Investment

[motorbiking]

Ms motorbiking has just spent 45 minutes on hold to explain to HMRC that her simple assessment is wrong. It showed she owed a few £100 in tax on savings, as she was a 40% tax payer. Because we set up her SIPP in the same tax year to use up her unused pension allowance, It pushed her out of 40% tax and back into 20% tax, fully restoring her £1k allowance. As a result her SIPP was topped up at 20% and she has a tax rebate of a few £k coming. There is nothing simple about "simple assessments". The average person just into to 40% tax would have no clue about being able to reduce their liability by moving cash into their pension and they should not need to pay for an expert to help them avoid tax.

 

[motorbiking]

Serious question for the investment gurus: When you make a profit, where does that profit money come from?

I.e. when Justin, for instance, makes a casual £1,000 in between making a brew and haaving a sh*t, where has that £1,000 come from? Whose was it the day before?

1. Global growth.
2. people selling other stocks which will fall and buying those stocks that grow.

 

[motorbiking]

That's what I was thinking.. I could be sat celebrating from my neighbours going bust.

Not always. there is growth too.

 

[JohnD]

Speaking as an investor, I try to invest in a well-run company, that makes a product, or supplies a service, that people want to buy at a profitable price.

For example, my old granny ended up holding shares in Kingfisher, which owns Screwfix and B&Q. Funnily enough she achieved this as a result of my granddad being a shareholder in Woolworths, whose high street stores were looted by the management to finance and staff the replacement businesses, which were still owned by the shareholders..

With ingenuity of development, and good management, such a company can make money, some of which it can invest for its future, and some it can distribute to its shareholders.

Of course, it is not as simple as that.

 

[motorbiking]

Are you familiar with their "screw-up" that resulted in Toolstation?

 

[JohnD]

I'm familiar with a successful business that grew out of a declining one.

Unsurprising that there is enough demand for similar businesses to compete for customers.

Despite weak non-compete contracts.

 

[motorbiking]

So no then. In 1999, B&Q owner Kingfisher PLC acquired Screwfix for £60M. However, Kingfisher neglected to include a strict, long-term non-compete clause. Just four years later, in 2003, Mark Goddard-Watts took his knowledge and a handful of former Screwfix executives—and launched Toolstation a carbon copy of screwfix, which he subsequently sold to TPG for £42M a few years later.

oops

I don't know too many Kingfisher investors who'd be happy with <2% growth in the last 5 years.

 

[Highway Man]

I am not aware of this story of toolstation, I suppose this is all part of this investing game, studying the companies and it's history before investing? I could imagine it being a bit of a kick investing into a harry average business and doubling your money?

 

[JohnD]

If there's a lot of demand, and a lot of money, in the umbrella business, somebody else is sure to set up an umbrella shop.

 

[motorbiking]

massive M&A lawyer f*up. The idea of buying someone's business is to buy their knowledge and not fund them building a competitor, which is what they did.

 

[motorbiking]

I am not aware of this story of toolstation, I suppose this is all part of this investing game, studying the companies and it's history before investing? I could imagine it being a bit of a kick investing into a harry average business and doubling your money?

Some just track the moving averages, when it crosses they buy or sell. As said earlier in this thread you have a 90% chance of doing better over a 10 year period than money in the bank.