'We lost everything gambling on shares'

prowla

Looks like they may have been chasing down too - buy stock, value goes down, buy more at the lower price in the hope that it'll go back up.

Nice_Weather_For_Ducks

I guess when they were £20-£30K down, panic set in and they chased their losses all the way down to getting broke.

This is classic human behavour. Its the same mentality as going to the casino with £200 and losing £50, then keep betting until you win it back or go home skint.

If you are going to "play" with your life savings, you need a VERY disciplined attitude, and be able to handle losses rationally. I would say only a few people in a 1000 have that control.

Hence the age old boring message that shares should only be bought with money you can afford to lose, and should be held for 5 years min.

MoneySaverLog

Nice_Weather_For_Ducks wrote: »

This is classic human behavour.

The markets are driven by Fear (Denial) and Greed. Simplez

You make money on a share. You cut your profit short cause you fear the market going the other way when you should have let the profit run.

You let a loss run, or add to it by buying more at the lower price, when you should have cut your loss short. You are in denial and fear sets in. You chase your loss (out of fear and greed), only to realise bigger losses.

jimjames

Colin_Hunt wrote: »

Mr Prinzi saw 98 direct debits returned unpaid, using credit in a series of manoeuvres to invest up to 850pc of the value of his holdings. He estimates that £16,000 was taken in trading commission and £1,400 in late payment fees between 2008 and 2011

It took 3 years to realize how "good"they were at stock picking?
Back in the eighties my stockbroker allowed me to trade within the accounting period (buy at the start, sell at the end), October 19th 1987 was "interesting", is it too late to claim?

I'd not originally spotted it was over a 3 year period, that isn't some spur of the moment decision and they clearly had plenty of time to realise what they were doing.

I do think they deserve some kind of award though. Anyone who can lose all their money between 2009 and 2011 when the UK markets almost doubled has got to be something special.

bowlhead99

MoneySaverLog wrote: »

With share trading, leverage can work for you if you're sitting on the right side of a trade, used in the wrong way with poor risk management it can wipe you out completely.

This is very true.

I think the reason the Telegraph is trying to paint Barclays in a bad light is that this was not some fancy spread betting or CFD platform promoting the ability to take risks and use leverage, but a standard broking product available from a high street bank brand name.

Apparently the punter "discovered a function" (which, as EdGasket says, is very standard among decent brokers) that allows you to use the 3-day market settlement terms to move new money in from your bank, or sell existing shares, to give you the cash in your trading account on the day the trade settles (i.e. 3 days after placing the order).

The Telegraph shows a screenshot of an account with zero cash and £7k trade capacity (which you would get after passing their credit check). Nothing particularly wrong with that, as you can't lose £180k in one go with only 7k limit.

And says "Subsequently, the more they invest, the more they can borrow". Well sure, that's a standard product and makes sense. If I hold £50-100k of highly liquid blue chip shares, and I want to buy about 15,000 shares of Vodafone, I want to be able to place the order, see exactly how much cash I need to settle the trade and pay duty and commision, then go and liquidate some stock or introduce new cash into the account to meet that requirement before it settles.

I don't want to have to put £34k in on my debit card and then find out I actually need £34,150.42, then top it up and then find the price moved more significantly so I won't buy this month after all, and wait several days to get the funds back. And I don't want to exit my ABC shares and XYZ shares and the exotic Aim shares with a large spread, to generate £35k in three days time and only then buy Vodafone or my old shares back if market prices have made me change my mind.

So being able to commit to the 15,000 Vod purchase before I front the cash is important and I would not use a broker that didn't allow it. But technically at that point I am then exposed to losses on both the Vod shares and the ABC shares and the XYZ shares and the Aim shares, which together could be high as a percentage of what actual assets I have in a volatile market. So it's a completely standard feature, but if I try to use it as a loophole to buy shares I can't afford when everything is falling in value in the credit crunch, I could get burned.

The investor's mistake was abusing a 3-day settlement facility to push it to its limits and create gearing even though he absolutely knew it was a liability he would have to clear from his portfolio or his bank account, and he could see that he had to keep topping up his bank account and manually pay money in every time the direct debit failed.

The idea that some guy from a discretionary fund management house (who has a vested interest in making portfolio management seem intimidating and difficult and risky and keeping DIY investors from DIYing) really thinks "I wouldn’t trust most professionals to use this type of tool, let alone give access to those without highly developed skills and qualifications" is laughble.

