Slack Investor Guide to investing in ASX UK US Stocks Shares

The Slack Factor – March 2025 End of Month Update

A WordPress AI generated weird image that reassuringly does not make any physical sense.

Reporting Season

During February, most companies report on their progress up to the end of December. There is a similar reporting season in August for the period up to 30 June. Once all the analyst projections for future earnings are in, it is a good time to update the state of play for companies in the Slack Portfolio.

It took a while for Slack Investor to understand that a company could come in with a great report on the business and still, the price of the shares might go down. This is because reporting season is all about expectations. If a company was expecting an increase in earnings of 22% – and they ‘only’ achieved 20%, the share price is likely to get knocked down on the announcement.

As the Slack Portfolio consists of mostly growing stocks with a relatively high Price to Earnings Ratio. The growing stocks usually have high prices as the company’s growth is priced in. These stocks can get punished severely when an earnings target is missed – price falls of 10-20% are not uncommon. But, it is long term results that really count and Slack Investor is willing to endure any short-term pain for a growing company. This period of ‘Trumpenomics’ is an example of such a time.

Slack Investor uses the excellent Market Screener site (requires email registration) to get information from the Financials tab for each company. Analyst information is not available for ETF’s so, only data on the individual companies that are in the Portfolio is gathered.

In the table below, information is listed for the forecast P/E Ratio (PE 2027), the forecast Return on Equity (ROE 2027), the forecast Earnings Per Share Growth (EPSG 2025) (EPSG 2026) (EPSG 2027) and the average of the three Earnings Per Share Growth figures (EPSG AV). There is some fudging of the figures as some of the forecast EPSG figures were unavailable. Also, for some of the companies that are new to profit, their EPSG figures are skewed – I have limited the EPSG (AV) to a maximum of 50. I have ranked the companies in order according to their Slack Factor.

The Slack Factor

What is the Slack Factor? It is well known that Slack Investor likes

Profitability – measured in terms of the forecast Return on Equity – ROE 2027
Growth – measured as the average forecast Earnings Per Share Growth – EPSG (AV) for the three years 2025, 2026 and 2027.

It is well known that Slack Investor does not like

High Price to Earnings Ratios – measured in terms of the forecast Return on Equity – PE 2027. Sometimes, great companies are just too expensive.

ROE is the forecast ROE (ROE 2027), EPSG is the forecast EPSG for the next three years (EPSG AV) and, PE Ratio is the forecast PE Ratio (PE 2027).

So, things he likes go on the top line and the things that he doesn’t like go on the bottom line. This reduces a lot of the complicated information in Slack Investor’s tiny brain to one number. He has made no attempt to scale (normalise) each input into the Slack Factor. It is just a simple way to rank companies with qualities that he thinks are good. The bigger the number, the more likely the company has attributes that Slack Investor likes – profitability, growth and a price tag that is not too expensive. With these traits … surely good things are more likely to happen?

The fast growing Telix Pharmaceuticals (TLX) is a company that Slack Investor is a fan of, and it has a high Slack Factor of 52. The growth dullard Commonwealth Bank (CBA) has a Slack Factor of only 3 – and, is of no interest to Slack Investor.

Name	Symbol	PE 2027	ROE 2027	EPSG 2025	EPSG 2026	EPSG 2027	EPSG (AV)	SLACK FACTOR
Telix Pharmaceuticals	TLX	25	26	230	70	30	50	52
REA Group	REA	40	32	98	11	17	42	34
Codan	CDA	19	23	20	23	18	20	25
Alphabet (US)	GOOGL	15	25	12	14	16	14	23
Supply Network	SNL	29	38	23	14	15	17	23
Megaport	MP1	50	19	-9	160	40	50	19
Pro Medicus	PME	115	53	40	42	30	37	17
WiseTech Global	WTC	42	20	32	38	34	35	17
Technology One	TNE	48	34	18	20	19	19	13
CSL	CSL	20	18	12	15	16	14	13
Goodman Group	GMG	18	11		34	12	20	12
Coles Group	COL	18	32	-2	17	5	7	12
RPM Holdings	RUL	38	18	10	25	40	25	12
XRF Scientific	XRF	20	18	17	11	11	13	12
CAR Group	CAR	28	15	35	18	12	22	12
ResMed	RMD	20	23	9	10	11	10	12
Wesfarmers	WES	24	33	3	13	9	8	11
Nick Scali	NCK	15	29	-28	29	14	5	10
Cochlear	COH	34	25	15	7	16	13	9
Macquarie Group	MQG	15	13	6	18	8	11	9
Botanix Pharma	BOT	Not	Ranked	–	Not	Enough	Info

Over the next quarter, I will try and sell some of the Slack Investor owned companies with a relatively low Slack Factor – and invest more in those with a high Slack Factor. For homework, using Market Screener, try to work out the Slack Factor for some of the companies in your own portfolio.

