• Luis G. ha respondido al debate Ted SeeksQuality en el foro Estrategia hace 8 meses, 2 semanas

    Este comentario es para enmarcar:

    «When people read the comments and actions of others, they tend to filter those comments through their own perspective and situation. As a result, they often reach very strange conclusions. I talk about my moves, putting them out there for consideration and criticism, however I operate quite differently from others — and thus the motivations ascribed can be very much off-target.

    I talk a lot about «risk». To me, «risk» is most fundamentally the chance that our portfolio fails to meet our needs. I tend to take a much broader view of risk than others, including the risk that my needs exceed what I am planning for. Thus it isn’t quite as simple as aiming for an income target and then standing put. While achieving my planned needs is essential, any margin of safety above and beyond that is also potentially risk-reducing. Perhaps the most serious risk of this type is the possibility that one or both of us will need expensive long-term care, perhaps for many years. It is unrealistic to plan an income stream that will accommodate that level of expenditure, thus it could be necessary to spend down the portfolio in this scenario. Total return matters for this purpose.

    There is also the risk, one that @Bob Wells talks about, that my death or mental deterioration will prevent me from continuing to manage the portfolio. Educating my wife and children in the plan and process are perhaps the best answer to this form of risk.

    Risk assessment need not imply a high likelihood of an adverse event. On my optimistic days, I expect that there is a 99.9% chance that we will have enough to be comfortable. (I don’t honestly see how that isn’t going to happen.) On my pessimistic days, I figure that there is a 5% chance that I’m overlooking something huge. On my cynical days, I figure there is a 25% chance that I am grossly overconfident. 😉 Still, I expect we will be fine. I actually lean optimistic in this kind of stuff.

    Risk assessment need not be emotional. For me it is more an intellectual question, «What could go wrong, and how can I minimize that chance?» People talk an awful lot about «fear», which in this context is foreign to me. When it storms, I am anxious that the roof might leak. When I drive in the winter, I am anxious that the cars around me might do something crazy. I’ve been dealing with anxiety since a nasty auto accident a few years ago, a low-level continuing stressor. But finances? Not something I get anxious about. I’ve done my best to bullet-proof our financial plan, and have no fear of it going wrong. Whatever happens will happen, and I will trust in providence.

    Moreover, while I work in terms of «total return», planning and projecting future position and portfolio values, I am not sensitive to market prices. My valuation spreadsheet estimates a future value four or five years out. This works from projected earnings, projected growth, dividend yield, and quality metrics. The calculation does not include the current share price, except in the final step where it estimates the five-year total return. Thus when the market goes down, that final column turns very green. (When it goes up, it fades towards red, moderated by any earnings upgrades.) Half the time I don’t even know the current share price of one of my holdings. Until people teased me with the comments that O was rising, I would have guessed that it was in the high 50s. I watch only a handful of stocks closely, those that I might be trading based on valuation. The rest just do whatever they are going to do, without my attention.

    Recognize also that a five-year Total Return projection is not highly sensitive to share price. Or to almost anything else, for that matter. Right now, working from $200, I project a 6.5% annualized return for MMM. This is not going to change substantially if the earnings estimates move by a percent or two. For example, bumping the 2019 earnings estimate from $10.78 to $11.00 only changes the forward return by 0.3%. Increasing the projected growth from 7.3% to 9.0% increases the forward return by just 1.2% Dropping the share price by $10 increases it by 1.1%. So these numbers move slowly, mostly wiggling back and forth within a broad range of inaction. I am not going to dump MMM just because it has a forward return of 6%, and I am not going to «back up the truck» just because it rises to 8%. The valuation-based moves in the portfolio happen outside the 4% to 10% range. (In the past I may have tried too hard to optimize. At this point I am more content to watch and wait.)

    So while I do find the occasional «back up the truck» conviction buy, it tends to be the result of longer-term moves rather than an ephemeral price correction. I was talking about NKE a few years back — and was talking about them for at least a year before the price moved. CVS still hasn’t gone anywhere. These days I am mentioning AAPL, DIS, and INTC. These trends are measured in years, not months. But once a stock shows as a strong buy on my spreadsheet, there are really only two ways it can exit. Either a severe downgrade in quality or forward expectations or a substantial rally. Looking at numbers won’t help you anticipate the former, you have to consider the business plan and your confidence in the business plan.

    Thus I would encourage other investors to relax a little, especially if your investments are causing you stress. You don’t need to pounce on every 5% move, and in fact the best values are often found among those stocks that HAVEN’T moved much recently. (Think DIS or CVS.) And it is pointless to worry about what is going to happen. Try to consider the risks dispassionately, weighing and balancing them against your own situation, then set a portfolio plan that is designed to meet your needs with minimal risk. After that? Implement the plan.

    I spend a lot more time commenting here than I do actually looking at my investments. I spend a lot more time managing the daily/weekly bookkeeping, entering grocery receipts, logging/recording income, paying bills… I do update the prices on my spreadsheet weekly, sometimes also mid-week if there has been a large market move, but that takes just 1-2 minutes and rarely leads to further action. I do update my projection spreadsheet quarterly, which takes perhaps five minutes per stock, but again it rarely leads to substantial changes. When the plan does call for trimming or adding, I have a handful of positions to consider, and it is usually a matter of 30 minutes to figure out how to implement the plan.

    Do you have a clear plan that tells you what you should be doing in any situation? If not, consider writing one? Once that is established, the rest is easy and emotion-free. Good luck!»