How did you perform during the recession?

Loughton_Monkey

chewmylegoff wrote: »

Perhaps this is pedantic but "buy when others are selling and sell when others are buying" is pretty rubbish advice given that you cannot physically buy something unless someone else is selling it and vice versa...

Every day I get the same old "there are more buys than sells so the price should go up" nonsense from AiM market spanners who cannot grasp that the number of buys and sells is always equal.

Pedantic is my middle name so I understand what you're saying.

The advice is, in any case, virtually impossible with electronic trading.

There seems, also, to be another popular misunderstanding that when you buy shares in a company, you are basically 'doing them a favour' by investing in them. This of course is rubbish since all the shares were sold for 5 shillings back in 1954.

I will never forget, though, a 'thicko' I once worked with. Way back in the 70's when direct share trading was very rare from mere 'mortals' like us lowly insurance clerks. He'd got some shares. I have long forgotten the actual numbers [but that's irrelevant], but he was on the phone to the stockbroker who was obviously telling him that he was now (say) £500 up on this specific block of shares. He instructed the broker to 'cash in his profit'. He smugly made sure we had heard the conversation enough and filled in the details that he wanted to get the profit to spend on something.

A few days later he was red faced and literally tearing into the stockbroker on the phone again, complaining that his paperwork said he used to have (say) 1,000 shares, but now he's only got 673. The Stockbroker just couldn't seem to get any sense into him and eventually he slammed the phone down. He explained to us he wanted to keep the 1,000 share. All he wanted was a cheque for the "profits".

I'd love to know if this guy is still 'trading'!

vivatifosi

Thrugelmir wrote: »

One understated skill is to be emotionally detached from your investments. There's a price to sell at. Standing back and being objective is a failure of many investors.

Can't remember who by, but there has been some very good research into the psychology of this. Once prices start falling, people hang on to things for longer than they should in the hope of regaining the highs. This is even if they bought in before peak. Very much the same as gamblers chucking money at a losing streak... same response mechanism. So people through their nature lose mire than they should. I found this quite an interesting theory as someone who held on to my Halfax shares for too long.

Never get too attached or comfortable seems to be a good lesson.

IveSeenTheLight

chewmylegoff wrote: »

Perhaps this is pedantic but "buy when others are selling and sell when others are buying" is pretty rubbish advice given that you cannot physically buy something unless someone else is selling it and vice versa...

Every day I get the same old "there are more buys than sells so the price should go up" nonsense from AiM market spanners who cannot grasp that the number of buys and sells is always equal.

I totally agree with what you have written above.
How does it translate when you modify it slightly

chewmylegoff wrote: »

Perhaps this is pedantic but "buy when others are selling and sell when others are buying" is pretty rubbish advice given that you cannot physically buy something unless someone else is selling it and vice versa...

Every day I get the same old "there are more buyers than sellers so the price should go up" nonsense from AiM market spanners who cannot grasp that the number of buys and sells is always equal.

Of course the number of transaction remain the same between the number of buys to the number of sells, but by articulating the quantity available of both helps a little to understand the competitive market scenario

MFW_ASAP

Houses
We overstretched ourselves and maxed out with a 5xsalary mortgage, but bought a house that someone from an ordinary working class background like mine could only dream about. To our advantage in this, we bought at the bottom of the market and have enjoyed a sustained period of low interest rates. The house needed work and we have been able to secure decent deals from local tradespeople who were desperate for the work. We have just fixed our mortgage for 5 years and in that period we'll do overpayments so that if rates rise, we'll be secure.

Shares
I cashed out of the market just before the crash (I was contracting in the City of London and could see it wobbling). I bought back in pretty much at the bottom and have made significant gains since. One fund is currently at over 140% from when I bought into it.

Overall

I took various gambles, with buying the house and hoping rates would stay low enough to enable me to afford to renovate it and then reduce the mortgage and also cashing out of the stockmarket but more importantly cashing back in at a time when most people were predicting further steep falls. It all seems to be going well. Our pension pots have almost doubled and we have a dream house. When we get to retirement, we will downsize and use the tax free cash released, plus our enhanced pension pots to finance a very comfortable lifestyle.