Wouldn't trust investment professionals to not abuse an ability to place a buy trade before a corresponding sell trade or ahead of the cash collection?? That's pretty damning of investment professionals -perhaps thinking of the wide boy trader lifestyle in investment houses, where they are driven to earn bonuses by profits on other people's money and need to exploit every opportunity to maximise their trade limits. It doesn't mean that high street brokers should make all their trading accounts to be like their ISA wrapped accounts where any kind of dealing ahead of funding is necessarily outlawed.

I sincerely hope that when the FCA publishes that "investigation into whether DIY investing services should improve to stop customers making grievous mistakes" (if indeed that's an official title of the investigation rather than media spin...) it does not regulate so hard as to protect people from themselves at the expense of a broker having to compensate people for being idiots, or of the services being dumbed down to the lowest common denominator assuming we all have IQ of 80.

Certainly, with the market standard settlement being T+3 (or longer, if one prefers and is willing to pay extra to the seller of the shares), I don't want to have to create liquid cash in the account at T+0. It might not be a big deal for some who use funds-based platforms or tax wrapped accounts (as I also do) which already force you down that route but I would prefer choice in the market. And even if that particular feature is not a big deal to the majority, what other toys will they take away next!

As a side note, the notion that they were using Barxdirect to display trading indicators to help them recoup their losses is probably the bigger risk for a newbie and it makes sense that it now only comes bundled with premium accounts or on a higher-risk tilted website. Anyone unfamiliar with the stock market who only knows about shares from watching Wall Street or other interpretations of trading rooms on movies or TV, will think that the way one is supposed to make money from shares is watch all the little numbers go up and down, follow the charts, and buy and sell on some sort of signals within the rapidly moving noise.

With no experience in such matters and refocussing on their original goal of investing for retirement, it is madness for them to try to do that. Consequently, having it included in their newbies broking software package is perhaps a "highly dangerous investing tool" - rather moreso than a simple deferred settlement facility. If that is what the investment manager is talking about when the Telegraph asked him, rather than focussing exclusively on the credit aspect of the Barclays product, then fair comment. But the Telegraph have only mentioned it in one sentence, as if 'gambler deals on credit' is the entire story.

Having Barxdirect tools in the package encourages trading churn and doesn't really cost Barclays anything to implement, given they already have a demand from their premium customers and have built it. So you can see why it was included, but it sounds like it isn't any more, so Barclays are to be commended for that (even if its move was to segregate their market and monetise it as premium product at £30-50 a month, rather than a lofty goal of customer protection).

But looking at things one could ban from being available to retail investors, I still wouldn't legislate against that, because if they don't get it free from Barclays they should still be allowed to find someone else to sell them live charts with Bollinger Bands and stochastic analysis or whatever without doing a whole background check of whether they understand the information given to them.

kidmugsy

MoneySaverLog wrote: »

So you can effectively be over-leveraged in property, just as you can with shares.

Quite so: my comment was entirely sarcastic.

mark55man

DaveTheMus wrote: »

I read the story.......

They sold their house, yes, I'm surprised that people that stupid where able to buy a house in the first place.

Or perhaps they were normal, possibly high functioning, people who were led into the war zone and abandoned by Barclays


The fact Barclays then removed this feature at entry level suggests to me strongly that someone in compliance said - wait !!!!!! what are we doing giving green slope people the keys to the cresta run


The man has a small part of my sympathy, the current retail environment is so aggressive you need to be a lawyer, CAB and Martin Lewis to not get shafted one way or another. This was just extreme

Archi_Bald

mark88man wrote: »

the current retail environment is so aggressive you need to be a lawyer, CAB and Martin Lewis to not get shafted one way or another.

Alternatively, you could just use your brains and a bit of common sense. Works to perfection for the vast majority of people I have come across.

atush

these numpties were NOT 'lead into the war zone' by Barclays. They decided, over a period of 3 years, to walk across a mine field.

They are the ones responsible for their plight. No one made them borrow to buy/gamble.

Totton

atush wrote: »

these numpties were NOT 'lead into the war zone' by Barclays. They decided, over a period of 3 years, to walk across a mine field.

They are the ones responsible for their plight. No one made them borrow to buy/gamble.

Nice to see some common sense rather than the often seen tripe about it being someone else's fault.