Potential Equity Investor - Paralysis by Analysis!

W

WarrenBuffet

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Folks,

I am suffering from paralysis by analysis! I have money, want to invest in equities, am willing to take on risk. Have begun this process a number of times in the last 2 years but have given up in exasperation!

To give you an overview of my financial position: I have property, healthy amount of cash savings. I want to diversify and move into equities. Index tracker funds attract me as they are understandable and provide diversification. Plus, on average they give a better return than cash savings.

I understand:

  • The value of my investment may go down as well as up.
  • Past Performance is not a reliable guide to future performance.
  • An investment in a index tracker fund may be affected by changes in currency exchange rates.
However, after reading various posts on AAM, I am starting to wonder will the increased risk I am taking on result in any financial reward!! See this post!

In short, can anyone point me to a cheap tracker fund in Ireland?

Or, even more fundamentally, can anyone give me some guidance on how to get started in investing in equities?!

Thanks,
A confused (potential) equity investor
 
Hi Warren

Just buy a portfolio of around 10 shares directly. Unless you are Warren Buffett, you won't be able to beat the market, so just pick 10 blue chip shares diversified across sectors. You might consider diversifying currencies as well by buying some sterling and US$ stocks. I have bought German shares recently as a protection against Ireland being kicked out of the euro.

I don't think that you can use the gains or losses on tracker funds against other gains or losses for CGT purposes.

So if you sell one of your properties at a gain, and you have a loss on one of your equities, you can sell the equity and use the losses. If you have losses in a fund, you can't set them against gains elsewhere.

Brendan
 
"I am suffering from paralysis by analysis!"

Me To

Leaning towards value investment

But concerned about Taxation in long run
 
so just pick 10 blue chip shares diversified across sectors
Click to expand...

Huh!

You must be diversified across asset classes as well as diversified across sectors.

Asser Classes: Asset allocation, the types of bonds you hold, their maturities and credit quality .....................

[broken link removed]
 
Agreed

In a landmark paper Bimson Hood and Beebower illustrated the point that over 90% of the return of a diversified portfolio could be explained by asset allocation.

Asset classes are things like stocks, bonds property and cash.

Within bonds you have duration and credit risks and within equities you have market risk and also size and value/ growth risk factors. Sectors and countries do not explain variations in stock returns see Fama French 1992.

If you have at least 50k to invest we can build you a portfolio of low cost trackers diversified across these 5 risk factors which taken together explain around 96% of the returns in a portfolio.
 
Folks,

Thanks for the replies. Have to say though, I would love if someone could put together a beginners guide to investing in stocks, tailored for Irish people.

Any further insight welcome.

WB
 
Hi Warren,

A question for you or maybe somebody reading this post - I am not recommending a particular company here by the way.

Given that you believe in the investing style of Warren Buffet why not buy shares in Berkshire Hathaway and then put your feet up? Indeed as a value investor why don't we all just do that?

I seems unlikely you will better the Great Man.

Regards

Extra
 
The problem here is that everyone knows Buffett is a good investor.

This is reflected in the price you pay for Berkshire shares.

There are no free lunches in investing.
 
Marc said:
The problem here is that everyone knows Buffett is a good investor.

This is reflected in the price you pay for Berkshire shares.

There are no free lunches in investing.
Click to expand...

People may know that Buffett is an excellent investor....but, that fact is most certainly not always reflected in the share price.

Are you are a believer/ follower of efficient market theory?
 
Are you suggesting that sometimes people "forget" Buffett is a great investor and so the price of Berkshire Hathaway just goes down so that the price is no longer fair?
 
Marc said:
Are you suggesting that sometimes people "forget" Buffett is a great investor and so the price of Berkshire Hathaway just goes down so that the price is no longer fair?
Click to expand...

Marc, I thought that the premise of the EMH was that the like's of Buffet were merely lucky investor and not great investors.

Are we now saying that certain investors who partake in certain investment styles (value investing, margin of safety approach) can actually beat the market?!
 
Ringledman,

Thank you for the question.

If you read most of my posts you will see that I have consistently stated that ANY investor pursuing a value strategy has a higher expected return than the market portfolio and therefore SHOULD beat the market.
I am also saying that this is entirely consistent with the Efficient Markets Hypothesis and the reason for this is that in my world value is a risk factor rather than a pricing mistake.
Where we will differ is that you believe that "value" relates to "unloved" stocks whereas I argue that it is compensation for risk.
 
Marc said:
Are you suggesting that sometimes people "forget" Buffett is a great investor and so the price of Berkshire Hathaway just goes down so that the price is no longer fair?
Click to expand...

No. Im a value investor.
 
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