He who dares, wins.

N1AK

chewmylegoff wrote: »

Perhaps this is pedantic but "buy when others are selling and sell when others are buying" is pretty rubbish advice given that you cannot physically buy something unless someone else is selling it and vice versa...

It is being pedantic, because like almost any quote it wouldn't be quoted if it had been expressed over 8 pages to be absolutely clear rather than requiring a modicum of understanding by the reader.

People like Churchill's "if you're going through hell, keep going" but being pedantic, as you seem to think is insightful, it's nonsensical because: if you're in hell then you are dead and you can't get out of there.

In the case of this quote it is painfully obvious that "when others are selling" means when supply exceeds demand and thus prices are falling or have fallen.

michaels

vivatifosi wrote: »

Can't remember who by, but there has been some very good research into the psychology of this. Once prices start falling, people hang on to things for longer than they should in the hope of regaining the highs. This is even if they bought in before peak. Very much the same as gamblers chucking money at a losing streak... same response mechanism. So people through their nature lose mire than they should. I found this quite an interesting theory as someone who held on to my Halfax shares for too long.

Never get too attached or comfortable seems to be a good lesson.

It always amuses me when people post up a question about what they should do with a shareholding and mention the price they bought at as if that in some way should help inform their decison making process....

chucknorris

vivatifosi wrote: »

Can't remember who by, but there has been some very good research into the psychology of this. Once prices start falling, people hang on to things for longer than they should in the hope of regaining the highs. This is even if they bought in before peak. Very much the same as gamblers chucking money at a losing streak... same response mechanism. So people through their nature lose mire than they should. I found this quite an interesting theory as someone who held on to my Halfax shares for too long.

Never get too attached or comfortable seems to be a good lesson.

I'm afraid I am even worse than that, but I am talking about ftse trackers not individual shares, I not only hold on, I usually invest more when the price has dropped. It has absolutely nothing to do with being emotionally attached, it is because I am investing for the long run, and I think that somewhere in between 10 and 20 years time the price I am paying will look very cheap and the dividend income will be producing a very good yield (on the price originally invested).


EDIT: When I said that I usually invest more, this time around I didn't invest as much as I should/could have when the stock market collapsed, I only invested up to the max for SS mini ISA's, which I do routinely anyway.

Generali

michaels wrote: »

It always amuses me when people post up a question about what they should do with a shareholding and mention the price they bought at as if that in some way should help inform their decison making process....

Capital gains could be a consideration. In general terms you're right of course: what you paid has no bearing on the current value.

Loughton_Monkey

michaels wrote: »

It always amuses me when people post up a question about what they should do with a shareholding and mention the price they bought at as if that in some way should help inform their decison making process....

Most people, however, are not in 'active trading' positions where they are conscious of such decisions. I would estimate that 90% of our equity investments [that's the sort of people who frequent these threads] are in one or both of two scenarios:

1. Regular contributions to a pension plan, where you have long since chosen your fund mix - which is effectively a big basket of hundreds of specific shares - and you just bung the same £500 in every month. It buys what it buys.

2. A bag of ISA funds which maybe get added to once a year, but otherwise languish in the basket of funds that felt right last time you looked at them.

Like most people, I take a snapshot of progress at least every month, but only buy/sell on a roughly annual basis. The price paid is not relevant in itself, but highly relevant in the context of how it performed lately. In other words, you are heavily "Into China", but it dropped 15% last year. What do you do? Sell and move on, or stick with it because it must be cyclical and is set to bounce right back up?

Personally, I always find such decisions difficult, but I will always take a view - but not necessarily taking into account what I paid for them. But I must admit to possessing the psychology that makes me sceptical of going too heavily into something that has just boomed at +20% [lest it is set for a fall] or of selling the other that has just plummeted -20% [lest it is set to bounce back up].

purch

Generali wrote: »

what you paid has no bearing on the current value.

No, the only thing that has any bearing on it is the current price, not what the price once was.

If you wouldn't buy it at the current price, then why are you still holding onto it, and if you would buy it at the current price, then why have you not bought more ???

That advice was often accompanied by a clip round the ear.

My first boss was such a "nice" chap :eek: