First up, I’ll address the difference between the two in relation to the “perceived” returns. Some people think that the returns between the two can be compared. They can’t. You are comparing apples and oranges, so to speak. Apart from basic arithmetic, which I’ll get to in a minute, the investing styles are completely different.

Let me explain, Trident Confidential is a trading style investment newsletter these days, because of markets being so volatile since 2008, the newsletter has been almost a trading newsletter due to the number of trades being put through. Prior to 2008, we hardly had a stop loss triggered, nor did we have to watch our stocks almost daily. This has been a fact of life since the GFC started in 2008. Now, I don’t expect this to be the case beyond 2012, but it’s a fact of life now until we exit these difficult and changeable times. The newsletter attempts to produce profits by being not only contrarian, but acting a “little opportunistic” while still having a long term investment goal. It doesn’t always work out that way due to the volatility, however. The newsletter has a quarter by quarter time horizon. Well, these days it does. Due to market conditions, I have had to modify my methodology to be more nimble and watchful, but I expect conditions to normalise in coming months as the EU debt crisis is stabilized.

The Trident Global Growth Fund is very different. It does not invest in companies from a quarter by quarter basis necessarily. The fund bases it’s investments more on medium to long term macro-economic trends, the underlying business fundamentals, business model execution and long term prospects of the investments it makes. It looks not at what will happen next quarter, but where the business will be in 2 to 5 years. Conservative long term investment fundamentals based on buying a great business at a fair price. It often turns out that many of the stocks that we choose for the fund end up in the newsletter or vice versa. Our selection process for both vehicles is very similar as you would imagine, but not always.

Let me explain. If a company has a poor result in a particular quarter, the newsletter will probably sell it or it will be stopped out due to adverse over-reaction from the market. That tends to be the end of the story for the stocks in the newsletter until the fundamentals once again become compelling and we may look at it again. However in the fund, if we hold the stock, we may judge it’s not in fact a time to sell, but a time to buy more because the quarter that let us down may have been a timing issue where sales will come through in the following quarter or some other aberration that has no effect on the longer term prospects of the business. We are constantly thinking long term in the fund and shorter term in the newsletter.

You may still be wondering why the different approach? Well, the fund is watched by me personally every single day. I investigate every stock that drops by more than the market and make sure there isn’t a fundamental change to the business. If, on the rare occasion, this is the case, I will sell the stock – I don’t communicate this to 3,000 subscribers, I just quietly do it. I make a long term investment decision.

The newsletter is a very different approach. Many of you don’t watch the market every day, you don’t check the latest news on all your stocks daily, nor do you get up in the middle of the night most days, as I do to check the market and all the stocks. I usually rise at 3am and 4am to make sure all is as it should be, market craziness notwithstanding. Because the newsletter information is acted upon by individuals, some with little stock market experience, we have trading rules and buying strategies that allow you to sleep. They protect you from big losses.  This works superbly well in these trying times. As the market settles down, stop losses will become rare occurrences as they were between 2004 and 2007.

As regards the fund, it doesn’t work that way I’m afraid. I can’t go and set stop losses on all the positions in the fund as it could cause market chaos, particularly as the chances are newsletter subscribers have their stop losses set on many of the same stocks and would cause even greater volatility. Not only that, the fund positions are simply too big to be putting stop losses on.  I have to think through all my actions carefully with regard to subscribers, and fund unit holders, as well as complying with the regulations that are imposed on fund managers. There is much to consider so nobody is disadvantaged and there are no conflicts. However, having two different investment approaches, based principally on time horizon works out well.

The two Investment approaches in a nutshell:

The Trident Confidential Newsletter

• Time horizon is 3 months to 2 years.
• Risk is controlled by stop losses being set
• Investment philosophy is based on strong fundamentals, earnings growth, current to near term macro-economic favourability and contrarian approach to market volatility. Stocks are sold when they are stopped out, or when their prospects for near term price appreciation have faded.

