Building your wealth

Share Wealth founder Gary Stone, who has spent 30 years researching and investing in the stock market, designs trend-following investment systems for self-directed investors to manage their own portfolios. But what does that really mean?

We’re talking about how to maximise your returns in the stock market and the first question is: you talk about investment tortoises, which sounds like a bad thing, but what is it and is it good or bad?
Gary Stone: Well it is good because people see the stock market as being highly volatile, up and down, everything’s quick and fast and it’s a place to make a quick buck. Whereas it’s actually the exact opposite. The way to be successful in the market is to use a systematic approach and to be slow and steady about it. To have a big picture perspective. The tortoise is a symbol of longevity – play the long game and have a plan and stick to it. The tortoise also has built-in protection, the shell that protects from danger. In the market the type of danger is when we have a fall like we had back in March. You need to have a systematic approach that has a built-in protection that is a call to action, if you like, but the systematic process allows you to get out of harm and protect yourself. Also, the tortoise is a symbol of patience and it has endurance, but ultimately the tortoise wins the race and I think that’s the key thing by being slow and steady.

So, what does a tortoise’s approach to share market trading look like?
GS: Well having a systematic approach is a different way of going about it but it’s not a new way, it’s been around for probably 40 years since the early 1980s, basically since computers came around. A systematic approach is about developing a set of rules, this is what I do. I design the systematic approach, researching historical days on how the stock market ebbs and flows and then recognising patterns of how prices move and then building steadfast and fixed rules to actually execute in the market. So, what you do is by following the rules, you’re not having a knee jerk reaction to noise, and news, and geopolitical events, or stock market events. You actually are letting the rule play out and you’re following those rules.

Is one of the dumbest things you can do is look at the stock market and your shares every day? 
GS: Absolutely, but if you’re only really doing it from a vigilance perspective to see if any of your patterns have been hit, that’s fine. As long as they’re not going to look there to find out ‘what should I do today?’ and knee jerk react to a situation; you’re going there to see if your specific rules are still in place and whether you should buy or sell or hold accordingly. And typically, you’re looking to go and see that ‘today I should hold’ and that might only take you 10 seconds to work out.

Say someone signs up to Share Wealth’s systems and owns their own shares in a self-managed super fund, how are the rules applied to their holdings?
GS: It works by effectively we look at fixed universal stocks so you’re looking at about 30 or 40 stocks which are the large kept, well known, household name stocks from the market or you could look at the US market in the same way as well. What we’re looking for is trend-ability so the stocks are able to trend up or down. We don’t mind if they trend down, but we’re looking for potential to trend up and hold strong. So the idea is to look at the fixed universe, and you don’t need to look at it every day because you have an app that’s going to alert you to it. You’ll get a notification to say ‘hey this one is on the radar’ or ‘this one it’s time to sell’ and you then manage your portfolio accordingly so you build up a portfolio of anywhere between 5 and 15 stocks and there might be days or weeks that go that you don’t touch it. Once you’re in the market, you don’t do anything. We just let the stocks run, and then you’ll get sell signals and the sell signals will typically come after the stock prices start to fall a little bit. And as we had in March this year, we got 100 per cent into cash just because the systems rule called for active sell out of the market. Now we didn’t know it was going to crash to 37 per cent at that stage, it had only gone down about 9 or 10 per cent when all that happened. But then in April we started getting signals to get back into the market again and they were just the rules playing out based on the movement of prices of the stocks.

The short answer is you’re sending updates, whether it’s via app or email, that signal to people to action or not action. But can you tell us what your performance has been like in terms of the Australian stock exchange?
GS: The good that I did was in the research, the research is now a system. But I trade a real money portfolio that we put out for our customers to follow, so it’s a publicly transparent portfolio. And we’ve been doing that on this particular portfolio from the 1st of January 2016 and as of today that portfolio over the four and half years has achieved nearly 18 per cent compounded return per annum. That means that over that period of time you would have more than doubled your money in four and a half years.

Our members are at a time where they don’t want to gamble. This is not the time where they are looking for short-term gain, they are looking for long-term gain and they don’t want to gamble with what they’ve got left. It’s a confusing time and there are people who are holding tight. We know the market went down and then it has clawed its way back up. But at the time of such uncertainty, is holding tight such a bad idea?
GS: Well it depends on your horizon for investing. Most of our customers are in the range of 50 to 80 years old, but that sweet spot would probably be in the low to mid-60s. Most of our customers have self-managed super funds, they’re retired and the biggest risk to them is the sequence of returns risk. If the market declines and stays down like it did in the early 2000s, and even in 2008, where it stayed down for quite a long time. If you’re just about to retire and that happens to the market, that’s a huge risk. Our clients, over the 25 years in business keep telling us that the biggest advantage we provide to them is knowing when to sell so they can go into cash and to not only put up with the financial downturn but the mental strain and angst that goes along with that. Sure, they might come back but you don’t know and you don’t know which ones are going to come back, some can stay low like the banks. They’ve stayed low for 4-5 years now and it might be another 4 or 5 years before they start trending up.

How can people find out more?
GS: They can just go to There’s a case study that they can actually download as a pdf and what I just told you about that portfolio they can have a look at that and they can see all the actual positions that we’ve taken, they can see the stockbroker reports. So that’s a real money, large case study that they can examine.


Written by YourLifeChoices Writers

YourLifeChoices' team of writers specialise in content that helps Australian over-50s make better decisions about wealth, health, travel and life. It's all in the name. For 22 years, we've been helping older Australians live their best lives.

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