# Rory Gillen's free book: "A guide to sound investing"



## Brendan Burgess (21 Nov 2016)

Rory Gillen has a book which people can get a free copy of by email.

http://www.gillenmarkets.com/

I haven't read it yet, but he usually offers sound advice on investment and risk: 






Anyone with the time to write a review? 

Brendan


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## Rory T Gillen (22 Nov 2016)

Brendan,

I might point out that the booklet is just 64 pages, and is available free up to the end of November.

Thanks

Rory


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## mtk (22 Nov 2016)

got it


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## Brandy (23 Nov 2016)

I just liked the way he said "when she invests her money" for lots of examples. I thought Rory was speaking to me directly!


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## sunnydonkey (24 Nov 2016)

I stopped when it said 'register your details to receive our free book'.


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## Gordon Gekko (24 Nov 2016)

sunnydonkey said:


> I stopped when it said 'register your details to receive our free book'.



Why?

Someone releases decent intellectual property for free...joining some form of mailing list is a more than fair price to pay.


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## Brendan Burgess (24 Nov 2016)

sunnydonkey said:


> I stopped when it said 'register your details to receive our free book'.



In most cases, that is enough to stop me as well.  I don't usually progress any further. But I know that Rory usually writes good stuff, so I had no problem with that. 

Brendan


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## monagt (24 Nov 2016)

sunnydonkey said:


> I stopped when it said 'register your details to receive our free book'.



I stopped as well. usually an email address is enough.


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## PMU (24 Nov 2016)

The book was given away free in hard copy with the Sunday Times a few weeks ago.  If you are not willing to supply Mr Gillen with an e-mail address you can, at present, download it for free in Kindle format from Amazon at https://www.amazon.co.uk/Start-Thy-...F8&qid=1479984911&sr=8-2&keywords=rory+gillen


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## monagt (24 Nov 2016)

PMU said:


> The book was given away free in hard copy with the Sunday Times a few weeks ago.  If you are not willing to supply Mr Gillen with an e-mail address you can, at present, download it for free in Kindle format from Amazon at https://www.amazon.co.uk/Start-Thy-...F8&qid=1479984911&sr=8-2&keywords=rory+gillen



Email no problem................it was the extra details..........


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## Gordon Gekko (24 Nov 2016)

Why not stick down "26 Main Street, Ballygobackwards"?


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## sunnydonkey (25 Nov 2016)

Well I got the booklet from Kindle and had a read.

Its quite a basic background discussion of some things that anybody investing should be aware of. It does try to stimulate investing and points out some pitfalls and risks. As a very short summary it points out the benefits of investing and the value of compounding over the years, the advantages of diversification and the need to stay away from spread betting and day trading. It does this in a nice conversational style with quite a few examples. It also describes some of the various types of investments and explains that markets go up and down and the hidden but substantial cost of guaranteed returns.

I would be very worried if somebody was investing anything other than exploratory sums without being aware of these matters.

However, the book is certainly not a 'how to invest' type book. 

Apart from avoiding the general pitfalls mentioned above, it gives few pointers towards selecting investments. For example, there is nothing about how to compare shares, no explaination of terms such as p/e, dividend yield, cover etc, reading the financial tables, fee structures on funds, avoiding churning etc etc.  I would consider these items as essential knowledge for anybody investing for themselves and also for anybody who wishes to discuss investments with an advisor.

Clearly the booklet is designed to drum up business, and i'm not knocking it for that. But perhaps this is where the above limitations spring from.


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## noproblem (25 Nov 2016)

Could be compared to buying a book titled, "Learn to read", without being able to read, so a bit of a conundrum there really. Mr Gillen is, I believe, quite successful in his line of business and imagine this offering is a way of (as the last writer said) drumming up a bit of business. Guess there's no harm in that but there's an awful lot of the same type of offering all over the internet. 
I found it contained plenty of basic information that most people would know so could be called informative just for that, but short in detail. What makes Coca Cola a buy and lets say, Providence a very chancy investment is never explained, etc, etc. Ok to read but nothing else and barely holds the attention to be honest.


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## Gordon Gekko (25 Nov 2016)

I profoundly disagree with the idea that this is basic stuff. We live in a country where gombeen investments have devastated people's wealth. It is vital that investors are educated around the basics. Otherwise the gombeenery will continue.


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## noproblem (25 Nov 2016)

Gordon Gekko said:


> I profoundly disagree with the idea that this is basic stuff. We live in a country where gombeen investments have devastated people's wealth. It is vital that investors are educated around the basics. Otherwise the gombeenery will continue.



I agree with you on the gombeenery element of investment, but do remember a massive amount of the money lost through that very same gombeenery was done by professionals in the economic field working in our very educated banking industry.


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## mathepac (26 Nov 2016)

I signed up and got the pamphlet. I have no issue with the writer or Davy Stockbrokers having my name and address.

I didn't have to move past the introduction before I was given pause for thought by the startling announcement that "three good quality Real Estate Investment Trusts (REITs) have listed on the Irish Stock Exchange". REITs are the latest derivative to land on stock exchanges.

"What's a derivative?" you may ask. A derivative is a bond (some would say a junk-bond) that in and of itself has no value because its value as such depends on the value of the underlyings.  Underlyings are, generally speaking and in order to keep things simple, currencies, precious metals, stocks, shares or other assets that may rise or fall in value on their respective markets. A derivative spreads risk, theoretically, by varying the assets a bond-holder invests in. BUT buying a derivative bond does not give you access to or ownership of the underlying assets. If you buy shares in a company, you own that amount of the company's assets on the day you buy them (let's not get into A or B shares, special shares, preferential shares, etc.)  You share in the profits or losses accumulated by the bond over the time you own the bond. So if the currencies, and precious metals making up your derivative or bond earn money, and your oil shares, for example, take an equivalent or deeper dive in value and declare no dividend, you earn nothing, but you must still pay your brokerage fees.

As with other derivatives, buying into REITs gives you no access to or ownership in the assets, i.e. buildings, building sites, rentals or leases, etc. in the property portfolio managed by the Trust and your share of any profits (or losses) depends on how well the company does after all costs are deducted in line with standard accounting practices. As with other derivatives, naturally you pay the piper whether he plays a tune or not.

So what happens to the money you pay out for the bonds / shares in the Trust and brokerage fees? They have probably been invested in the real underlying assests and may earn a decent return, particularly at this time and in this market.

So there you have my 2p worth based on reading as far as the derivative part of the pamphlet.


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## Rory T Gillen (26 Nov 2016)

In response to the above observation, you may be misunderstanding what REITs are; they are funds that exclusively focus on owning a portfolio of properties - as opposed to shares - and they are listed on a stock market (they are listed funds)......that's explained later in the booklet, but not in great detail as the booklet is aimed at being an introductory overview to what constitutes sound investing. In Ireland, our knowledge of investing is well behind that of the US and UK. In both those regions, there's a long history of wealth so it's not unsurprising that the average person in the US and UK is more clued in regarding investment matters than perhaps we are in Ireland.

REITs - Real Estate Investment Trusts - have been around in the US since the 1960s and the UK since the 1990s (I think). In my view, REITs are superior to the life company open-ended property fund structures, which are unsuitable for holding/owning illiquid assets such as property. REITs, which are closed-ended funds are more suitable for holding illiquid assets, such as property. This is outlined in more detail in an article I have written for this week's Sunday Times.

There'll be a Featured Article on the same issue on our website next Monday. For anyone on AAM who has downloaded the 64-page booklet, you are now on the GillenMarkets database and will automatically be notified when we publish new Featured Articles. They can be accessed by members and non-members alike. It's all part of our marketing for (potential) new subscribers to our weekly newsletter, the only one in Ireland. Like any database, you can *unsubscribe* at any stage.

I'll send Brendan the link to the upcoming Featured Article and he can post it if he wishes. If you have an open mind, there's always something new to learn about investing. For myself, it's a bit of a hobby, too. I'll read an investment book just for one good line, one good observation. Apart from improving one's knowledge, it can also improve how to communicate key messages better. There's many times when I have come away from reading a new investment book with no new knowledge, but an example of how to communicate a complex issue simply. The Coca-Cola chart on page 36 in the booklet is a case in point. In that case, the chart does paint a 1,000 words!

To understand what risk is took me years; not sure why, maybe there's so much noise in markets that it's more difficult than one envisages at the outset to see the wood from the trees, or maybe I could have benefitted from a mentor earlier in life. Thankfully there's plenty of good investors who have written their knowledge down and for a few pounds or dollars one can benefit from another's life experiences. Thank God for that, as I certainly have benefited from others' writings. Action, of course, is also a learning tool and there's little substitute for practical investing. Some on this website have previously said that there's nothing to learn in books. I beg to differ, but each to their own.

