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

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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! :eek:
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.
 
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.
 
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.
 
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.
 
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.
 
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.
 
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?
 
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?
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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.
 
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.
 
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.

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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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.
 
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.
 
Gordon Gekko said:
$10k invested in the S&P500 from 1995 to 2014 grew to $65k.
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Unless I'm very confused the original premise is bunk! o_O

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! :D

Sounds like I should check out that "best 10 days" claim too!
 
dub_nerd said:
Unless I'm very confused the original premise is bunk! o_O

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! :D

Sounds like I should check out that "best 10 days" claim too!
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The source is JP Morgan, AKA The Safest Bank in the World:
 

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Gordon Gekko said:
The source is JP Morgan, AKA The Safest Bank in the World:
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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 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.
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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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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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