March 2025 – End of Month Update

The current ‘Trump Slump’ in stock prices can be attributed to the largest upheaval to global trade since the Second World War – Thanks Donald! All followed markets fell this month. The ASX 200 down 4.0%, the FTSE 100 down 2.6%, and the S&P 500 down 5.8%. For now, each Index remains above their stop losses. Slack Investor remains IN for the FTSE 100, the ASX 200, and the US Index S&P 500.

Slack Investor took the opportunity to tighten up his stop loss values for the FTSE 100 and the ASX 200. On the UK Index chart below, by drawing a black wavy line under the monthly minimum values, it can be seen that some new ‘higher lows’ have been established. It made sense to move up the stop loss to the most recent ‘higher low’.

Monthly price chart for the FTSE 100 – incrediblecharts.com

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index). The quarterly updates to the Slack Portfolio have also been completed.

Trumpenomics … Be Brave!

The talented David Rowe shows ‘Me the People’ Donald Trump and his entourage re-enacting George Washington’s crossing the Delaware – Australian Financial Review

Because I can’t resist David Rowe images of Donald, in the above cartoon he is shown leading the way – his loyal band of grifters, scammers, chancers and influencers are happily along for the ride. Slack Investor still finds it hard to believe that Trump has been elected again by the US people. This ‘second coming’, and all its associated upheaval and chaos, has been going on for less than two months!

‘The stock market is going to be great’ – _{Donald Trump – Investor Conference, February 19, 2025 – Rollcall.com}

Perhaps I am selling Donald a bit short here, and Slack Investor hasn’t given his ‘genius’ policies the chance to work through in the long term. Although, picking a trade war with Canada, Mexico and China (and now, the rest of the world!) may not be seen by history as one of Trump’s ‘genius’ moves. Tariffs make imported products more expensive than domestic ones and might make sense in a limited way if you are trying to encourage local production. However, they inhibit trade and make goods more expensive. Virtually all economists think that the US tariffs will be bad for America – and for the world. So far, it is certainly bad for the stock market.

This is not a political blog, but Trump’s anti-science and chainsaw approach to cutting government departments seems random and very short-sighted. Also, Trump’s treatment of Ukraine using standover tactics on mineral deals, his commitment to the rich getting richer, his rejection of international treaties, and his ‘negotiating’ a Ukraine surrender on Russian terms – are all just appalling acts to Slack Investor.

What to do in times of Market Crisis?

Slack Investor would love to have some cash reserves while prices are low, however he is in retirement mode and fully invested. There might be some tinkering with the portfolio but, he will do mostly nothing. Slack Investor has his Stable Income Portfolio if he needs cash. If there is a need to sell any stocks, he will be buying other stocks in the same market. The worst thing to do, from a long-term wealth perspective, is to convert shares to cash in a down market.

Individuals who cannot master their emotions are ill-suited to profit from the investment process. _{– Benjamin Graham, Legendary Investor and Author}

Despite the Trump administration commitment to ‘Alternative Facts’. Slack Investor is guided by some established facts.

The stock market is the best asset class for long-term returns above inflation. See the Vanguard 2024 30-Yr chart or Long Term Returns. This is the premium game in town for non-business owners to increasing wealth.
The stock market is volatile. There will always be the swings between the market being overpriced, or underpriced, due to the news of the day. After a correction/crash, the market has always recovered to new highs. This happened after: Gulf Wars, Israel/Ukraine/Gaza invasions, terrorist attacks, GFC, COVID-19, etc. Trumpenomics is just one of those things that will affect the market in a temporary fashion.
On average, the sharemarket falls by:
- 5% – about 3 times a year
- 10% – about once a year
- 20% – every 3-5 years.
Timing the market is just too hard (for Slack Investor). I have a long-term experiment going where I try to time the market in a methodical way using the ASX Index, the UK Index and the US Index. After 20 years, Slack Investor is either marginally ahead, or marginally behind, the markets. In all cases, in hindsight, he would have been better to buy and hold – and collect the dividends throughout.

There is still a need to constantly review your portfolio

‘I don’t think people understand there’s 100% correlation with what happens to a company’s earnings over several years and what happens to the stock.’ _{– Peter Lynch, Legendary Investor, Slack Hero}

In view of Peter Lynch’s wisdom, as the Australian reporting season is over for the first half of FY 2025 (up to the end of December 2024). I will do a review of my current holdings next blog to ensure that they are still, mostly, growing earnings companies.