The 64-page ebooklet should be particularly useful in the providing an understanding of risk and how an investment plan can mitigate those risks. My aim was to articulate that in a way readers can understand.

The 64-page booklet is available for download for Free only until next Friday. Someone on AAM observed that it's available on Amazon for Free. That was an error, and it'll be taken down from Amazon shortly. It will be on Amazon again at some stage in the future, but at a fair price.


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## mathepac (26 Nov 2016)

Sorry I forgot to say the pamphlet makes the point about buying into real assets by investing in stock markets and then springs REITs on you in Paragraph 2, Page 3 in the Introduction. A Page 3 proposition?


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## mathepac (26 Nov 2016)

Thanks for your response. Would you be happy with my (brief) explanation of derivatives? 

If I invest in a REIT, and a REIT is not a derivative, what do I get?


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## Username2012 (26 Nov 2016)

mathepac said:


> Thanks for your response. Would you be happy with my (brief) explanation of derivatives?
> 
> If I invest in a REIT, and a REIT is not a derivative, what do I get?



Shares in a company that specialises in renting out property and gets a corporate tax exemption if it compiles with certain rules to distribute most of its earnings by way of dividends


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## PMU (26 Nov 2016)

Mr Gillen's pamphlet is aimed at the non-investor and in clear and simple language says (a) why you should invest; (b) how much of your income you should invest; (c) why and how you should diversify (i.e. over different asset classes and over time); (d) the risks investors face and how these can be mitigated; and (e) the different investment vehicles (e.g. funds, investment trusts, REITS, etc.) that can be used to implement an investment strategy.

I'm certain more experienced investors will quibble with certain sections, but as an introductory text for a non-investor I think it has a lot to offer.  Frequently there are posts on AAM where non-investors pose questions on the line of 'I have X amount to invest but know nothing about investment. What should I do?, etc.'  I think such posters could profitably be pointed in the direction of this text.

[Please note I have no connection with Mr Gillen; I have never met him and do not subscribe to his investment service.]


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## frankde (27 Nov 2016)

"I could have benefitted from a mentor earlier in life. Thankfully there's plenty of good investors who have written their knowledge down and for a few pounds or dollars one can benefit from another's life experiences. Thank God for that, as I certainly have benefited from others' writings. Action, of course, is also a learning tool and there's little substitute for practical investing. Some on this website have previously said that there's nothing to learn in books. I beg to differ, but each to their own."

Great points, I have learned the hard way myself from bad investments. I wish I read more books such as this when I was younger.
I live abroad and have seen first hand how "Financial Advisors" exploit peoples lack of knowledge in regards to investing, and sell them products that have very high fees or in somes cases lose all the money that was invsted.

Here is a link to an article that describes how a investment firm in Japan defrauded people of their life savings.
In the end no one at this firm was held accountable. The fund in quesiton was hosted by Friends Provident

[broken link removed]


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## jpd (27 Nov 2016)

Apart from the problem of property being valued at buying or selling price, all property funds and REITs have the general problem of valuation of the properties in the portfolio. Someone has to estimate how much they are worth - either by capitalising the future estimated revenues or evaluating the property on its own merit. Until the property is actually sold, no one, repeat no one, knows it's exact value.

 As the turnover in commercial property is low compared to the turnover in shares, it is and always will be a bit of a guessing game. Trust and confidence in the managers is key ...


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## Rory T Gillen (27 Nov 2016)

mathepac said:


> Thanks for your response. Would you be happy with my (brief) explanation of derivatives?
> 
> If I invest in a REIT, and a REIT is not a derivative, what do I get?


Nothing to do with derivatives. With a REIT, you buy shares in a fund that is listed on a stock market and that fund owns property assets. A decent way to get diversified exposure to property assets if that's what you want.


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## Wollie (28 Nov 2016)

I agree with Rory on the derivatives point. It's a red herring.  More importantly,  I would appreciate if Rory could respond to my comment on the misleading interpretation that could be taken from the last sentence in his article in yesterday's Sunday Times and if he agrees with my assertion that REIT's introduce a further element of volatility in terms of the extent to which the share price can fall below (or above) the value of the underlying assets.  To put numbers on it, I hold shares in a REIT that is currently trading at a discount of more than 25% to NAV.  The same fate could befall shareholders in Green or Hibernia.


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## mathepac (28 Nov 2016)

It's not a red herring. Every time you mention REITs you mention the value of the underlyings or underlying assets. This strengthens my case that REIT shares/bonds have no value in and of themselves, only the underlyings have. The other telltale sign that REITs are derivatives by another name is that a shareholder in a REIT only earns or has ownership of a portion of the INCOME produced by the underlyings and not the assets themselves. IMO it's less like a red herring and more like a red flag.


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## Rory T Gillen (28 Nov 2016)

Wollie said:


> I agree with Rory on the derivatives point. It's a red herring.  More importantly,  I would appreciate if Rory could respond to my comment on the *misleading interpretation* that could be taken from the last sentence in his article in yesterday's Sunday Times and if he agrees with my assertion that REIT's introduce a further element of volatility in terms of the extent to which the share price can fall below (or above) the value of the underlying assets.  To put numbers on it, I hold shares in a REIT that is currently trading at a discount of more than 25% to NAV.  The same fate could befall shareholders in Green or Hibernia.



I deal with several queries every week on my own website for subscribers, who know their queries are being answered by someone with experience. Now and then I participate on AAM, but I've been put off engaging further by the plain rudeness of many participants.

I see no misleading interpretation in the Sunday Times article as you so eloquently phrase it! The REITs have fallen to discounts on the basis that investors are concerned that NAVs - actual property prices - will decline some time ahead. That may occur or that may not occur. If NAVs do not decline, the REITs share prices will recover. Hence, the discounts are a signal that the risks of a downturn have risen. Such share price weakness/volatility is not unique to REITs; rather it happens to every company or fund listed on stock markets if investors believe the outlook has deteriorated for that particular company of fund. The stock market is a discounting mechanism, but it's not always right.

Physical property prices are so illiquid that they take time to decline, but if the downturn is real, they decline. Whereas it took six months for the share prices of REITs to bottom in the downturn of 2008/09, it took 3/4 years for physical property prices in Ireland to bottom. It often helps to ask: What would you prefer...a volatile share price with liquidity or less volatility with no liquidity! There's pluses and minuses to both...and I covered that issue in detail in Chapter 7 of my original book, 3 Steps to Investment Success. I should say that that book was not aimed at the Irish market, but UK market. Hence the publication now of an easier to read booklet - 'A Guide to Sound Investing'.


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## sunnydonkey (28 Nov 2016)

Why does the Irish market need an "easier to read" booklet than the UK market?


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## Rory T Gillen (28 Nov 2016)

Wollie said:


> Rory
> 
> My comment was not intended to offend.  I am sorry if you felt offended by it.  I just wanted to correct a possible misunderstanding for readers arising from the final sentence in your column in yesterday’s  “*There's an opportunity to reinvest in the shares of Green REIT and Hibernia REIT knowing that they are already priced for a substantial 12 - 16% decline in Irish commercial property values.”  *
> 
> That statement is simply incorrect.  It’s not true.  Investment trusts generally trade at a discount to the net asset value irrespective of the prospects for the assets underlying the investment trust.  Do you disagree with this statement?


We deal with investment trust discounts on our 1-day seminar in detail. As you point out REITs are, in essence, investment trusts, but their special nature means that they are as likely to trade at premiums to NAV as discounts to NAV. Your observation about investment trusts and discounts in general is mostly correct, but I think you've over-read into my last sentence in the article.

While the general observation that investment trusts tend to trade on discounts in aggregate (which is what I think you are saying) is correct, it would be overdoing it to apply such a generalisation to REITs, and certainly it would be overdoing it to suggest that all investment trusts trade at discounts 'irrespective of the prospects for the assets underlying the trust'. We know of many investment trusts trading on the London and New York stock exchanges trading at premiums to NAV at present. For example, IRES REIT, which is an Irish REIT trading on ISEQ, currently trades at a small premium to NAV. In its case, investors are simply anticipating an uplift to NAV, which seems sensible given the buoyancy in Dublin residential property prices and rents.

It might also help to ask the question: If I was to buy Irish commercial property today as an investment for the medium to long-term - would I buy a life company fund (which has not yet recorded any setback in value) or a REIT (which has already discounted a downturn)? Personally, I'd buy Green REIT and/or Hibernia REIT regardless of whether the discounts they currently trade on apply consistently in the future. Others might see it differently and act differently, and that makes a market, I guess.


