GROWING YOUR WEALTH BY INVESTING

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GROWING YOUR WEALTH BY INVESTING

• Peter Temple

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Who am I?

• 18 years in the professional investing scene
• 13 years as a financial writer
• Regular correspondent for Interactive Inv.
• Articles in FT, Investors Chronicle, Shares
• Invested on my own account since 1985

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What am I talking about?

• Should you invest?
• What should you invest in?
• How often should you trade?
• Should you be an online investor?
• What do I invest in?

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Should you invest (1)

• We are all invested somehow
• Pension contributions up to date?
• Enough cash for contingencies?
• Time for research?
• The right temperament?

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Should you invest (2)

• Starting point is assessing your assets
• Cash, pensions, equity in your house
• Get a feel for what your assets are
• Will stocks just offer more of the same?
• Know yourself..
• .. And devise a plan

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What should you invest in (1)

• Your investment plan should flow from your age
  and circumstances
• Your plan flows from your attitude to risk
• Select the type of trading you do and what you
  deal in accordingly
• Dealing is a chore what matters is what you buy
  and sell and when

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What you should invest in (2)

• Life cycle investing
• Young professional. LT inv. in stocks
• Married.. Plan for later expenses
• Empty nest.. Retirement planning
• Retired.time for detail, need extra income
• . But spending capital.

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What should you invest in (3)

• Stocks.. find your method and stick to it
• My best successes - small undiscovered gems.
• Devise your own ideas get an information edge
• Analyse fundamentals
• Use charts to time purchases

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What should you invest in (4)

• The information edge. Not inside but
• .Something you know about
• ..Talk to management
• Crunch the numbers
• .Research the topic
• TAKING A GUESS INCREASES RISK

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What you should invest in (5)

• Several key ratios
• Price to sales (lt 1)
• EV/EBIT (lt 10)
• After tax ROE (gt15)
• If you must invest in lossmakers, look at
• Burn rate (24 months plus)

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How to trade (1)

• With your temperament
• Trading too actively enriches your broker
• Find your pain barrier and cut losses
• CUT LOSSES
• Dont sell too early
• if it doesnt go up dont buy it

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How to trade (2)

• Volatility risk
• Risk is not fun
• Maximum return for minimum risk
• Dont ignore bonds
• Dont ignore options

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How to trade (3)

• Bonds or bond funds useful to.
• .. Jack up income or park cash
• .. When rates likely to fall or fall further
• ... Economy slowing
• Profits under pressure
• ie NOW

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How to trade (4)

• Use options EITHER to..
• Generate income (writing a covered call)
• Insurance (buy an index put).
• Or if you must..
• As a directional speculation
• Beware of time decay
• If buying.. In-the-money, long expiry..

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How to trade (5)

• DAY TRADE ONLY
• . If you do it full time
• ..Already experienced
• ...Resilient temperament
• ...Plenty of capital
• ..Low dealing costs

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Online investing?

• Cuts cost of information
• Easier access to companies
• Monitor your holdings
• Contact other investors
• Easier dealing

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Information

• Easier to search for press comment on cos. (eg
  ft.com, newsunlimited.co.uk)
• Access to RNS news on cos. (eg iii.co.uk)
• Some sites charge (WSJ, Economist)
• Easy ordering of A/Rs online (willink.com)
• No need for a big paper bill!

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Access to Companies

• Corporate sites are getting better
• Look for.. Presentation slides
• .IR email addresses
• Site says a lot about a company

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Monitoring your portfolio

• Easy access to information in one place
• Links to BB comments and news
• Background financial, charts
• Several to choose from but iii pretty versatile.

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Easier dealing

• but go for reliability
• .not necessarily the biggest
• ..dont pay for what you dont need
• Use online portfolio monitor to track invs.
• ..esp. if more than one account.

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Contact with other investors

• Investing can be lonely
• General vs stock-specific BBs
• Look for efficient policing
• Treat comments sceptically
• Do your own research

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Some key sites

• www.newsnow.co.uk www.ft.com
• www.linksitecorporate.com
• www.iii.co.uk/portfolio
• www.uk.gomez.com
• www.linksitemoney.com

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What do I invest in? (1)

• Averaged around 14 compound return
• Very poor some years
• Mixture of assets (property, bonds, options)
• In stocks, mainly smaller companies.
• Spent some of the returns!

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What do I invest in? (2)

• Best stocks
• Control Securities (classic property shell)
• BAT (at time of Hoylake bid)
• HACAS

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What do I invest in? (3)

• Worst stocks
• A FTSE put at 4200
• Evestment
• BP

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What do I invest in? (4)

• Ones that got away
• Northern Leisure sold at 32, went to 400
• Glaxo sold at 8, went to 20

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What do I invest in? (5)

• Current holdings
• Inter Link Foods (own label cakes)
• HACAS (social housing consultant)
• Powergen (originally bought for yield)
• Environmental Polymers (green play)
• E-Xentric (cash shell)
• Treasury 5 2004 (interest rate play)

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Summary

• Look at ALL your assets as a whole
• Focus on stock selection, not trading
• Use the web to cut your info costs.
• .. and for access to companies
• Develop your own ideas and style.
• CUT LOSSES

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Books

• Traded Options A Private Investors Guide (FT
  Prentice Hall)
• The New Online Investor (Wiley)
• Courtesans of Capitalism (Wiley)
• First Steps in Shares (FT Prentice Hall out
  next month).

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Thank you

• Email any comments to
• petertemple_at_hotmail.com