Just a few of Trump’s quotes to mull on from shortlist.com. The Clown Prince Donald always has a lot to say …

‘I look very much forward to showing my financials, because they are huge.’ _– _{TIME, 14/4/11}

‘My fingers are long and beautiful, as, it has been well documented, are various other parts of my body.’ _– _{New York Post, 2011}

‘The concept of global warming was created by and for the Chinese in order to make U.S. manufacturing non-competitive’ _– _{Twitter, 19/10/15}

‘There are those that say they have never seen the Queen have a better time, a more animated time.’ _– _7/05/2019

‘What you’re seeing and what you’re reading is not what’s happening’ _{– 24/7/2018}

‘[Kim Jong-Un] speaks and his people sit up at attention. I want my people to do the same.’ _{– Fox & Friends, 15/6/18}

‘Sorry losers and haters, but my IQ is one of the highest – and you all know it! Please don’t feel so stupid or insecure, it’s not your fault’_{– Twitter, 9/5/13}

GOLD … Not for Slack Investor – and February 2025 – End of Month Update

Goldfinger, the Bond film from 1964, portrays a scene where a woman is covered in gold and dies from ‘skin suffocation’. Slack Investor notes that gold has had a good recent run and hopes that those involved with gold continue to prosper.

Is Gold Good?

A lot of people think so – and, it has performed well lately.

The price of gold exceeded US$2,900 an ounce last week for the first time. Since October 2023, it has risen by more than US$1,000 an ounce. The price is three times higher than it was a decade ago. – _{Tom Stevenson, Fidelity – Livewire, February 2025}

Gold does well as a hedge against inflation and, in times of uncertainty. The chart over the past 10 years looks pretty good.

From Stockspot – Why you should consider gold in your super

Gold is also rare and, besides its valued use in jewellery and ornaments, it is an essential industrial metal for computers, communications equipment, spacecraft, and jet aircraft engines.

All of the gold discovered thus far would fit in a cube that is 23 meters wide on every side. _{– U.S. Geological Survey}

Chris Bryki from Stockspot argues that every investment portfolio should contain gold to even out portfolio performance in uncertain times. Stockspot have even increased their gold exposure, through the GlobalX GOLD ETF, to above 12% in their very successful personalised investment and super funds.

There is no doubt that gold has been successful during market crashes in the past – and it will decrease your portfolio volatility. But, usually, it can also drag the portfolio down when times are good in the markets. Unusually, since 2023, gold has increased greatly at the same time that stock markets have also done well. Something weird is going on!

Gold makes sense for investors that sleep better at night knowing that at least some part of their portfolio is going up during times of market stress. Gold might also help to avoid selling your investments during a downturn – when the shares are undervalued! You could sell the gold for income during a market crash.

Slack Investor has his own plan for these down times – the Stable Income pile.

Does Gold appeal to Slack Investor as an investment?

Firstly, gold would not get a guernsey in his Stable Income pile as it does not produce any income by itself.

Only a Goldsmith Knows the Value of Gold _{– Old Turkish Proverb}

Despite the sound arguments for gold, Slack Investor just can’t bring himself to put gold in the Slack Portfolio – the Investment pile. The big problem he has, is that Slack Investor has no idea whether the current price for gold is a fair reflection of its value – it has had a big run lately – is it overvalued? At least when he is buying stocks, he can have a look at the company’s earnings and get an idea of whether the company is cheap, or expensive, by comparing its projected price to earnings (P/E) ratio.

This is Slack Investor’s difficulty with all non-income producing assets – these include precious metals, artworks and even cryptocurrency – there is no way to determine their actual value. The price of these speculative assets is only defined by what the next person will pay for them. So, none of these types of assets will appear in the Slack Investment Portfolio.

Slack Investor will continue to take his chances with stocks that are growing, predicted to grow further, and producing income. His investment portfolio will be more volatile for not having gold – but, it is the long-term performance that counts the most with Slack Investor.

Slack Investor hopes to never draw down on his investments in the lean years when his stocks are undervalued. He has his Stable Income pile (currently 22% of total retirement funds) to get him through the periods when his Investment pile might go negative. The Stable Income fund target is to earn a little above the inflation rate. The Slack Investment fund has more ambitious goals and the pursuit of growing stocks (without gold) might have more ups and downs – but, so far it’s working!

5-yr Return	10-yr Return	15-yr Return
13.4%	15.7%	14.8%

Slack Investment Portfolio long-term annual compounding average returns. Pre-tax annual average returns till the end FY24.

February 2025 – End of month update

Slack Investor is IN for Australian index shares, the US Index S&P 500 and the FTSE 100.

February has continued well for the UK Index, the FTSE 100 is up 1.6 %.

The S&P 500 (-1.4%) has had a bit of a pull back and the ASX 200 is down 4.2%, erasing its January gains.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

Tinkering with the Portfolio Part 2

Most of the time, Slack Investor indulges in the zen of long-term investing and leaves most of his portfolio alone. But, there are times when a little tinkering is advised. Having raised some cash with the sale of DHHF, it is time to put the money to work.

The Return of The Wedgie

Slack Investor introduced the wedge-shaped chart pattern ‘The Wedgie back in 2019′. Technical chart purists will boringly describe this pattern as ‘breaking a long-term downtrend line’. But, Slack Investor hopes that you agree, The Wedgie is more amusing to his child-like mind.

The pattern forms when there is a lot of negative sentiment about a stock and the price is in decline for about six months (or longer). There comes a point where the price gets so low that the sentiment reverses – and the buyers come back in. On the charts, this shows as a leap in price above the wedge-shape (see below) as the institutional investors and other buyers gradually push the price up. Slack Investor loves this pattern as it has had a good (but not perfect!) track record in the past.

Megaport (MP1)

In a world where the cloud and networking are important, the Australian company Megaport puts its own equipment in data centres across the globe. MP1 creates high-speed virtual ‘ports’ that other businesses can connect with. This would seem a useful thing for their customers who need secure data ports and connectivity with AI gateways.

What initially attracted Slack Investor to this growing stock is the promising projected numbers and the trend of increasing sales and projected sales shown in the income chart below. Despite these glowing numbers, my initial purchase of MP1 was sold at a loss in September 2024 after a reporting season miss. Sometimes, even with the best of projections, things just don’t work out.

From Market Screener, the current PE Ratio is very high (144) but, as its profits increase over the next few years, the projected PE for 2027 comes down to 42. Accompanied with an acceptable 2027 ROE of 19% (above 15%) and, EPS projected growth rates of 44% and 34% (above 10%) for 2026 and 2027 – this is a growing stock. It is a good exercise to look up the financial metrics on some of your own stocks with the Market Screener – Financial Tab (email is required to register). It might be enlightening to see if they qualify as growing stocks.

The good news is that MP1 achieved its first profit in FY24. There is some uncertainty though, as Megaport has some competitors in this data connectivity field and, it is a relative minnow with less than 2% market share. This could also be seen as an opportunity!

Slack Investor is taking a risk with this buy. However, in his favour are the good forecast profits and the powerful Wedgie pattern. MP1 had an earnings downgrade in 2024 but, he will give it another chance.

If the projected numbers come to pass, all will be well. I have re-bought MP1 @ $8.34 with a small position (0.4% of Slack Portfolio). This post is published a little earlier than the mid-month as, Slack Investor has already done the tinkering – and, at least in the short-term (MP1 $8.99 on 07/02/25), this Wedgie is working. Who doesn’t love a Wedgie!

Tinkering with the Portfolio Part 1 – and January 2025 – End of Month Update

In the middle of 2024, Slack Investor had some cash from the sale of Altium (ALU) that needed investing. He had spread the amount into buying into some companies that he already had (TNE, CAR, SNL, NDQ, PME, TLX). He also brought in some new blood (WEB, MP1, NCK, RMD, JNDQ, BOT, RUL, DHHF). The new companies were picked because he hoped that they were in the ‘growing stage’ – to replace the growth superstar ALU.

As with most things, some have worked well – and some not so well. The real duds were associated with Webjet (WEB) and its subsequent spin-offs. He also dumped his small holding of Megaport (MP1) – but, he is now having a rethink about MP1. As the Slack Portfolio is fully invested at the moment, to buy something, he must first sell something.

BetaShares Diversified All Growth ETF (DHHF)

This was the last thing that Slack Investor bought on his 2024 buying spree and, to be honest, he didn’t look to0 deeply into it. Slack Investor was initially impressed by the simplicity of an All Growth ETF at a low management fee (0.19%). DHHF has done very well since purchase (+11%). The ETF is certainly diversified but, he is wondering whether the All Growth, as it says on the label, means that it is growing.

DHHF is a bundle of four low cost funds. The funds are:

The percentage allocation, on 24/01/2024, with the Management Expense Ratio (MER) of the underlying funds is shown below. Betashares have done a good job to ensure the underlying funds have very low fees (MER).

ETF	% Allocation	MER (%)
VTI	42.0	0.03
A200	37.1	0.04
SPDW	15.0	0.03
SPEM	5.7	0.07

Slack Investor must admit to a misunderstanding when he bought DHHF – he thought All Growth meant he was buying a selection of growing companies. It is only when he read the accompanying Product Disclosure Statement that he realised that All Growth was in reference to the fund being almost 100% in growth assets (shares or property). They are using All Growth as a descriptor to investing style. The All Growth assets make this fund suitable for those who have a high tolerance for risk. Betashares recommend a holding period of at least 7 years.

Does Growth mean Growing?

Not necessarily. This can be confusing – it was for Slack Investor! He has been guilty of using these terms interchangeably. Growth can be used as an investment style description – indicating the asset mix and amount of risk. The more shares and property in the mix, the higher the risk (chance of negative returns). According to Investsmart, typical mixes for funds are:

High Growth: around 100% in shares or property.
Growth: around 85% in shares or property, and 15% in fixed interest or cash.
Balanced: around 70% in shares or property, and 30% in fixed interest and cash.
Conservative: around 30% in shares and property, and 70% in fixed interest and cash.
Cash: 100% in bank deposits or ‘capital guaranteed’ products.

Of course, Slack Investor should have fully read the DHHF PDS before his purchase – a rookie error! Because he also has a stable income portfolio, the ‘riskiness’ of DHHF didn’t bother Slack Investor. However, his favourite companies to fill the Slack Portfolio are those that are having earnings that are actually growing or, are projected to grow, at least 10%.

A big portion of DHHF consists of the ASX 200 (37.1%). Slack Investor owns a small holding of the Australian Index and, he acknowledges that it is a fantastic part of any income portfolio – as it is a great source of dividend imputation income. However, he has never really been a big fan of the ASX 200 in the growth-based (or, should I say, growing-based) Slack Portfolio.

The ASX 200 is a mixture of ‘Duds’ (shrinking companies, decreasing earnings), mature companies (companies in steady state – earning but not really growing) and, companies that are increasing earnings and actually growing.

In the ASX 200, seven of the top ten holdings are either banks or mining companies – these types of companies are not known for growing every year at above 10%. For example, the top ASX 200 holding is the Commonwealth Bank (CBA). According to the Market Screener site, CBA’s 2024 Earnings Per Share (EPS) growth was -4%. For 2025 and 2026, growth is projected to be 5% and then 4% p.a.

Slack Investor rates Betashares DHHF to be an excellent ETF for diversified share exposure at a relatively cheap cost. It definitely qualifies as High Growth as it consists of nearly 100% in shares or property. However, Slack Investor would rather concentrate on companies that are actually growing. He will sell DHHF and use the cash to buy something else.

January 2025 – End of month update

Slack Investor is IN for Australian index shares, the US Index S&P 500 and the FTSE 100.

The new year has started well, particularly for the UK and Australia where, the FTSE 100 is up 6.1 %, and the ASX 200 up 4.6% in January.

The S&P 500 (+2.7%) is relatively subdued after the monster 25% gains of 2024.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

Long Term Returns … Boring?

Boring isn’t it. How Slack Investor goes on and on … and on and on … about long-term returns. But firstly, some short-term returns. All numbers are in for 2024 and the Slack followed markets all had an ‘above average’ year when dividends are included. The average returns are based upon the 2024 Vanguard Index chart 30-yr returns and, for the FTSE, the 20-yr return.

Index	2024 Index Return	2024 Total Return (inc. Div)	Av. Yearly Total Return
ASX 200	7.5%	11.4%	9.1%
FTSE 100	5.7%	9.7%	6.9%
S&P 500	23.3%	25.0%	11.1%

The beautiful histogram of annual ASX 200 (and proxies) returns (that include dividends) from MarketIndex.com.au has been updated for 2024. Slack Investor is always pleased with an addition on the positive side of the ledger – he notes that there are many more positive years than negative – this also helps his disposition.

Historical Annual Returns of the ASX 200 (including dividends) – Source: MarketIndex.com.au

A similar pattern with the S&P 500.

The last 151 years of annual returns (without dividends) for the S&P 500 Index – From visualcapitalist.com

For both the S&P 500 and the ASX 200, 19% of calendar years delivered a negative return. Therefore, on average, we can expect a negative return for one in every five years.

2025 Predictions?

Slack Investor is no seer. The Financial Press has come up with a range of views for 2025. In a very 2025 move, Slack Investor asked the AI Bot Perplexity for its predictions for the S&P 500 for 2025.

Based on various Wall Street analysts’ predictions, the S&P 500 is expected to deliver positive returns in 2025, with estimates ranging from approximately 9% to 20%. – Perplexity

From experience, Slack Investor knows that the financial press predictions are not very good. Perplexity cautions that the past S&P 500 predictions have generally been inaccurate and unreliable.

Whatever 2025 brings, Slack Investor will take the short-term returns on the chin – he does rely on positive returns in the long-term. As the chart below indicates. If you held a World Index Fund such as Vanguard MSCI Index International Shares ETF (VGS) for 5 years, you would expect positive returns on 88% of occasions. Longer holding periods will almost certainly yield you positive returns. VGS has a relatively low management fee of o.18% and does not hold Australian shares.

Some say that long term investing is boring – but Slack Investor finds it exceptionally satisfying.

Intergenerational Wealth Transfer and December 2024 – End of Month Update

The incomparable cartoonist David Rowe capturing Donald Trump in the Australian Financial Review taking the Republican party for a swim in the sewer.

The Clown in Chief – Stable Genius? Great Investor?