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## jpd (29 Nov 2016)

If REIT are ALWAYS discounted to the NAV is this not an indication that the NAV are too high ie permantently over-valued? In that case, why wouldn't someone buy all the shares and dissolve the REIT and realise the profit? after all, is the discount is permanently bin the range 60-85% it would be like taking candy from a baby.

I suspect there is something more profound going on here


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## Username2012 (29 Nov 2016)

mathepac said:


> It's not a red herring. Every time you mention REITs you mention the value of the underlyings or underlying assets. This strengthens my case that REIT shares/bonds have no value in and of themselves, only the underlyings have. The other telltale sign that REITs are derivatives by another name is that a shareholder in a REIT only earns or has ownership of a portion of the INCOME produced by the underlyings and not the assets themselves. IMO it's less like a red herring and more like a red flag.



That is the same with every share, ever. You own a residual claim on the earnings of the companies assets. Every financial instruments is a derivative by that logic, including cash.


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## mathepac (29 Nov 2016)

No, you don't understand the basics. Regular shares give you ownership of the assets of the company and an entitlement to a share in the earnings of those assets. Depending on the type of REIT, publicly traded or private, and the type of investments the REIT has, mortgage or property, you may or may not have bought a derivative. The chances are high for a derivative.


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## Rory T Gillen (30 Nov 2016)

Wollie said:


> Rory
> 
> I haven’t attended any one-day seminars on REIT’s, but I do have a relevant qualification and, most importantly, I have considerable experience of investing my own money in REIT’s.  (I don’t try to advise others on what they should do with their money, but I do try to help them steer clear of bad advice.)   I’ve been investing in REIT’s now for more than 10 years and I’m well aware of the vagaries of price relative to net asset value.
> 
> ...



This will be my last post on the issue. There's little to quibble about here - your observations are accurate and your experiences are real and interesting. However, the frustration you communicate - by demanding certainty in responses - shows a certain inexperience. The following is not meant as a criticism, but the saying that _'a little knowledge can be a dangerous thing' _may be apt. In this case, I think you are not seeing the woods from the trees.

In my experience, the most important thing about a stock or fund is the likely rate of growth in the future and how it is priced relative to that likely growth. In the case of an investment trust - which is a fund listed on a stock market - if investors feel the future growth is likely to be well above average they are likely to bid up that fund's price to a premium. Sometimes it is still worth paying that premium because the subsequent growth makes up for it. If the growth does not materialise the price may revert to a discount. But that's not really much different to how investors treat individual stocks. Sometimes investors on masse get excited about a certain company's future growth prospects and pay, say, 20 times earnings when in the past the stock normally traded at, say, 10 times earnings. In that case one might argue that the stock is trading at a huge premium to its historical valuation.

The key in both instances is the actual growth, and, in the case of investment trusts, the growth in net asset value. The share price wanders around the net asset value - sometimes at discounts, sometimes at premiums. But if you get the right fund and it delivers decent growth over the medium to long-term, whether it started at a discount or premium is not particularly important. In other words, the discount or premium is not the primary determinant of returns. In that context, I think your own experiences, which are informed and real, suggest you are more comfortable looking for REITs where investors see no excitement or see a lack of growth (in other words, you sound like a value investor). This creates a lack of demand and the shares fall to a discount. In the case of the Irish commercial property market, both Green REIT and Hibernia REIT were priced at premiums to their balance sheet values (NAVs) since they listed in 2013 as investors in general expected strong growth as the Irish commercial property market recovery took hold. Good growth has been delivered, but the future is now quite uncertain. As a probable contrarian investor you may now be more comfortable with a significant discount, or you may want to see wider discounts given the cloudy outlook. Your patience and understanding of value may be rewarded or you may miss the boat if investors change their gloomy forecast.

Personally, I don't have a strong view one way or the other at present, sometimes I do. In July 2013, we thumped the table for subscribers to GillenMarkets that the great recovery in the Irish commercial property market had most likely begun, and it was time to buy into life company Irish property funds (there were no REITs listed then). We got that right, we don't get everything right.

So, in closing, investment trusts where the outlook for growth is opaque or where the track record of the fund manager has been poor mostly trade at discounts. But well-performing funds which carry low risk and where investors think more of the same lies ahead often trade at premiums to net asset value. The mighty £2.5 billion RIT Capital Partners Trust (ticker code: RCP LN), which trades on the London Stock Exchange, is a case in point; it currently trades at a small premium to NAV. Such investment trusts, of course, are the minority which is why it is accurate to say that the average investment trust trades at a discount. But as I think you'll agree, it's not the full picture.

In the current low interest rate climate, investment trusts that focus on delivering an above average income (dividend yield) that is well supported by underlying revenues into the fund are trading at premiums to net asset value. If long-term interest rates rise those premia won't last, but it's what investors are doing at present and one can subscribe to it or avoid such funds. The Holy Grail is to find a trust that trades at a wide discount - 80p in the pound, say, - and where investors are misjudging the outlook. But, again, that's no different than finding a company whose shares are trading on a below average price-to-earnings ratio and where prospects for growth are about to change or are simply underestimated by the market.


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## Rory T Gillen (1 Dec 2016)

PMU said:


> Mr Gillen's pamphlet is aimed at the non-investor and in clear and simple language says (a) why you should invest; (b) how much of your income you should invest; (c) why and how you should diversify (i.e. over different asset classes and over time); (d) the risks investors face and how these can be mitigated; and (e) the different investment vehicles (e.g. funds, investment trusts, REITS, etc.) that can be used to implement an investment strategy.
> 
> I'm certain more experienced investors will quibble with certain sections, but as an introductory text for a non-investor I think it has a lot to offer.  Frequently there are posts on AAM where non-investors pose questions on the line of 'I have X amount to invest but know nothing about investment. What should I do?, etc.'  I think such posters could profitably be pointed in the direction of this text.
> 
> [Please note I have no connection with Mr Gillen; I have never met him and do not subscribe to his investment service.]


The booklet is aimed at existing investors as well as new investors.


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## Rory T Gillen (1 Dec 2016)

Wollie, no problem engaging, very busy at present. Also, I feel enough has been said on that issue as I was even beginning to bore myself. For a free website (AAM), I think I've given you enough engagement on this topic. I have a website where subscribers pay for quality advice/information. That's an option for you. Engaging with others who know as little as oneself was never an option I considered in the past when looking to learn, it's hardly an ideal way to advance one's knowledge. The subscription-based investment newsletter is a huge one in the US, different mentally over there perhaps.


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## Rory T Gillen (9 Dec 2016)

The Free offer has ended, but a PDF copy of the booklet can be bought for €6.99 - just Google the title or call our office - 012871400.


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## Dan Murray (9 Dec 2016)

I got this free awhile ago and read it out of curiosity. From what I can see, Mr. Gillen's investment services and commentaries, seem to divide the jury. My vote, for what it's worth, would be very unfavourable. The fact that it's no longer available for free is neither here nor there.


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## Rory T Gillen (10 Dec 2016)

There's really nothing for the jury to be divided about. GillenMarkets offers a range of investment services from training to a subscription-based newsletter to asset management services. Those who believe they can do the investing themselves are unlikely to avail of any third-party services, and there's nothing wrong with that. Many others don't feel proficient enough to invest in a vacuum and should use professional, third-party services. We compete in that marketplace.

The booklet is simply a bit of marketing on our part. Brendan posted the offer, not myself. Brendan did so as I believe he trusts that I don't sell sizzle and have sound views worth sharing. The booklet was free for a period and should assist many existing private investors and would-be private investors to gain a better understanding of investing. It's 30 years of experience in 56 pages and written in a style that should allow even an inexperienced investor to follow.

Those who read the weekend Financial Times know of Lord John Lee and his style of investing and communicating. I enjoy his monthly articles and I was grateful to him for providing a 'Foreword' in the booklet. I doubt he provided it lightly, as his own reputation is on the line.

Over 200 from this website availed of the Free booklet offer. I hope they enjoy the read and, who knows, someday we might be doing business with some of them.

On the other hand, if there's something in the booklet you disagree with then just say so; that, at least, could add some value to users of this website by encouraging debate, which after all is the foundation of AAM. Otherwise, you're in danger of sounding like a whinger, and God knows there's a few of them lurking on this website. But, in the spirit of empowerment through knowledge-sharing I will not be put off by those who appear to have nothing but negative opinions on everything and little by way of facts to back them up.


