Investing, thy name is volatility.
No, Shakespeare I'm not (though a rose by any other name, etc etc).
And yet, here we are. The investing gods have spun the big chocolate wheel in the sky, and Coronavirus is this week's obsession for the pessimistic and the easily spooked.
A few weeks ago it was geopolitical tensions between the US and Iran.
Before that… I can't quite remember, so fast do these things loom large, then disappear without a trace. Maybe it was the potential for President Trump to be impeached, or consumer confidence. It could have been house prices. At one point, I'm pretty sure it was just the old 'How long can the good times last?' standby.
I've gotta tell you, I could make a lot more money on the doom and gloom circuit by selling fear.
The problem? It's financial snake oil.
The money isn't worth my soul.
(By the way, if the market is trading near an all time high… I guess all of that past doom and gloom was wrong. There's a lesson there.)
Oh, don't get me wrong. Eventually one of these potential risks will come to pass. The problem for the doom-and-gloomers — and the great news for the rest of us — is that it was always thus.
And while those risks might temporarily take 10%, 20% or 30% off the value of the market, it has always — always — surpassed those old highs to set new ones.
Or you could stuff your money under the mattress.
(I'm kidding. Don't do that. Invest!)
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Hi Motley,
Little bit of feedback which I'm sure is not new to you guys. I've been a subscriber now for a little under a month and must say I'm not really impressed.
After making 20k worth of investments over 5 different stocks – all recommended by Motley – I'm down 20% and heading towards 25%.
I can deal with the above as I know it's the long run that counts. However, after waiting expectantly and patiently for 3 weeks for the first ASX recommendation, then only to be told Webjet which was already on the buy list (and has only underperformed of late) I was totally disappointed.
I understand no one has a crystal ball but I just can't see how so many bad calls can be made from a paid service to those who claim to be professionals.
I'm well prepared to now receive your standard, cut and paste response to emails like mine which I'm sure you receive on a daily basis. I just wanted to give you my own personal feedback either way.
I was giving it a small tester before investing a larger amount and to be honest I'm very glad I did the test. I'll not be renewing any membership and be looking elsewhere for my companies investments.
G'day,
Thanks for the feedback. No, I'm not going to give you a cut and paste reply, but I also expect you'll know what I'm about to say, at least in general.
First, 5 stocks isn't enough. Second, a few months isn't enough. Not just for us, but for any other service you might subscribe to. If Share Advisor isn't for you, that's cool. I respect that. But I do want you to leave with a clear expectation of what I think you need to be ready for.
If you'd bought 5 other stocks? 5 that had — over the short term — gone up? Say, around this time last year, when something like 7 out of the prior 10 stocks were in the green. We weren't geniuses then, and we're not idiots (my word, not yours) now. You might have felt happier, but that would be a trick of randomness on behalf of the stocks that grew.
Almost 5 years ago, I wrote an article for our members. Titled 'Here's How You Beat The Market', here's how the first two paragraphs went:
"Let me tell you a story about three Motley Fool Share Advisor companies. Here's a hint. Their total returns are currently a 215% gain, a 49% gain and a 28% gain. Unsurprisingly, all three are soundly beating the market.
"Let me tell you something you mightn't know — after the first 12 months on the Motley Fool Share Advisor scorecard, those same companies had returned 2.9%, -11% and 7%, respectively — for an average gain of -0.3%."
What I didn't know then is that those returns are now 233% (we sold that one), 426% and 325%, even more clearly showing the value of compound returns for quality businesses.
Again, whether you stay — or go elsewhere — I want you to be armed with some facts about volatility and market performance.
Next, I want to share another Webjet Limited (ASX: WEB) story (full disclosure, I own shares. Unfortunately, I didn't buy at the same time as the story I'm about to tell!) . Many years ago, Joe Magyer and I ran Motley Fool Hidden Gems. At that point, Webjet was a much, much smaller company.
We recommended it at a dividend-adjusted price of $3.27 in August 2013.
Three months later, the shares were $2.39 (again, dividend-adjusted). We re-recommended the company.
Yes, after it had fallen 27%.
Was it guaranteed to go up? No. Was it likely? We thought so. The rest is, thankfully, history.
(For the record, even after the Coronavirus scare, at the time of writing the shares are trading at $11.99 each.)
Lastly to your statement "…I just can't see how so many bad calls can be made from a paid service to those who claim to be professionals."
You're entitled to that view, of course. But I would caution any of our members to think about what that means. To say 'the last 9+ years of market-beating performance is invalid because the 5 recent stocks I bought are currently down' may well be the work of (understandable, but dangerous) psychological biases that preference both 'recency' and 'stocks I own' over the long term and representative samples, respectively.
For the record, our average gain, per recommendation, is 47.3% (including the losers), 9 percentage points, per pick, ahead of the market. (Both metrics include dividends).
As I said, I respect your decision not to continue with us. But I wanted to take the time to give you a thoughtful reply, and to hopefully arm you with some information as you ponder your next move.
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Hey Scott and Doc,
Respect!
Just listened to your Sunday 2 Feb mailbag extra podcast … gee you guys work hard! 😉
Thanks for going through all my questions and providing thoughtful and useful info for me. Much appreciated.
I feel clearer about what I need to do and how I can go about planning that.
You've also set me some things to consider re bonds/cash in light of our investment goals.
I can't talk to my friends and family to thrash this stuff out, so it's great to hear the thoughts from you fellas who've done this for a long time.
I'm happily surprised that you went through the questions in full and didn't squib or spin the answers, even the tricky capitalism ones (Doc almost convinced me to buy Apple … I'm not into Apple).
[Doc would want me to disclose that he owns Apple (NASDAQ: AAPL) shares.]
In an age of spin and dissembling it's so refreshing to have people actually answer questions in thoughtful and truthful ways and not just in popular ways.
You are making a real difference.
I'm glad both of you decided to go Foolish.
G'day,
Thank you. I'm not sure you could have given us a higher compliment.
[For the record, "Doc" is my mate and colleague Anirban Mahanti, who is our Director of Research. He's also a computer science PhD, hence the nickname.]
I do want to remind you — as you likely know — that nothing we said was personal advice, but rather just our general thoughts. We're glad they were useful for you.
Isn't it disappointing that words like 'thoughtful' and 'truthful' are unusual these days, especially in financial services?
We're straight shooters from way back. I'm glad that comes through.
(Just this week, one US-based investor asked if Share Advisor could help him get international diversification. The easy answer was 'yes'. The more honest, complete answer was:
"Usual caveat: I can't give personal advice.
"Australia is 2% of Global markets (~5% ex-US), so it's not exactly globally representative.
"Depends what you're after. We'll do our best for you, of course, but if you want more diversified international exposure, an ETF, maybe?
We'll keep on being honest and straightforward, to the best of our ability. Thanks for listening!
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And thanks to you, for reading.
Fool on!