Far be it for Slack Investor to disparage the wisdom of the majority of voting Americans that have just elected Donald Trump for four years as their president. Despite Trump declaring himself as a ‘stable genius’, my mother wisely used to say that ‘Self-praise is no recommendation’.

“I built what I built myself” – Donald Trump

PolitiFact disputes the extent of this claim. There is no doubt that Donald’s path to being a billionaire was helped by intergenerational wealth transfer. Around 1974, his father lent him $140 million in today’s dollars – most of which was never paid back.

“Fred Trump actually lent him at least $60.7 million, or $140 million in today’s dollars.” – New York Times: Special Investigation

There is some contention on how much was available in ‘free cash’ but, if the available amount was invested in S&P 500 stocks in 1974, PolitiFact estimate that it would be worth at least $3 billion today. Using different initial estimates, the National Journal estimates that passive investing in stocks could have enriched Donald by $US8 billion. So, it seems that Donald was destined to be a billionaire – whether investing in real estate – or the stock market.

“Bloomberg puts Trump’s current net worth at $2.9 billion, Forbes at $4.1 billion. The National Journal has worked out that if Trump had just put his father’s money in a mutual fund that tracked the S&P 500 and spent his career finger-painting, he’d have $8 billion.” – Source: National Journal

To further harp on about the miracle of compound interest , there are huge advantages in starting to invest at an early stage. The chart below contrasts the case of Investor 1 at age 25 and investing $5000 per year for 10 years – then stopping, and allowing the compounding interest to do its work. Investor 2 doesn’t start his investing quest till the age of 35, and invests $5000 per year for 30 years. He never catches up to Investor 1.

Source: Federal Reserve Bank of St Louis

Of course, Slack Investor is all about personal empowerment and the chart above rings the bell on starting your investment journey as soon as possible. In the journey of life, you may be one of the lucky ones to receive a gift or inheritance along the way – this advantage is huge! Slack Investor acknowledges his privilege and was given a gift from his grandfather’s estate equivalent to 30% of a year’s salary in his early thirties. The gift went straight on my mortgage.

This makes Slack Investor ponder about the help that a monetary gift can bring. Slack investor is all for self improvement, through education or travel. However, if given a gift of money, he would recommend, at least, using a good portion of it to reduce any debt – or invest. But do it now.

December 2024 – End of Month Update

OK, someone must have been naughty! The year closes and there was no December ‘Santa Rally’ this month. All followed markets fell. The ASX200 down 3.3%, the FTSE100 down 1.4%, and the S&P500 down 2.5%. Slack Investor remains IN for the FTSE100, the ASX200, and the US Index S&P500.

I haven’t yet done the maths on the market yearly gains that include dividends. In raw terms, for calendar year 2024, the ASX 200 was up 7.5%, the FTSE 100 up 5.7%, and the S&P 500 up 23.3%.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index). The quarterly updates to the Slack Portfolio have also been completed.

Market Value – December 2024 Update

A few times a year, Slack Investor likes to take a snapshot of the markets using the Cyclically Adjusted Price to Earnings ratios (CAPE) – which use ten-year average inflation-adjusted earnings. He first started using CAPE as a ‘value’ tool in September 2021 and, the most recent post on Market Value was for the end of May 2024. That was 6 months ago and, probably due to the strange ‘Donald 2.0’ effect, the US and Australian markets have powered on since then.

There are some critics of CAPE as a predictive tool. However, there is some good research that links CAPE to future returns … and future returns are what Slack Investor is all about.

Shiller P/E and S&P 500 10-year annualised forward returns from 1983. There is a clear relationship between higher CAPE and lower expected 10-yr returns for the S&P 500. Data valid as of 31 December 2023 – Investco

The CAPE (cyclically adjusted PE) ratio is not a useful timing signal for market turning points, but is a powerful predictor of long-term market returns.
Research Affiliates

For the following charts, Slack Investor uses monthly CAPE data from Barclays, the 40-yr mean is calculated and plotted together with the latest CAPE values – up till the end of November 2024. A ‘fair value’ zone is created in green where the CAPE is within one standard deviation of the mean (average) – click images for better resolution.

ASX 200 CAPE Value 23.0 (12% above long-term av.)

ASX CAPE values – up till the **end of November 2024**

FTSE 100 CAPE Value 16.3 (7% below long-term av.)

UK CAPE values – up till the **end of November 2024**

S&P 500 CAPE Value 37.7 (52% above long-term av.)

US CAPE values – up till the **end of November 2024**

What is Slack Investor doing about the high US market values?

Not much. The predictive skill of the Schiller CAPE is not very good over 1-yr and 5-yr periods. It does show some skill for periods of 10 years and longer. This poses the question – should he withdraw his investments and just wait out the next ten years? Not likely! Time in the market is what matters.

The CAPE ratio is a helpful way for Slack Investor to look at the current state of the markets – it doesn’t change his approach to investing. He will just stick to his guns with his tried and true investment strategy.