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## trajan (18 Dec 2016)

My problem with the Rory Gillen approach is that it tries to oversimplify things that are and always will be multi-dimensional and therefore complex.

You always have to keep in mind that for most people the money invested is not casual punting money but rather their life's hard-earned savings.

A long time ago I read the famous rule of thumb of investing: put a third in high-interest savings accounts in case you need to overdraw cash for medical operations, emergencies, etc; put a third in government bonds as they are state guaranteed and gains tax free; and put the rest in either companies whose industries/markets you understand and have up-to-date information on or else in unit trusts.

Mr Gillen is in an industry (brokering) that benefits from other people's activities in several ways but principally through the application of transaction fees. The more people engaging - even in a small way - then the more revenue the brokering sector receives. Naturally he wants to generate interest in his sector's services and get more people trading in stocks. But most people are not competent or comfortable in this process and would be like babes in the wood if they were to proceed down the Teach Yourself Investing route: they need someone competent, trusted and accountable - to most, this means socially as well as legally - to manage things for them.
In the long run I don't think the stock market is a place for people with superficial perspectives, limited knowledge or business analysis abilities. And it's certainly no place for amateurs who simply cannot afford to lose their hard-earned savings.


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## Itchy (18 Dec 2016)

I think that is a very disingenuous post about Rory and his business. You make it sound like he is the wolf of Wall Street! He wants to 'get more people trading in stocks'? Why? To what end?

Surely he just wants to manage your money in his fund so he can earn the management fee? Rory, on his website (satisfied customer here, no connection to him) explains how he runs the money so people can copy it through a third party broker if they want. No transaction fees for him there. Also, afaik it is 100k minimum to deposit in the fund, not 'casual punting money' by any stretch!

Your opening accusation that Rory 'oversimplifies' a multidimensional issue is closely followed by your own 'famous rule of thumb of investing'? 

To be fair to Rory he provides an excellent service in my experience. He has great 'business analysis abilities' which IS an important attribute in the world of investing. His service is unique in Ireland and if you examine his thought process you will learn something, even you reach different conclusions. If you are interested in his service, I recommend you buy his book for €20. If you want to know more, get the FREE trial on his website. There is no pressure from him to trade stocks, it's simply market/stock analysis, I haven't spotted any agenda or anything so far. I agree that the market is no place for amateurs who can't afford to lose money but Rory is imparting (selling) his knowledge on the subject. I would recommend the service anyway


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## trajan (18 Dec 2016)

Evening, Itchy.
I did not intend the rule of thumb as something to be guided by. And it ain't my own, as you know well ! It's just simplicity and of little specific use except where no pro help is at hand and large sums deposited temporarily in a current account must be put somewhere else fast out of the hands of a predator bank manager. That rule of thumb is purely defensive - a sort of kick for touch to gain breathing space to think before a proper investment plan is made. As you know well, everyone's circumstances (age, family, needs now, needs going forward, existing assets, priorities, ethical preferences, etc) differ and the investment plan must be accordingly different
On the odd time I heard Gillen giving tips on the car radio, he also gave generalised macro-observational advice like that. Never said much about analysing a company, an industry or the economies it operates in. It always seemed odd to me then that while his day-job company, Merrion, were doing things analytically - and rightly so - by studying actual consumer behaviour in relation to take-up of Magner's cider in UK for C & C, their main man was promoting investment tools that were quite superficial by comparison.

Buy the book ? This whole thread started with the book being FREE online, I thought.
€20 for a booklet of some 64 pages ? Haaaahhhhh! 
I just paid €6 for an imported surplus US stock imported hardback bio of oul Joe Kennedy (Mr Short-Selling) and I'm getting fierce satisfaction from that books 800 pages + 100 odd pages of references.

Goodnight, Itchy.


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## Itchy (19 Dec 2016)

The book: http://www.askaboutmoney.com/threads/rory-gillens-new-book-3-steps-to-investment-success.174019/ 20 quid I think and more substantial than the booklet.

Listen, I just dont get what you have against the man. None of your points are logical, I can't follow your line of argument and I don't think you should put the man or his business down on the back of it. You should be called out for your non-factual statements and the conclusions you draw from that.

For example, you didn't address any of the points I raised in your first post and then you double down with your impression of him from the 'odd' statement on the radio? What's that got to do with his business which is clearly different and more substantial than a radio piece? Then you go on to disparage him by alluding to a supposed conflict of interest with his former employer? Afaik (open to correction please) he left Merrion before he started promoting "[superficial] investment tools"? At least elaborate on what these are to give us some idea of what your issue is?

I think the theme of your two posts is a point about amateurs getting caught out in the market, which is fair enough. But why is Rory the target? All we've got so far is that he "oversimplifies" and gives "generalised macro-observational advice" on the radio. Both generic and unsupported points. At least say you read his stuff and you disagree. At least actually detail your issue a la Wollie so people know why you disagree with him. Your argument can't be credible otherwise.

I am a subscriber, I do think it's a great service, particularly for amateurs as Rory goes out of his way to explain how NOT to get caught in the market. And if you think you are, you can ask him directly and specifically about an issue. Spend your €6 and don't get caught in the market, good luck to you. But your grossly generalised and unsubstantiated comments about a good business are not warranted.


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## Gordon Gekko (19 Dec 2016)

There is something sinister about some of the contributions to this thread. I do not know Rory Gillen, but I do know that he is a good operator, and I welcome his contributions to this forum.


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## mathepac (19 Dec 2016)

Which contributions?


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## Gordon Gekko (19 Dec 2016)

Posts by Wollie, Dan Murray, and Trajan.

Frankly, I was appalled to read them.

Someone comes to this site without the veil of anonymity and is subjected to what I would call abuse and innuendo.

Disgraceful.


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## Logo (19 Dec 2016)

At the end of the day, financial advice is a bit like a blind-folded dart player who is sometimes right on target - but at other times gets it spectacularly wrong. I'm amazed when logical people rely totally on the advice of others (Eddie Hobbes springs to mind) for financial advice as no one can really forecast without a crystal ball. Investors can only base predictions on information at hand at the time of investment. Everything else is an educated guess. Thanks and you can donate to Simon Charity if you wish.


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## Gordon Gekko (19 Dec 2016)

That is utterly wrong. The markets reward people who stay invested in a diversified manner for a very long time. As I understand it, Mr Gillen encourages people to invest in high quality companies on a diversified basis and to remain invested. What compliance etc prevents advisors from saying is that, if you do this, you will not lose money. But all the noise etc about people who lost their shirts punting on rubbish bank stocks or "the abandoned Detroit homes market" contaminates people's views on investing.


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## Logo (19 Dec 2016)

You're probably right Gordon Gekko because I was basing my assumptions on a one-time investment i.e. property. Hey while I'm on here would you advise a 52yo to move pension investments to cash fund or to stay diversified?


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## Gordon Gekko (19 Dec 2016)

Logo said:


> You're probably right Gordon Gekko because I was basing my assumptions on a one-time investment i.e. property. Hey while I'm on here would you advise a 52yo to move pension investments to cash fund or to stay diversified?



One would need detailed background info before giving a definitive view, but typically the advice would be to remain invested on a high-quality and diversified basis.


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## Gordon Gekko (19 Dec 2016)

The ridiculousness of trying to time the market is best illustrated by a stat I heard a while back:

$10k invested in the S&P500 from 1995 to 2014 grew to $65k.

However, if the investor only missed the 10 best days over that period, that collapses to $32k!

Also salient is the fact that six of those 10 best days occurred within two weeks of the 10 worst days!

Time in the market rather than timing the market is the key to building wealth, especially in a world where cash and bonds can't deliver.


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## dub_nerd (21 Dec 2016)

Gordon Gekko said:


> The ridiculousness of trying to time the market is best illustrated by a stat I heard a while back:
> 
> $10k invested in the S&P500 from 1995 to 2014 grew to $65k.
> 
> ...


There's an implication there that if you tried to time the market you were likely to miss out on the best growth. But the anecdote itself suggests that the good and bad days are so interspersed that even by random chance you are as likely to miss the bad days as the good days and thus make _more_ than the average market growth.

The statistic seems misleading anyway, on several scores. First, if you were trying to time the market you would be presumably doing it on the basis of some special knowledge, otherwise it would be just gambling. I don't claim to know a whole lot about it but wouldn't it be hard to have special knowledge about a broad market index like the S&P 500? Almost by definition it seems that someone trying to "time the market" wouldn't be investing in that.

