£1,000,000 challenge

23rd Feb '20 by Tonysaparito

9 comments 935 reads

Are you here to meet the challenge?

I imagine most of us here are investing to make ourselves a few quid or most likely to ensure our Sipp’s or SSAS‘s are as close to a £1m as we can get them...bearing in mind the lifetime limit of our pension pot is just over £1m before the tax take kicks in .

At the same time I am sure many of you are familiar with 2 great books....namely : 100 to 1 in The Stock Market by Thomas W. Phelps and 100 Baggers ( stocks that return 100-to-1 and how to find them) by Christopher Myers .

Accordingly, I AM NOT looking for share tips per se or advice, rather I am looking for your views on how you might take an initial £250k pension pot and get it to say a £1m, within the next 5 to 7 years .

Obviously, I am interested if you believe you have found that 100-1 share or you have a proven strategy that we can learn from here...but fundamentally, I am interested in your strategy , as I believe I have a strategy...it’s not complicated or clever and might surprise many of you...both positively and negatively and of course whilst there are no guarantees and past performance is no indication of future performance etc etc , we all know there is money to be made in shares in the next few years as the technology revolution, we are living in , is only going to move faster and create new wealth and markets for those of us who have the nous to invest wisely ..

My strategy I am happy to reveal ..but not yet, because as I have written , my strategy is not complicated or clever but I know I will get either my SIPP or SAAS, to a combined £1m...though at present some of my pension pots are circa £250k..

The strategy I use has proven itself over the last 10 years but I appreciate in the next 10 years, this same strategy could come to nothing ...I accept the risks in that .

Finally, I should write, I do have other asset /income streams in property which are long term holdings and have proven themselves over 30 years..

Over to you clever cloggs on Stockopedia for the challenge

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mojomogoz

23rd Feb '20

I recommend a simple strategy of investing in stocks that will quadruple in no more than 7 years time...

...now over to you tonysaparito to tell us the strategy you promised to tell us...

wildshot

I couldn't find the first book you mentioned when I searched on Amazon, is it a well known book? I've not heard of it but I have read 100 baggers.

Without knowing your strategy I think your timeline is very short to quadruple your funds into the magic million. This maybe obtained by active trading (high risk) or getting a streak of luck (as well as good stock picking) to get there.

For me, I consider myself more an investor and less a trader. Well I'm not a trader at all. My current pot is not significantly lower than where you are starting from today. I also have an ambition of exceeding £1m and maybe £2m. I am working on a longer timeline though of around 15 - 20 years which has more chance of the target being reached. (For the record my total portfolio gains since the EU referendum now > 100% so I'm quite happy with my performance recently.)

I'm not a brilliant investor but I am relatively patient, with a couple of 10 baggers still held in my portfolio (4imprint (LON:FOUR) and £GAW). Like 100 baggers I believe in holding good investments for the long term.

Whilst I've not been on the Lemon Fool website for a number of months I remember there being a discussion thread on there about someone who wanted to trade his way to a million. (Last time I read he wasn't doing as well as his ambition). Maybe you could post your aspirations on there too where I think the audience maybe more suited to your ambitious timeline?

Brilliant Leader

24th Feb '20

As a strategy, buying high quality companies (high ROCE, strong FCF), at reasonable prices and doing nothing (Fundsmith, Buffet et al) is likely to double your portfolio every 5-7 years due to the compounding effect. To quadruple your portfolio in 5-7 years, you will need to take higher risks and have Lady Luck on your side. I look forward to learning more about your strategy.

Cheers
Simon

William K

In order to convert £250K to £1M over 5 years, you'd need a 32% annual return compounded. Over 7 years this would fall to 22%. These figures are not achievable except by luck.

But, if you were able to borrow £500K at 3% (interest only loan) and use leverage of 3:1 you would only need an 11% return over 7 years (compounded) to turn your original £250K into £900K after paying back the loan (which at 3% compounded would have grown to about £615K and given you a net profit of around £400K).

Whilst 11% compounded annual return is achievable by a simple buy-and-hold strategy, the use of leverage is high risk and I wouldn't go down this path myself. If you're a risk taker you could achieve the £1M target by using a higher leverage ratio around 3.3:1

Good luck!

jwebster

UK ISA millionaires have already written about their process - Lord Lee, Robbie Burns etc. From memory, they achieve 'about' 25% p.a. so you would need six years to turn 250k to 1m on a compounded basis. But you'll need a steady bull run in the markets as well.

iwright7

I read the 100 Baggers book and do think the author is struggling to lay down screening rules. Selecting for above average ROE, ROIC, Gross Profit, nearness to 52 Week High to find micro/smallcaps with a moat, all get a mention.

What struck me at the time is that we are looking for exceptional growth companies (with price momentum), so why not let Growth and Momentum Ranks do the heavy lifting. So my screen became;

Mark Cap <£250M – Small enough for a Elephant to gallop in future.
Spread <500 – No crazy spreads
Growth Rank >75 – Top 25% mixed Growth metrics
Momentum Rank >75 - Top 25% mixed Momentum metrics
5Y Ave ROE >75% Market - Indicative of a moat
ROCE last year >15% - Better than the market, last year

I have to say that I don't use this particular screen myself although it produces a selection of decent companies which I do think will beat the market. There might even be a 100 :1 winner among them.

I wouldn't set myself the £1M target because I think you are setting yourself up for disappointment. If you can comfortably beat the market after 5-7 years you will be doing better than the majority of investors!

icm

QUOTE

Obviously, I am interested if you believe you have found that 100-1 share or you have a proven strategy that we can learn from here...but fundamentally, I am interested in your strategy

UNQUOTE

I haven't found the 100-1 strategy, I use a number of strategies for different pots, the best has achieved 27% over the last six months, (sadly this pot is only 4% of my total holdings) and the poorest 8% over the last six months, (even more sadly 25% of my holdings). I strongly suspect the 27% return will not repeat itself over the next six months, but that is the way of things, overlap the guru screen graphs and you'll see what I mean. Overall for the last five years I'm out performing the FTSE by 5 to 6%, (dividends and trading costs included), not rocket science stuff, but will do me just fine. I have a family to keep in retirement and am risk averse.

I use Stockopedia as much to inform me on which shares not to buy as much as what to select - I rather fear the Stockopedia metrics will keep me away from the 100-1 shots, and most of the time it would be correct.

I hope you will take advantage of the fantasy portfolio feature on your profile, I am sure many of us look forward to seeing the real time performance of the folio you select based on your criteria. Indeed you don't even need to share your strategy at this time, just the shares the strategy spits out.

Good luck - I am sure you'll get many followers watching your fantasy portfolio.

smegster

I couldn't find the first book you mentioned when I searched on Amazon, is it a well known book? I've not heard of it but I have read 100 baggers.

I think this might be it

https://www.amazon.co.uk/100-S...

Thanks for the link smegster. My error since I was just searching in Kindle books for which it is currently not available.

I'll wait for it to be on kindle then add it to my wish list. I travel too much to be buying and carrying physical books all the time and like to save a few trees :-)

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Tonysaparito

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