Performance Update for Colm Fagan's ARF

I think that I would find stuff like this pretty stressful...
Colm Fagan said:
The [Novo Nordisk] price started to fall. Down almost 40% by end 2024, down nearly another 50%, to Kr.325, by end 2025. Then up again, to over Kr.400 by end January 2026, only to fall 25% between then and Friday last, 20 February, before falling another 16% yesterday (Monday 23 February).
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ClubMan said:
Ouch! :eek:

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I guess that there's a potential equity risk premium opportunity cost in choosing a diversified passive index tracker over direct equity holdings, but I think I'm more comfortable with the former approach myself. Others might consider even my choice too gung ho (no real cash/bonds holdings or lifestyling) but I have other assets/means that allow me to ride out volatility. I guess it just points to the fact that what's best for an individual really depends on their overall circumstances and appetite for risk/volatility...
 
I agree with Colm that i would find it easier to live with volatility in shares that I reasonably well researched/ understood (in terms of risk and cash flow) rather than in a passive index fund. A passive fund feels like gambling to me at current market valuations (just because it is a black box that I am trusting someone to value) but who am I to say the market is wrong. Everyone has done v well from “buying the market” for years. I would probably need more diversification in single shares though!
 
Sybilla said:
I agree with Colm that i would find it easier to live with volatility in shares that I reasonably well researched/ understood (in terms of risk and cash flow) rather than in a passive index fund. A passive fund feels like gambling to me at current market valuations (just because it is a black box that I am trusting someone to value) but who am I to say the market is wrong.
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A few shares versus hundreds or possibly 1,500 or 2,000 holdings?

By definition, the passive index fund is more diversified.

Holding the passive index fund can not be compared to gambling.

If valuations of the 1,500 holdings in the fund are elevated, then surely the valuations of the few shares in your basket are also elevated?
 
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Sybilla said:
I agree with Colm that i would find it easier to live with volatility in shares that I reasonably well researched/ understood (in terms of risk and cash flow) rather than in a passive index fund.
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This is predicated on the ability to consistently identify "winning" stocks. An ability today nobody has because nobody can predict the future.
 
Colm Fagan said:
Charlie Munger held just five stocks. He didn’t do badly.
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Berkshire Hathaway holds c. 40 stocks and outright owns c. 60 businesses. And Warren Buffet regularly advises everyday investors to just buy a low cost index (e.g. S&P 500) tracker. He hasn't done too badly either at a net worth of c. $140Bn.
 
@ClubMan Point taken, but what about his other four? Also, while I understand that BH was one of Nick Sleep's three stocks, his other two were real businesses.
 
Colm Fagan said:
but what about his other four?
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By holding BH one is already benefiting from significant diversification since BH is a proxy for c. 60 wholly owned businesses, shares in c. 40 publicly quoted companies, and a significant chunk of cash and equivalents.

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ClubMan said:
This is predicated on the ability to consistently identify "winning" stocks. An ability today nobody has because nobody can predict the future.
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No, I am NOT claiming that I can identify winning stocks. In fact, I readily admit that my stock-picking skills are probably about average.
What I AM saying is that owning shares in individual companies rather than in pooled funds gives me a level of visibility that I wouldn't have with a pooled fund. That visibility means that I can stay 100% invested in equities rather than invest 30% or whatever in bonds, with a consequent reduction in expected return.
Over the last 15 and a third years that has paid off handsomely - average money-weighted return of more than 10.5% a year for my entire fund (net of all costs). I also think that it has provided some resilience in the face of a possible downturn, but that belief has yet to be tested in the heat of battle.
 
jpmackey said:
It’s like winning on roulette and then believing you have devised a winning strategy!
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That’s a ridiculous comment.
I’m not claiming to have outperformed the market.
I have done better than the average fund in drawdown because I’ve avoided bonds like the plague and I’ve kept costs low.
I’ve replaced bonds with high dividend paying shares. That decision has paid off but it could come unstuck in a bear market. I think I have built enough resilience into the portfolio to deal with that eventuality. I could be wrong.
In any event, it matters less at this stage.
 
@ Clubman - S&P 500 Total Return Index would be a fairer comparison? The price index excludes dividends which contribute a lot to long term performance...
 
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