Second -- the anecdote itself does exactly what it derides: it times the market, but worse than that it handpicks a year (1995) in which the index happened to take off like a rocket. One could just as easily roll the start date forward just five years to 2000. Now the annualised growth drops from over 10% to under 2%. And if you want to take a longer term perspective, the S&P Composite Index from 1871 shows exactly the same rate: just under 2%. If timing the market is a lost cause, retrospectively crowning a particular winning period is even more problematic (at least, for anyone without a time machine at their disposal).

Finally, with all these stats I think one has to avert one's gaze from the giant lumbering elephant in the corner. That is, the utterly improbable rate of 17% annual growth from early 2009, without which all the numbers crumble. Is anyone really under the illusion that all of it is real growth based on fundamentals, and not a bubble blown by the presence of QE money sloshing around the system? 

If there's anything special about 1995 it seems to be a time when market volatility increased. It means that even over periods of 20 years you better hope you got your market entry timing right because you may well be down rather than up overall.


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## Gordon Gekko (21 Dec 2016)

Interesting post, but it ignores the main point which is that, once invested, one shouldn't leave and then re-enter the market again based on noise. That's where the individual misses out. The same argument holds for the period 1999 to date where missing the 10 best days for markets would also have damaged one's prospects.

The difference between 1999 and now (because now is what's relevant) is valuation. Why was the investor in 1999 condemned to poor returns? Because he overpaid. And where are valuations now? Pretty average ex US and a little higher in the US. Therefore the investor is very unlikely to be condemned to poor returns for the next 17 years. But if he chops and changes in response to macro events, he will be, because he will miss the upswings.


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## dub_nerd (21 Dec 2016)

Gordon Gekko said:


> $10k invested in the S&P500 from 1995 to 2014 grew to $65k.



Unless I'm very confused the original premise is bunk! 

S&P500 close on 30/12/1994 was 459.27, and on 31/12/2014 it was 2058.90. 

That would grow $10k to $44,830. Even if you cherrypicked the worst day of 1995 and the best of 2014 you barely get over $45k. Your storyteller must have been doing some duckin' and divin' in the market themselves! 

Sounds like I should check out that "best 10 days" claim too!


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## Gordon Gekko (21 Dec 2016)

dub_nerd said:


> Unless I'm very confused the original premise is bunk!
> 
> S&P500 close on 30/12/1994 was 459.27, and on 31/12/2014 it was 2058.90.
> 
> ...



The source is JP Morgan, AKA The Safest Bank in the World:


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## dub_nerd (21 Dec 2016)

Gordon Gekko said:


> The source is JP Morgan, AKA The Safest Bank in the World:


They seem to be having a little trouble with their maths!
Here's the S&P500 for Jan 3rd 1994. And here it is for Dec 31st 2014. The multiple is under 4.5. The annualised return is 7.8%, not 9.85%.
it occurs to me ... is it possible I'm ignoring reinvested dividends? Any idea how I'd get those numbers?

EDIT: from a bit of rummaging around, it does indeed look like dividend yield is a couple to several percent per year. Need to think about that one. Dividend timing is predictable, unlike index growth.


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## Gordon Gekko (21 Dec 2016)

Yes, it's Total Return


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## Rory T Gillen (21 Dec 2016)

Gordon Gekko said:


> Interesting post, but it ignores the main point which is that, once invested, one shouldn't leave and then re-enter the market again based on noise. That's where the individual misses out. The same argument holds for the period 1999 to date where missing the 10 best days for markets would also have damaged one's prospects.
> 
> The difference between 1999 and now (because now is what's relevant) is valuation. Why was the investor in 1999 condemned to poor returns? Because he overpaid. And where are valuations now? Pretty average ex US and a little higher in the US. Therefore the investor is very unlikely to be condemned to poor returns for the next 17 years. But if he chops and changes in response to macro events, he will be, because he will miss the upswings.



Good post, in my view. The long-term returns from equities are mostly determined by the initial dividend yield and the subsequent growth in that dividend income stream. Share prices will follow the growth in earnings (and dividend) so that an investor's total return is the dividend income plus the capital appreciation as determined by the earnings (and dividend) growth. The tables on page 6 & 7 of the Booklet prove this point over a period long enough to iron out short-term anomalies. Of course, in the short-term, we know that markets rarely reflect this long-term truth, which makes it tricky to predict what returns are likely to be over shorter intervals. For example, a market can be valued at 10x earnings in one period and 20x in the next, boosting returns for a period. As 1999 was used in examples above as a starting point, investors in the US index were investing at a time when the US equity market was trading on a multiple of earnings at least double the long-term average, and quite possibly more. So, to an investor in 1999, future returns were compromised. While earnings in the US continued to grow thereafter, the multiple investors were prepared to pay quite rightly reverted to more normal levels leaving an index like, say, the S&P 500 flat from 1999 to about 2013 (not sure of exact dates). On page 36 of the booklet, this danger that we might describe as 'valuation risk' is highlighted in the Coca-Cola chart. As they say, a chart can paint a thousand words.

As we stand, the FTSE World Index currently offers a starting dividend yield of _circa_ 2.5% and this together with the future growth in dividend income will determine the returns to investors over, say, a 10-15 year period. If you assume global economic growth of 3% _per annum_ from here - which might underpin earnings and dividend growth of, say, 4% _per annum_ then one could argue for annual returns of 6.5% _per annum (before costs). _And an investor can capture those returns by investing in a global equity fund - a passively managed ETF or an actively managed fund. Not particularly appealing returns, perhaps, when we see that returns over the past century from equities have been in the order of 9% _per annum_ in the developed world, but it is what it is. Of course, if long-term interest rates were to rise globally, a not unrealistic expectation over, say, a 5-year view, given that long-term interest rates in the developed world are at generational lows (even in the US) then the dividend yield on the FTSE World Index might adjust higher to compete, and that means a once-off adjustment downwards in global equity prices. I think what this says is that future returns are likely to be lower than the historical returns, and that the risks to those returns are probably above average. Using the Ben Graham phrase, there's not much of a 'margin of safety'. Then, again, compared to bank deposit rates of near zero, can one complain?

The appeal of bank deposits in a period such as this is that your capital is not a risk as interest rates rise while your income rises. But waiting for bank deposit rates to rise can mean missing out on returns elsewhere for a prolonged period. There's little doubt in my mind that we are in a very tricky period for investors. When non-risk assets (like bank deposits and government bonds) offer no return, it's tricky.


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## fauxblade (21 Dec 2016)

I have just finished the book myself. I am a novice when it comes to investing and have spent the last few months researching the topics similar to what is covered in the book. For such a short book it really covers a lot of material. In my experience of books in this area they take a small part of the topic and spin it out to be a book three or four times longer. For example, I think you summed up the richest man in Babylon sufficiently in just four pages.
I think this is a valuable document for someone at my level of understanding, and seasoned pro's wont get much out of it that they don't already know. But then again the booklet says its aim is to provide the reader with a good understanding of what sound investing is all about and I think you achieve that.
The only chapter I didn't enjoy was chapter one as it comes across a bit blasé with the risks involved, and that you can only make money. But this is in contrast to later chapters that outline all the risks involved.
Chapters two and three are valuable financial lessons that everyone should be thought and is always worth reiterating.
I thought the rest of the booklet introduced the different investment options and other concepts that are not immediately obvious to the novice investor.

In summary, this was an absolute bargain as a free download, and at the current price you would still get value for money if you are within the target audience.
Thanks Rory!!


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## mathepac (21 Dec 2016)

I wonder is there anything else 'faux' about fauxblade


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## Setanta12 (21 Dec 2016)

Gordon Gekko said:


> There is something sinister about some of the contributions to this thread. I do not know Rory Gillen, but I do know that he is a good operator, and I welcome his contributions to this forum.


+1


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## Fella (21 Dec 2016)

How can people give out about a free book! I read loads of books sometimes I don't like them but you might pick up one or two bits of information you didn't know. 
I read this book and it was very much as the title suggested it would be so no complaints here.


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## PMU (21 Dec 2016)

Gordon Gekko said:


> The difference between 1999 and now (because now is what's relevant) is valuation. Why was the investor in 1999 condemned to poor returns? Because he overpaid.


 Correct. This was evidenced by Prof Shiller's 10 year cyclically adjusted P/E ratio (CAPE), which for the S&P in 1999 was 40.57 (and higher again at 43.77 in 2000). Shiller's theses is that the lower the CAPE, the higher the likely return in over the subsequent 20 years, and vice versa. The average CAPE value for the S&P is about 15.21 and this value provided an average annual return over the next 20 years of about 6.6%.



