Borrowing to invest is often demonised in the financial press.It is referred to as ‘leverage’ and for good reason, it ‘levers’up your gains and losses.The only time the leverage has no apparent effect is when the return is the same as the cost of the leveraged capital.Recent examples to demonstrate the potential effects of leverage […]
To clearly demonstrate the advantage of buy and hold equities, I will posit the following situation. Ten years ago on November 23, in the year 2000 you had $10,000, which you wanted to invest in a quality Australian company. I was originally going to say you chose BHP (whose performance I might add was much better than the stock I chose), however, they have done several things like stock splits & de-mergers in the last 10 years, that make a retrospective calculation tricky.
You will often hear me talk about the poor performance as a whole of the managed fund industry, after taking into account fees.Mathematically of course, over any given period, 50% of funds are going to out-perform and 50% will under-perform.Unfortunately, studies have shown that when fees and charges are added into that, over 80% of all managed funds fail to beat a basic benchmark.
I decided, rather than trust someone else’s ‘studies’; I would look into the matter myself.Here was what I discovered:
Our most satisfying result was calendar year 2008, a horrible year for investors globally, the S&P/ASX200 (TR) index declined by about 40%.I do not think it appropriate to quote an un-audited result here, but suffice to say that while our portfolio declined in value; it was nowhere near the quantum of the broader market. Any loss of capital is undesirable; however, if the cause of it enables you to accumulate significant positions in some seriously mis-priced issues then, in the longer term, it is not such a bad thing.
Over the next few months, while we get all the regulatory loose ends tied off prior to our July 1st 2011 ‘informal’ launch of EGP Fund No. 1, I will periodically post some information to direct our investors to the philosophical foundation of my investment choices and beliefs.
I am an unashamed fan of Warren Buffett as an investor, as I am of a great many other ‘super-investors’.I have reviewed extensively Buffett’s career and writings and would encourage anyone with a genuine interest in wealth creation to do the same.
Welcome to the Eternal Growth Partners Blog.
The Blog is created as a tool to communicate information with unit-holders of EGP Fund No. 1. This will be the default communication tool, the only materials that will be mailed out to unit-holders are those we are legally required to. The purpose of this is to minimise costs in order to maximise returns.