The Trident Global Growth Fund

• Time horizon is 2 to 5 years
• Risk is controlled by daily monitoring and review, as well as the use of a proportional stop loss strategy where deemed prudent.
• Investment philosophy is based on strong fundamentals, earnings growth, dominant market position with demonstrated innovation leadership, current to medium term macro-economic favourability and contrarian approach to market volatility. Buying great businesses at a fair price. Stocks are sold when they no longer meet the stringent fundamentals requirements or when the business’ prospects have negatively changed.

Now let’s consider the “Arithmetic”

Some people try to compare the returns of the newsletter and the fund. Well firstly, any fund manager will tell you can’t judge a fund in it’s first year. The reason? When a fund starts you get a “lump” of money to invest at the beginning and the over the next several months the fund grows, as further investment becomes available. This enters the fund at the start of the next month after it was received. So, “injections” don’t come at precisely the time that may be ideal, as you would have if you were investing in your own portfolio.

This means in a rising market as we had until April this year, when most funds into the fund were received, we had to constantly top up our existing positions to maintain the weighting they had in the portfolio, which at that time meant paying higher and higher prices, this tended to water down the overall return. Of course once we were “fully invested” by April the market turned south until early October. This was an unfortunate situation, but is now turning around. At the time in April, talk of mythical US recessions was only just beginning, and the Europe debt crisis was thought by most to be somewhat contained (even the EU thought it was). There is nothing you can do about events like these – except ride them out and wait for the turnaround as we are starting to see now. So, it will be better to judge the Fund in a year two when the intake of funds will be insignificant to the overall level of funds under management.

The next thing to consider is the fund return is calculated after foreign exchange fluctuations, which have been just as volatile as the stock market but in often opposite directions. There are fees charged as well as the brokerage costs. These are costs not reflected in the Trident Confidential results (as we state each week). If your positions are small, then your return may be adversely affected by transaction costs, particularly when the market is volatile. If your positions are large, then your returns would mimic the newsletters returns more closely, but only after making adjustments for foreign exchange, which may be positive or negative depending on the AUD$/US$ relationship at the time.

Also there are the issues of allocations too, which can be 1 to 3 allocations, these can also effect the returns depending on which stocks have a greater weighting when purchased due to multiple allocations. We keep to evenly weighted allocations to keep the method simple. We also keep foreign exchange out of it because if we calculated the return converted to Australian dollars, then we would have our overseas (mainly US subscribers) complaining.

We also mention the return in the newsletter is a “guideline only” and that it is as simple to understand as we can make it. Most newsletters calculate their returns exactly the same way as we do, and we stick to that method so people can compare apples with apples.

As I said earlier, showing returns this way is a requirement by the ASIC, and we are the only newsletter is Australia that complies with this regulation and degree of transparency. If in the future we come up with a simpler and easier to understand method to represent the returns, then we will (provided that it complies with ASIC regulations), but getting closer to a real life situation always includes complication, which is probably why all newsletters use a similar simple returns methodology. Although, we do at least include real achievable prices, not “day before” entry prices that everyone else uses.

Another thing to consider is that the simplistic way we show our returns is directly relatable to the various indices. The indices like the S&P500 and ASX All Ordinaries don’t include brokerage either so, comparing an after brokerage and all costs return is not comparable to the “gross” movement in an index. You would have to take a “hypothetical” brokerage rate off the index to be able to compare apples with apples, which is another reason we do it the way we do.

The next thing is the weighting of the portfolios. The newsletter is evenly weighted to make it easy and simple for subscribers to compare a simple benchmark and the arithmetic, whereas the fund is anything but evenly weighted. The weighting of the fund is based on risk reward - The higher the weighting the lower the risk; the lower the weighting, the higher the risk. This is prudent for any long term investment strategy, and while won’t produce the mercurial results that the newsletter may on a week to week basis; it will produce a better risk weighted return over time. For example, there is a much greater weighting of the risky leveraged ETFs in the newsletter that I wouldn’t employ in the fund, due to a more conservative long term investment strategy.  