Gordon Gekko said:


> And where are valuations now? Pretty average ex US and a little higher in the US. Therefore the investor is very unlikely to be condemned to poor returns for the next 17 years. But if he chops and changes in response to macro events, he will be, because he will miss the upswings.


 I disagree. The current S&P CAPE ratio is 26.09, its highest since 2009 and higher than its long term average. This implies low(ish) returns. Ex-US, it's difficult to find CAPE ratios for other markets, but with a bit of rooting around I found this research by StarCapital Germany http://www.starcapital.de/research/CAPE_Stock_Market_Expectations on stock market forecasts based on the current CAPE and price/book ratios. To prevent being condemned to poor returns it might be prudent to take this research into account in making investment decisions. Ireland, for example, has a CAPE of 28.2, higher that the US.
  Not that average.


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## dub_nerd (21 Dec 2016)

Gordon Gekko said:


> Interesting post, but it ignores the main point which is that, once invested, one shouldn't leave and then re-enter the market again based on noise. That's where the individual misses out. The same argument holds for the period 1999 to date where missing the 10 best days for markets would also have damaged one's prospects.



Ok, so I ran those numbers, and you're right -- the top 10 best days gave a multiplier of 2.00. If you stayed in the market the whole time you'd have made a profit of 348% (total multiplier 4.48). If you missed the top ten days your profit would be 124% (total multiplier 2.24). (I had to ignore dividend yields as a matter of practicality, not because I don't think they matter).

But then I also looked at the 10 _worst_ days. They gave a divisor of 2.15. So even if you randomly skipped days you'd probably do better by missing the best days because the bad ones you'd miss would more than compensate. If you managed to miss all of the ten worst days, your profit would be a massive 864%! In fact, that's _much_ more important than hitting the ten best days. If you leave out the ten best days _and_ the ten worst days, you make 382%, still better than just staying in the market the whole time.

None of this tells us how to predict market swings, but it does imply if you can find a strategy that even slightly improves your odds, the potential gains are great -- greater, in fact, that just staying in the market to make sure you benefit from the ten best days.

Your anecdote is still interesting, it has to be said. It's instructive to see just what a large difference a vanishingly small number of outliers makes (extended up to 2016 in the following graph):










Gordon Gekko said:


> The difference between 1999 and now (because now is what's relevant) is valuation. Why was the investor in 1999 condemned to poor returns? Because he overpaid. And where are valuations now? Pretty average ex US and a little higher in the US. Therefore the investor is very unlikely to be condemned to poor returns for the next 17 years. But if he chops and changes in response to macro events, he will be, because he will miss the upswings.



Does that imply, then, that you need to time your market entry right? And if so, why can't you use the same approach to skip in and out subsequently?



Rory T Gillen said:


> ...The long-term returns from equities are mostly determined by the initial dividend yield and the subsequent growth in that dividend income stream. Share prices will follow the growth in earnings (and dividend) so that an investor's total return is the dividend income plus the capital appreciation as determined by the earnings (and dividend) growth. The tables on page 6 & 7 of the Booklet prove this point over a period long enough to iron out short-term anomalies. Of course, in the short-term, we know that markets rarely reflect this long-term truth, which makes it tricky to predict what returns are likely to be over shorter intervals. For example, a market can be valued at 10x earnings in one period and 20x in the next, boosting returns for a period. As 1999 was used in examples above as a starting point, investors in the US index were investing at a time when the US equity market was trading on a multiple of earnings at least double the long-term average, and quite possibly more. So, to an investor in 1999, future returns were compromised. While earnings in the US continued to grow thereafter, the multiple investors were prepared to pay quite rightly reverted to more normal levels leaving an index like, say, the S&P 500 flat from 1999 to about 2013 (not sure of exact dates). On page 36 of the booklet, this danger that we might describe as 'valuation risk' is highlighted in the Coca-Cola chart. As they say, a chart can paint a thousand words.



So again, same question, are you saying that you should time your market entry? And if you've committed the (apparently) cardinal sin of market timing once, why not more than once?


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## Rory T Gillen (21 Dec 2016)

As I'm struggling to use the 'Quote & Reply Facility', this reply is to Dub_Nerd above:

I made no direct reference to 'timing the market', but by inference if a market is overvalued relative to history it is at least a yellow flag. But as the booklet highlights, overvaluation is not so much a danger to the 'Regular Investor' as it is to the 'Lump-sum' investor. The latter doesn't get to go again, so valuation is extremely important at the point of commitment. The Regular Investor and Lump-sum Investor have different issues to deal with. In 1999, it was not particularly important to the Regular Investor that the S&P 500 - or markets in general - were overvalued then, as he/she was not committing all their monies at that time, but investing over time.

However, if history is to be a guide in terms of valuation then there's more to it than has been argued above. For example, in 1999, the US stock market was trading at a very high multiple of earnings relative to history. If we take it that the S&P 500 was trading at 30 times earnings in late 1999 (I don't have the exact multiple), then that's the same as an earnings yield of 3.3% (100/30 expressed as a percentage). It's easier to use the earnings yield as it can be compared to bank deposits, rental yields on property or the yield to redemption on government or corporate bonds. At the time in late 1999, that 3.3% earnings yield could be compared to the risk-free 10-year US government bond yield of _circa_ 6.3%. So, not only had you overvaluation in US equities when compared to history, but you were being offered much better value in the risk-free alternative.

So, yes, in this context you might choose to 'time the market' by investing where the value was better. It may be market timing, but it is so on the basis of values. In other words, value can be a market timer for an investor. And market timing this way is not speculating, it is the very essence of sound investing, which should be on the basis of value. If the Irish had any understanding about 'value' they would not have been buying Irish property post 2002, if not before. But not only were we piling in, but we were doing so with debt. It did not take a genius to work out that it made little investment sense. Hence, my opening para in the booklet 'learning how to save and invest is not a luxury in life; it is a crucial part of our lives and we need to be more informed'.

Today, in my view, it's not so clear cut that the key US equity market is significantly overvalued. Yes, we have the S&P 500 trading on _circa_ 21 times earnings for an earnings yield of 4.7%. Yes, this earnings yield is well below the long-term average, which is a yellow flag, but perhaps not a red flag. Today, unlike 1999, the yield from a risk-free 10-year US government bond is 2.55% (when I last checked), which is well below (not above) the S&P 500 earnings yield. Today, it's tricky. It's not always necessary to have a definitive view. I don't have one at present. I neither feel the key US equity market is overvalued nor undervalued. I appears fairly valued relative to the alternatives. After all, how do you price an asset when interest rates are so low. If you believe long-term interest rates are going to be this low for several years then it is right equities are valued higher than was the case historically. In 1999, the bubble was in equities. In the mid-2000s the bubble was in property, and no more so than Irish property. We Irish do go to extremes! Today, I'd venture, the bubble is in developed world government bonds unless you believe in deflation. The 35-year old bond bull market in the developed world, that started as long ago as 1981, most likely ended last July. As they say, long bull markets rarely end softly!

These principles are all outlined in the booklet. I believe the more one reads the booklet, the more you will get from it. I am on my third read of 'Money, the Unauthorised Biography'. A superb piece of work by Felix Martin in the UK on the history of money. But if you follow my lead and buy this book, be forwarned that's it demands good initial insight to get the value.

I, like others, can see the remarks on this thread. I'm encouraged to see some saner voices making an appearance of late. In the booklet, there's 30 years' experience in 56 pages written in easy-to-follow language. Lord John Lee, columnist with the Financial Times, recognised that and hence the 'Foreword'.

However, it's a decent guide, not gospel...we might leave that to Warren Buffett. So, anyone is entitled to argue with points in the booklet and make their own points. That's debate. But before you add to the debate, have the common curtesy to read it first, as I will not engage with those who see a need for argument without facts to back it up.


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## dub_nerd (21 Dec 2016)

Thanks for the comments. This jumped out:



Rory T Gillen said:


> So, yes, in this context you might choose to 'time the market' by investing where the value was better. It may be market timing, but it is so on the basis value. In other words, value can be a market timer for an investor. And market timing this way is not speculating, it is the very essence of sound investing, which should be on the basis of value.



Maybe I've been missing something all along. Is there some other version of "timing the market" than waiting for value to appear? That's certainly what I've meant by it. Indeed, I'm a bit stumped as to what else it could mean.


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## Rory T Gillen (22 Dec 2016)

Yes, I was assuming most people refer to timing the market 'by way of the price action (also referred to technical analysis)' as opposed to 'fundamental values'.


