset Management Limited ABN 31 120 593 946 AFS Licence No. 304 301 ('Magellan') and has been prepared for general information purposes only and must not be construed as investment advice or as an investment recommendation.  This material does not take into account your investment objectives, financial situation or particular needs. This material does not constitute an offer or inducement to engage in an investment activity nor does it form part of any offer documentation, offer or invitation to purchase, sell or subscribe for interests in any type of investment product or service. You should read and consider any relevant offer documentation applicable to any investment product or service and consider obtaining professional investment advice tailored to your specific circumstances before making any investment decision. A copy of the relevant PDS relating to a Magellan financial product or service may be obtained by calling +61 2 9235 4888 or by visiting www.magellangroup.com.au.

Past performance is not necessarily indicative of future results and no person guarantees the future performance of any strategy, the amount or timing of any return from it, that asset allocations will be met, that it will be able to be implemented and its investment strategy or that its investment objectives will be achieved. This material may contain 'forward-looking statements'. Actual events or results or the actual performance of a Magellan financial product or service may differ materially from those reflected or contemplated in such forward-looking statements.

This material may include data, research and other information from third party sources. Magellan makes no guarantee that such information is accurate, complete or timely and does not provide any warranties regarding results obtained from its use. This information is subject to change at any time and no person has any responsibility to update any of the information provided in this material.  Statements contained in this material that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of Magellan. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon.

Any trademarks, logos, and service marks contained herein may be the registered and unregistered trademarks of their respective owners. This material and the information contained within it may not be reproduced, or disclosed, in whole or in part, without the prior written consent of Magellan.

Airlie Quarterly Update

Airlie Funds Management

January 2023

Speaker: Emma Fisher, Portfolio Manager

Funds operated by this manager:

Airlie Australian Share Fund

Important Information: Units in the fund(s) referred to herein are issued by Magellan Asset Management Limited (ABN 31 120 593 946, AFS Licence No. 304 301) trading as Airlie Funds Management ('Airlie') and has been prepared for general information purposes only and must not be construed as investment advice or as an investment recommendation. This material does not take into account your investment objectives, financial situation or particular needs. This material does not constitute an offer or inducement to engage in an investment activity nor does it form part of any offer documentation, offer or invitation to purchase, sell or subscribe for interests in any type of investment product or service. You should obtain and consider the relevant Product Disclosure Statement ('PDS') and Target Market Determination ('TMD') and consider obtaining professional investment advice tailored to your specific circumstances before making a decision to acquire, or continue to hold, the relevant financial product. A copy of the relevant PDS and TMD relating to an Airlie financial product or service may be obtained by calling +61 2 9235 4760 or by visiting www.airliefundsmanagement.com.au.

Past performance is not necessarily indicative of future results and no person guarantees the future performance of any financial product or service, the amount or timing of any return from it, that asset allocations will be met, that it will be able to implement its investment strategy or that its investment objectives will be achieved. This material may contain 'forward-looking statements'. Actual events or results or the actual performance of an Airlie financial product or service may differ materially from those reflected or contemplated in such forward-looking statements.

This material may include data, research and other information from third party sources. Airlie makes no guarantee that such information is accurate, complete or timely and does not provide any warranties regarding results obtained from its use. This information is subject to change at any time and no person has any responsibility to update any of the information provided in this material. Statements contained in this material that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of Airlie. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon.

Any third party trademarks contained herein are the property of their respective owners and Airlie claims no ownership in, nor any affiliation with, such trademarks. Any third party trademarks that appear in this material are used for information purposes and only to identify the company names or brands of their respective owners. No affiliation, sponsorship or endorsement should be inferred from the use of these trademarks.. This material and the information contained within it may not be reproduced, or disclosed, in whole or in part, without the prior written consent of Airlie.

China's reopening presents opportunities for investors

WaveStone Capital

February 2023

Funds operated by this manager:

WaveStone Australian Share Fund, WaveStone Capital Absolute Return Fund, WaveStone Dynamic Australian Equity Fund

Magellan Global Strategy Update

Magellan Asset Management

January 2023

Magellan's Portfolio Managers Nikki Thomas, CFA and Arvid Streimann, CFA, discuss how they are viewing the current inflationary environment and chances of a recession. They explain how Magellan's Global Portfolio is positioned to manage these risks and take advantage of thematic investment opportunities.

Funds operated by this manager:

Magellan Global Fund (Hedged), Magellan Global Fund (Open Class Units) ASX:MGOC, Magellan High Conviction Fund, Magellan Infrastructure Fund, Magellan Infrastructure Fund (Unhedged), MFG Core Infrastructure Fund

Important Information: This material has been delivered to you by Magellan Asset Management Limited ABN 31 120 593 946 AFS Licence No. 304 301 ('Magellan') and has been prepared for general information purposes only and must not be construed as investment advice or as an investment recommendation.  This material does not take into account your investment objectives, financial situation or particular needs. This material does not constitute an offer or inducement to engage in an investment activity nor does it form part of any offer documentation, offer or invitation to purchase, sell or subscribe for interests in any type of investment product or service. You should read and consider any relevant offer documentation applicable to any investment product or service and consider obtaining professional investment advice tailored to your specific circumstances before making any investment decision. A copy of the relevant PDS relating to a Magellan financial product or service may be obtained by calling +61 2 9235 4888 or by visiting www.magellangroup.com.au.

Past performance is not necessarily indicative of future results and no person guarantees the future performance of any strategy, the amount or timing of any return from it, that asset allocations will be met, that it will be able to be implemented and its investment strategy or that its investment objectives will be achieved. This material may contain 'forward-looking statements'. Actual events or results or the actual performance of a Magellan financial product or service may differ materially from those reflected or contemplated in such forward-looking statements.

This material may include data, research and other information from third party sources. Magellan makes no guarantee that such information is accurate, complete or timely and does not provide any warranties regarding results obtained from its use. This information is subject to change at any time and no person has any responsibility to update any of the information provided in this material.  Statements contained in this material that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of Magellan. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon.

Any trademarks, logos, and service marks contained herein may be the registered and unregistered trademarks of their respective owners. This material and the information contained within it may not be reproduced, or disclosed, in whole or in part, without the prior written consent of Magellan.

The Rate Debate - Episode 34

2023 predictions on the economy, inflation,

and the fixed-rate mortgage cliff 

Yarra Capital Management

December 2022

Funds operated by this manager:

Damen Purcell, COO of FundMonitors.com, speaks with Robert Gregory, Founder and Portfolio Manager at Glenmore Asset Management.  

The Glenmore Australian Equities Fund has a track record of 5 years and 6 months and has outperformed the ASX 200 Total Return benchmark since inception in June 2017, providing investors with an annualised return of 21.78% compared with the benchmark's return of 8.69% over the same period. 

Funds operated by this manager: Glenmore Australian Equities Fund

Insights from abroad

WaveStone Capital

October 2022

Funds operated by this manager:

WaveStone Australian Share Fund, WaveStone Capital Absolute Return Fund, WaveStone Dynamic Australian Equity Fund

Chris Gosselin, CEO of FundMonitors.com, speaks with Rob Hay, Head of Distribution & Investor Relations at Collins St Asset Management.

The Collins St Value Fund  has a track record of 6 years and 9 months and has outperformed the ASX 200 Total Return Index since inception in February 2016, providing investors with an annualised return of 14.17% compared with the index's return of 9.16% over the same period.

Rob also discussed Collins St Asset Management's new Fund, the Collins St Convertible Notes Fund.

Funds operated by this manager: Collins Street Value Fund, Collins St Convertible Notes Fund