In a nutshell: Over time, say 3 years, the return on the fund will probably be very similar to the newsletter return after the newsletter return is adjusted for foreign exchange and brokerage, as well as dividends. Why, when there appears to be such a difference now? Simply because 70% of the investments will be the same, but somewhat differently “risk weighted”, but bought at similar prices. 

Yes. Lance Spicer is certified as complying with RG146 as required by the Australian Securities and Investments Commission (ASIC) to provide General Investment Advice and Financial Product advice in the area of shares, derivatives and other areas of investment. Trident Investment Management Pty Ltd is an authorised representative (No 339798) of Australian Mutual Holdings Limited (ABN 90 115 182 137) holder of Australian Financial Services License (AFSL 295393).

Australian and Global, usually around 50%/50% but can go 20%/80% depending on the opportunities and the economic circumstances.

We will hold them forever if they keep going up. We still hold the first stock we put into the portfolio - though we have bought and sold it probably 5 times.

We allow our stocks to enjoy the lifts we predict and then move on when we feel they have reached their current potential. We often revisit them as new technology or growth trends puts them back on our radar.

Though we are not "buy and hold"  - the GFC has changed the investing landscape and that theory is no longer appropriate - now we are "buy and watch". We still take a long term approach and but will sell a position when we feel there is no further value or we have a better place to place the funds.

We are not day traders or speculators. We are investors.

A 12 month subscription is AUD$799 (50 issues) with renewals dropping to only $399 each year after that, as a loyalty discount, provided you stay subscribed.

Our information has been written with an international perspective and covers information for beginers, right through to experienced investors, so it is suitable for all.

Read The User's Guide - it is the instructions!

Do not leap in and buy all the stocks in our portfolio immediately, only buy stocks that fall into our buying range. We ask that you build your portfolio slowly and steadily over time. It may take up to 6 months to be fully invested in our recommendations, depending on how much money you have to invest.

Buying only stocks under our buy up to prices will ensure you get the best returns possible and closely emulate our own.

Yes, we do.

Our current portfolio (March 2011) has around 30 stocks in it and we attempt to maintain good diversification by having stocks in a number of sectors such as commodities, defense, aerospace, technology, medical technology, industrials, consumer staples and infrastructure (not a complete list).

We avoid certain other sectors when we feel there are problems. We will invest only in sectors and stocks where we can clearly identify earnings trends. We do not follow the crowd.

No, we don't recommend you buy anything unless you feel comfortable that the investment suits your risk profile. We simply present a portfolio of stocks that Lance Spicer is investing in. Subscribers follow the Trident Confidential portfolio and are advised what we're buying and selling and at what price, PRIOR to Trident Confidential doing it.
If you decide to copy the portfolio, that is entirely up to you, but we should point out investing is stocks carry a degree of risk and you should always seek professional advice if you are inexperienced.

Yes, very easy! Any broker in the US, most in Europe and our  recommended brokers in Australia will allow you to trade online - easily and cheaply - with a choice of two platforms. You can ring them up too, if you prefer. Don't think just because the stocks are overseas, they are hard to buy - they aren't. We show you how. We also offer a full service broker who can assist our members if required.

No, you can trade as little or as much as you like - You just have to be careful to watch your brokerage fees. We suggest $10,000 is a reasonable minimum to start off with, but many people have started with $5,000. What our system does is show you how.

Yes, we do. From time to time or selling strategy (outlined in our User's Manual) will come into play or the editor may inform readers that he feels that the maximum benefit has been attained and it's time to sell. Our hold times, depend on market conditions, naturally, but we do employ the "let your profits run and cut your losses short" theory. Some stocks have been in the portfolio for over two years.
 

Yes, often they are. In some cases, stocks that are exclusive to the Australian exchange, can be purchased by a US broker quite easily.

For the first 12 months - 50 issues - it costs AUD $799. Each year thereafter, it will cost AUD$399, which will include the Trident Confidential and all new books and updates.