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## dub_nerd (22 Dec 2016)

Ah, ok. I presume that's what these so-called "chartists" that I've been reading about are doing. That has always struck me as about as scientific as reading chicken entrails. I hadn't thought of it as "timing the market" so much as predicting movements based on supposed recurring patterns. But yeah, I guess that's the same thing. Those people should be locked up for their own safety.


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## Dan Murray (22 Dec 2016)

dub_nerd said:


> Ah, ok. I presume that's what these so-called "chartists" that I've been reading about are doing. That has always struck me as about as scientific as reading chicken entrails. I hadn't thought of it as "timing the market" so much as predicting movements based on supposed recurring patterns. But yeah, I guess that's the same thing. Those people should be locked up for their own safety.



Dub nerd,

My understanding is that Rory is not averse to a bit of chartism. I am sure he will qualify the extent he subscribes to such methods and how he reconciles this practice with post 22?!


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## RobFer (22 Dec 2016)

Not at all. It can mean many other things. Value based based investing can be rule based. In contrast timing the market can mean an approach that is haphazard and not rule based. Timing the market could mean trying to harvest the trend rather than capture an undervalued stock.


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## RobFer (22 Dec 2016)

dub_nerd said:


> Ah, ok. I presume that's what these so-called "chartists" that I've been reading about are doing. That has always struck me as about as scientific as reading chicken entrails. I hadn't thought of it as "timing the market" so much as predicting movements based on supposed recurring patterns. But yeah, I guess that's the same thing. Those people should be locked up for their own safety.


Despite what you say there is a lot of academic evidence that value based investing has historically worked.


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## Rory T Gillen (23 Dec 2016)

Yes, I pay attention to a number of technical indicators that I understand and find useful.


Dow Theory for the 21st Century - complex, but fully explained in the book of the same name written by Jack Schannep. Dow Theory, as a technical indicator, has been around since 1900 and Jack Schannep's is just one version of it.
The Coppock Indicator - very helpful at highlighting the move from bear to bull market, excellent track record.
Capitulation indicators - basically measure when the pace of decline accelerates, and usually signal a bottom or the start of a bottoming process.
I did not include any reference to them in the booklet, as the aim was to keep the booklet as simple as possible. But the above three indicators are all outlined in detail in the other book _3 Steps to Investment Success. _These indicators are also followed in the members' area of our website gillenmarkets.com.

I don't tend to base any of my own investment decisions on them. But I do find that they are very helpful in understanding what the market is saying. Capitulation, for example, is characterised as a frenzy of selling with prices cascading downwards at speed. It's a scary time in markets. But it can be measured, and as it signifies a time in markets when everyone is selling together it is a sort of contrarian indicator.

I don't think it is necessary to use such indicators for sound investing. I simply find them interesting, so each to their own.


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## Dan Murray (23 Dec 2016)

Rory T Gillen said:


> I don't tend to base any of my own investment decisions on them.



I am trying to understand your investment decision making process. I'm not at home, right now, so don't have your book or booklet to hand.

So just to be clear - are you saying that you don't base investment decisions on technical indicators (i.e. you rely on other forms of analysis) or are you saying that after your fundamental analysis you will adjust your buy/sell decisions based on such indicators? If the latter applies, how influential are the technical indicators or put another way, are they occasionally followed, invariably followed or somewhere in between and what determines when the technical indicators are followed or otherwise? Also, how do you reconcile the two approaches (fundamental analysis v. technical indicators.)?

The reason for asking is that I believe it is critical to understand the thought process of an investment adviser in order to be able to judge whether it's a philosophy with which one is comfortable.


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## dub_nerd (24 Dec 2016)

Rory T Gillen said:


> Yes, I pay attention to a number of technical indicators that I understand and find useful...
> 
> The Coppock Indicator - very helpful at highlighting the move from bear to bull market, excellent track record.
> ...I don't think it is necessary to use such indicators for sound investing. I simply find them interesting, so each to their own.



Wikipedia cites a claim that the Coppock Indicator is useful in bear markets less than half the time. In general, isn't the use (or even _existence_) of technical analysis at odds with the efficient market hypothesis? (i.e. any advantage that could be gained through its use would already be priced in).


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## Duke of Marmalade (24 Dec 2016)

This thread has been an interesting read this Christmas Eve

A few observations.  I bought the original book, Three Steps and I got the booklet free through the post, from Davys I presume.  I didn't read the booklet but I kept it on the shelf beside Three Steps.  I think there was an AAM thread one time on Three Steps itself and I seem to remember being a strong critic of several aspects.  In particular I was skeptical of the "Buy The Cheapest 15 (by PE) and Rebalance Each Year" system to beat the market; that it historically appeared to deliver proved nothing IMHO.  I also in general have no time for chartist type predictors like Coppock.  This thread made me give the booklet a quick skim and it doesn't seem to suffer from these pretentions.

I was particularly interested in the "discussion" between Wollie and Rory.  As seems to be inevitable online it got a bit tetchy but I think it would be unfair to accuse either of overstepping the mark into abuse.  I think the fact that the REITs stand at a discount to NAV is a comfort to buyers though I note that Wollie has had personal experience that it by no means guarantees you are getting good value.

I am firmly bought into the narrative that we are sitting on a massive asset bubble inflated by QE.  Thus, for example, I have maxed out on Prize Bonds yielding 85bp tax free.  However, Rory's reminder that dividend yields are 2.5% p.a. and that there could be a reasonable expectation of future growth of say 3.5% p.a.,  shows that there is still quite a bit of headroom over 2% bond yields.  The problem is Rory seems to accept that a correction is likely so on a, say, five year view its hard to be confident on equities.


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## Rory T Gillen (28 Dec 2016)

dub_nerd said:


> Wikipedia cites a claim that the Coppock Indicator is useful in bear markets less than half the time. In general, isn't the use (or even _existence_) of technical analysis at odds with the efficient market hypothesis? (i.e. any advantage that could be gained through its use would already be priced in).



Since 1970, if one had bought the S&P 500, for example, on each Coppock signal, the average 1-year returns were 19%, 3-year returns 42% and 5-year returns 91%. These returns were before dividend income which, of course, would be material over the 5-year horizon. There have been just 12 signals since 1970; that's 12 signals in 46 years. That can hardly be classed as trading or speculating in markets.

I am not saying using Coppock beats a 'Buy & Hold' approach, which I favour, but they are solid facts on which to base a decision should you follow such an indicator. You could, for example, add to a position at such a time. In a bear market, it is impossible to know where the bottom will be put in. Better, perhaps, to wait for the turn and the 'Coppock Indicator' has proven itself to be a useful indicator in that regard. Not perfect, but useful.

In March, April and May 2009, the Coppock Indicator gave a serious of 'Buy' signals when most in the investors were shell-shocked. What it actually signaled was that the (professional) buyers had returned despite the media headlines, which were still universally apocalyptic at the time. And this is the most important point....such indicators can assist you to see clearly through the fog to what the market is 'doing', not what everyone is 'saying'. They assist you deal with the biggest bogey of all in markets, your emotional responses to poor media headlines.

In March, April and May 2009, professional fund managers were buying not selling and the 'Coppock' indicator strongly hinted that a turn was in. The same occurred this summer (2016) with a series of 'Coppock' buy signals first in the emerging markets, then the UK FTSE 100, then Asia Pacific, the S&P 500 and so on. Reading the media heading would have led you to different conclusions perhaps, but it was fairly clear from 'Coppock' that the average investor was buying not selling.

You can ignore such information and buy only when you see solid value in easy-to-understand companies or funds. But I find 'Coppock' and other such medium-term technical indicators useful tools in the investment bag.

How you calculate the 'Coppock Indicator' is in an Appendix in _3 Steps to Investment Success_. So, it's open to anyone to check those 'facts'. There's also a fascinating history behind 'Coppock' for anyone with an interest in stock market history.


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## Rory T Gillen (28 Dec 2016)

Duke of Marmalade said:


> This thread has been an interesting read this Christmas Eve
> 
> A few observations.  I bought the original book, Three Steps and I got the booklet free through the post, from Davys I presume.  I didn't read the booklet but I kept it on the shelf beside Three Steps.  I think there was an AAM thread one time on Three Steps itself and I seem to remember being a strong critic of several aspects.  In particular I was skeptical of the "Buy The Cheapest 15 (by PE) and Rebalance Each Year" system to beat the market; that it historically appeared to deliver proved nothing IMHO.  I also in general have no time for chartist type predictors like Coppock.  This thread made me give the booklet a quick skim and it doesn't seem to suffer from these pretentious.