Invest in a range of companies using ETF’s or a portfolio of at least 15 stocks.
For the individual stocks, continually monitor these investments to make sure that they still have some competitive advantages (e.g. A Moat), generate sustainable profits, they are continuing to grow and predicted to grow further.

These type of companies should do OK over most market cycles.

Slack Greetings from the UK – an ode to English Pubs

Slack Investor is not really much of a cold season traveller but he is here in the UK for some family business. England in winter is pretty grim with short days and cold weather. However, there is joy in slipping into a great English pub with a fire going and conversation everywhere. Experience tells me that most English pubs are good. But, he wasn’t just in any pub – Slack Investor was drinking at the RAF bar of The Eagle in Cambridge. Famous for being the pub where Francis Crick and James Watson (based on the work of Rosalind Franklin and others) celebrated and announced the double helix structure of DNA in 1953. Long live the English Pub.

The Eagle, Cambridge, UK. Long live the English Pub.

Money Makes Money – and November 2024 – End of Month Update

My Dad was an amateur finance bloke and would often spend the quiet hours of the night with a notebook and reading matter that would usually have the theme of unlocking great wealth for his family. One of his sayings was:

‘Money Makes Money’ – My Dad

We were from a large family and there were always sufficient ‘outgoings’ to make sure that my Dad never really got to test the theory on his own funds. But, he believed that if only he could amass a chunk of money, then this could be invested wisely and, it would keep on growing and, he would never have to worry about money, ever again!

He had seen many examples of the rich getting richer. People with money increasing their wealth in a seemingly effortless fashion e.g. A Sydney harbourside home bought for $10 million selling for $26 million four years later. He was also a fan of Noel Whitaker and bought one of the first editions (in 1987!) of Noel’s great book Making Money Made Simple. My Dad understood the simple truth of saving more than you earn, investing these savings and letting the compounding do its work over time. Although it takes more time than harbourside investing, Noel’s advice still holds up.

I have since learned that my Dad might have got the ‘money’ quote from Benjamin Franklin who, expresses the full beauty of the compound interest process.

“Money makes money. And the money that money makes, makes money.” – Benjamin Franklin

So, it is not only the money that you invest, but all the earnings are earning too.

The one-eyed political investor

Let’s suppose you were such a committed US political investor that you only had funds in the market when ‘your president’ was in power – and, quickly withdrew your investments when the other team got in. Using 70 years of S&P 500 data shows that you might be better off if you were a Democratic investor. However, your gains would be tiny compared to the situation where you were more relaxed and just kept your money in the market – regardless of President. The lesson is, that time in the market is the key.

Investing in the US S&P 500 index from Jan 1953 to September 2024- Source Financial Synergies

It is time in the market that matters – not who you vote for!

The following pair of charts presents another way of looking at the effects of one-eyed political investing, either Democrat or Republican, over a 10-yr time frame and also, a 70-yr period. The time periods are different to the above chart and hence the different final dollar totals.

If you invested ONLY when your political party was in power, you would be much worse off.

Using S&P 500 and proxy data for 10 years and 50 years till December 2023 – Source: Steelpeak Wealth

Slack Investor has seen the shape of the green curve on the right hand side before. It echoes the hundreds of compound interest charts that I have looked at for inspiration. It starts flat and then rapidly increases with time.

“Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” – attributed to Albert Einstein

Let’s say you managed to save $10 000 per year and you invested the money with an average return of 10%.

The blue line indicates the value of investing $10 000 p.a. and, compounding over 30 years. The green circle is where your interest earnings start to exceed the amount of your own money invested – Source: A Wealth of Common Sense

The brown line shows savings of $10 000 p.a., for 30 years, amounting to $300 000 of your money. The grey line represents the total compound interest on your investments. For the first 15 years you think you are getting nowhere – then the compounding kicks in with the help of time – your money plus earnings on that money plus time. Using the above assumptions, the total accumulated amount would be over $1 660 000.

The 10% earnings seems a little wishful. Although, past 30-yr averages for US shares, International shares, Australian stocks and Australian Listed property are, respectively, 11.1%, 8.2%, 9.1%, 7.8%. If your investments averaged 8% p.a., the total value of your investments would be $1 233 449 – Not Bad! However, life is not really like an Excel spreadsheet.

Slack Investor’s case study of compounding

A real-life example of compounding returns can be found in Slack Investor’s own tracking of Net Worth. He has diligently tracked his Net Worth (Assets – Liabilities) for 34 years since 1990 using the free software Microsoft Money Sunset International Edition. There is no magic in this chart – except for the miracle of compounding! As a family, we achieved a savings rate (including superannuation) that varied between 20% and 45%p.a. of take home salaries. During this time we have had home loans and have always been investing.