Yes, we understand your opinions, but it would be nice if you did not mix them up with the facts, which is one of my basic criticisms of many on this website. In the above response to 'dub-nerd', there are facts provided on Coppock. In addition, these same facts were initially outlined in _3 Steps to Investment Success, _published in late 2012. A different approach perhaps, but hardly 'pretentious' simply because you don't accept the facts!


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## Duke of Marmalade (28 Dec 2016)

Rory T Gillen said:


> Yes, we understand your opinions, but it would be nice if you did not mix them up with the facts, which is one of my basic criticisms of many on this website. In the above response to 'dub-nerd', there are facts provided on Coppock. In addition, these same facts were initially outlined in _3 Steps to Investment Success, _published in late 2012. A different approach perhaps, but hardly 'pretentious' simply because you don't accept the facts!


It is a FACT that on each occasion that Saturn has been aligned with Jupiter the Fiji stockmarket has shown a bounce, so what?

I think AAM contributors can decide whether the Coppock Indicator is pretentious based on the following explanation.



			
				Wiki said:
			
		

> The indicator is designed for use on a monthly time scale. It is the sum of a 14-month rate of change and 11-month rate of change, smoothed by a 10-period weighted moving average.


 _Three Steps_ helpfully explains the theoetical basis for this formula.  Apparently Mr. Coppock asked the church how long was the recovery time after bereavement.  He was told between 11 and 14 months and naturally he concluded that 11 month and 14 month growth rates would be key inputs into his indicator.  However, despite its impressive ecclesiastical origins I am not convinced of its infallibility.


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## Duke of Marmalade (30 Dec 2016)

Ok, _Boss_, I have read the booklet from cover to cover.  Overall a good read and much sound advice/comment but and there is a but which I will come to later. First the good things.

At the end of the day one is left wondering just what to invest in and that is not a criticism, that is how it should be, there are no silver bullets in this booklet.

We are in absolutely unprecedented financial conditions.  I for one can see no possible reason for investing in long government bonds at these yields even within a balanced fund.  The booklet almost agrees with this.

I was nearly persuaded by the comments on REITs.  I do like that these are openly traded and their tax treatment is attractive (especially if you have past bank share losses) - perhaps more emphasis should have been given to the taxation aspects.

The only definitive "advice" seems to be that anyone embarking on long term asset accumulation, say for a pension, should think equities and even I, the incurable equity skeptic, can't argue with that.  Though he should have emphasised more the role of inflation in past statistics.

My favourite exhibit is the Coca Cola one.  This is my hobby horse.  The stockmarket is a second hand market.  It is the price that will decide the value not the quality of the good.  Coca Cola has been shown to be an excellent company but its inflated price meant that it was a poor value investment.

Of course he is right in advising investors to steer clear of Financial Spread Betting and CFDs.

He has a swipe at Guaranteed Tracker Bonds, are these still available at these interest rates?

For the But I will dedicate a separate post - why oh why did he include that ultimate pretension Euro Cost Averaging?  9 outa 10 without that but barely scrapes a pass with that included, I hope he drops it from future editions.


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## Duke of Marmalade (30 Dec 2016)

Euro Cost Averaging

Pound Cost Averaging was the ubiquitous tool of the early Unit Trust salesmen esp. in the UK.  It served them in several ways:
1.  It argued that regular savings systematically provided a "free lunch" in that when prices were down you picked up more "extra" units than the "shortfall" when prices were up.
2.  It made a merit of falling prices - the main downside to the ordinary investor comparing with bank savings.
3.  It made them sound clever.
I thought that in these days of high regulation this tool had been disgarded even by this constituency.

In academic circles Pound Cost Averaging was always dismissed as a mere demonstration of the arithmetic tautology that the Arithmetic Mean is greater than the Harmonic Mean (Google it).  It conferred no economic substance whatsoever.

Rory will no doubt argue that Table 6.3 of the booklet is Fact.  The Table demonstrates that over this time period and for this market a system of investing a regular money amount was 3.6% better than a system of investing a regular number of units (aggregate money investment equal).  This will tend to be the case in rising markets because the former invests the money earlier than the latter.


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## Rory T Gillen (30 Dec 2016)

Duke of Marmalade said:


> Euro Cost Averaging
> 
> Pound Cost Averaging was the ubiquitous tool of the early Unit Trust salesmen esp. in the UK.  It served them in several ways:



I think the real strength of euro-cost averaging is the discipline it brings to the table. Volatility in markets can be scary at times and it can knock many a saver off course, but by pre-committing to a programme - like many do with their monthly pension contributions - it is somewhat easier to ensure that you don't just buy when things are on the up.

Of course, euro-cost averaging exclusively into equities is no use if a market is in a sustained decline (as opposed to a cyclical bear market i.e. temporary decline), like can occur in a deflationary environment, and did occur in Japan from 1990 to 2012 in both equities and property. So, for euro-cost averaging to assist, you need to make the assumption that equity markets will continue to make progress over the long-term. That's the glass-half-full attitude discussed in the booklet, and in that context, yes, Table 6.3 is fact. If an investor doesn't accept that equities are headed higher longer-term then he/she has the alternative choice of investing using a balanced approach - investing in both risk assets and non-risk assets alike or, indeed exclusively into non-risk assets.

Overall, however, good to see someone post a comprehensive review. I'm not sure why you favour opinion over fact regarding Coppock, but I've said my bit and I will leave it at that. On the FTSE 100 P/E approach, just to clarify, it's not simply the lowest 15 p/e stocks in the index, it's the lowest 30 P/E stocks from the top 75 stocks in the FTSE 100 Index, with a stock from each 'industry' selected from this basket of 30 to give a portfolio of somewhere between 12-15 stocks diversified across sectors or industries. But, enough said on that topic also!


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## Fella (30 Dec 2016)

I don't really think euro cost averaging is that bad , its just regular investing , most people don't have huge lump sums to invest in the stock market and any habit of regularly topping up your investments in bad times and good times is to be encouraged. It's one thing knowing the right thing to do but its another thing doing it. I've invested a good portion of my savings but I found it mentally tough to put money in when the markets where going down. I invest a bit more each month now taking from my savings and adding to my investments , I may be losing out slightly long term but for me if there is a small loss its worth it anyway. Most people don't earn money in blocks anyway so its just like regular savings . If you've 500k in cash and decide you want to invest it in the stock market my advice would be maybe put in 200k and then drip in the rest over x years.


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## Duke of Marmalade (30 Dec 2016)

_Fella_ regular investing is a good thing, as good as motherhood or apple pie.  I'll give Rory the benefit of the doubt that that is all he meant.  But the more pretentious version goes as follows:  It is better to buy two lots of units priced at 0.5 and 1.5 with equal investments of 1 than to buy them priced both times at the average of 1.  The former buys 2+2/3 = 2 and 2/3rds units whilst the latter buys only 1 + 1 = 2 units.  That is an arithmetic truism just as valid as saying you buy twice as many units than if the prices had been double what they actually were.  It is a classic "so what?"  There is no economic substance to the arithmetic tautology.  Said quickly, it sounds very clever and a bit of alchemy to generate a free lunch, salesmen loved it.


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## Rory T Gillen (31 Dec 2016)

Fella said:


> I don't really think euro cost averaging is that bad , its just regular investing.



I wouldn't be put off by the 'Duke's' theorising. For many investors, regular investing is a critical part of sound investing as it assists with the emotional side of investing. It was no coincidence that I outlined the benefits of euro-cost averaging in the section in the booklet dealing with 'How to Mitigate the Risks', for there's no doubt in my mind that the markets' volatility is a risk to the extent that it creates fear, which then stops people investing when prices are lower and values better.

We run three regular investing portfolios on the GillenMarkets website, investing real money each month, to assist subscribers make decisions. That's the purpose to an investment newsletter. When markets dive - as they did in Jan 2016 - we tend to bring forward the monthly contributions to make the point that lower prices offer better value if you know how to assess the risks in the stock or fund you are buying. A mistake we all made in 2008 - myself included - was not to have understood banks and leverage well enough. I well recall being extremely bearish on Irish property from 2003 onwards, but somehow I did not read the consequences of a likely decline in property prices into bank bad debts. I made the naïve assumption that the scale of losses would be like past cycles. We live and learn.


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## Odenwald80 (13 Jan 2017)

As an experienced investor in certain sectors of the market, I found Rory’s book a short simple and useful back to basics guide and helped me start a reassessment of my strategy. Always useful to start at a new point from time to time”.


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## Brendan Burgess (16 Jan 2017)

I presume nothing new is being added to this thread in recent pages.


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