Slack Investor’s (+Ms SI) Monthly Net Worth Chart over the 34 years of saving and investing since 1990 – Microsoft Money

Even though Slack Investor is familiar with the concept of compounding interest – he is continually astonished with the spectacular gains in net worth over the latter years.

My Dad was right … Money makes Money! Start saving and investing now and get on this ride!

November 2024 – End of month update

Slack Investor is IN for Australian index shares, the US Index S&P 500 and the FTSE 100.

To Slack Investor’s bewilderment, in what can only be described as a ringing endorsement for Trump economic policies, the S&P 500 raged ahead by 5.7 % in November.

For the ASX 200 (+3.4%) and the FTSE 100 (+2.2%) – it has also been a great month.

Slack Investor feels it is time to tackle another valuation of the markets next post.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

The World According to GARP ETF

Slack Investor has never seen the film, though well reviewed, but he did struggle through the complex book by John Irving in the late eighties. His interest in GARP has been rekindled by a new ‘Smart Beta’ ETF that has been floated by Global X in October 2024. This one is fresh!

Smart Beta refers to an enhanced indexing strategy that seeks to exploit certain performance factors in an attempt to outperform a benchmark index – Fidelity

This is good … is it possible to get the benefits of passive investing with some of the advantages of active investing strategies? Can you have low fees with better performance than benchmarks? Perhaps all the hard work in selecting growth stocks can be done with a financial selection algorithm and Slack Investor can get back to the couch.

Global X S&P World ex Australia GARP ETF

Exposure to companies with robust earnings growth and solid financial strength trading at reasonable valuations – Global X S&P World ex Australia GARP ETF

Growth at A Reasonable Price (GARP) … in an ETF … am I dreaming? Is this too good to be true? Ahh … there is a management fee. But, it’s 0.3%. Not bad for a fund that has some selection smarts plus international exposure. There is a lot to like about this ETF.

Selection Process for GARP ETF

The GARP ETF tracks the S&P WORLD EX-AUSTRALIA GARP INDEX using a rules based stock section process. From the global shares universe, all companies are assigned a Growth score for their previous 3-yr growth. Then there is a Quality score that combines company assets to debt ratio, return on equity (ROE), and the earnings to price ratio (Inverse of P/E Ratio).

Once the ranking is complete, shares are selected that score highly in both categories and some restrictions on exposure to individual shares and sectors is applied – Mark LaMonica, Morningstar

So, by weeding out some of the companies that are ‘unreasonably’ priced the top 250 global companies are selected according to GARP principles. The price (P/E Ratio) filter should help mitigate the portfolio downside in a market downturn.

Performance

The GARP ASX ETF has only been running a month but Morningstar has gathered some data based upon the GARP principles over time.

GARP seems to perform better than the S&P 500 in some time frames, particularly in the periods that include a share crash. The 5-yr period includes the 2020 ‘Covid Crash’ and, the 20-yr frame includes the 2007–2008 financial crisis (GFC). But these are just index values – without fees. When you factor in the GARP management fee of 0.3% compared to the iShares S&P 500 ETF (IVV.ASX) fees of 0.04%, the outperformance of GARP does not look as good.

Top 15 Holdings GARP

There are a lot of tech companies in here but also some consumer discretionary stocks. Some of the more expensive (high P/E ratios) tech companies must have been filtered out by the GARP process. It is only when Slack Investor takes a closer look at these companies that he starts to get ‘cold feet’. Overall, Slack Investor thinks this is a good package to get exposure to reasonably priced growth companies. Two things that hinder Slack Investor from investing are :

The overlap in holdings to some of the ETF’s that he already owns. e.g. Betashares Nasdaq 100 ETF (NDQ.ASX) and Betashares Global Quality Leaders ETF (QLTY.ASX) – a purchase of this ETF would not really add to the diversity of his share ownership
In the the top 15 holdings, there are 3 Petrochemical companies – Exxon, Chevron and Shell.

Slack Investor will admit to some hypocrisy here. He owns a 15-yr old petrol driven car and regularly uses jet fuel to get to far away places. On the plus side, his roof is making renewable energy. However, the world is getting hotter and he’s aware that we must continue to work toward phasing out the use of fossil fuels. Are you listening Donald?

Slack Investor is a part owner of all types of companies through index and broad market ETF’s (e.g. VGS, STW, S&P 500 Index, etc). However, he has a ‘piddly’ moral stance of trying not to bundle into the Slack Portfolio any ETF’s that actively select higher proportions of Tobacco, Gambling or Fossil Fuel companies.

Is this making a better world? Probably not. But, leave Slack Investor alone to pursue his token activism – no harm done. Besides, it’s likely to be better than doing nothing. This is a personal thing and, Slack Investor encourages all investors to take on any sort of investment stance that feels right for them – providing it is profitable in the long term.