New Share Dealer?!!?

EdInvestor

<i>Who knows how the next 18-24 months is going to be?</i>

In the dotcom era - late 90s into the millenium - it was pretty obvious there was a bubble out there and sooner or later it would burst. This happened in 2001-02, and it was the worst crash since 1974-75, which was a mighty one (accompanied by a banking crash and a houseprice crash, you can imagine :eek: ).

Since 2003 the market has recovered more or less and returned to normal, ie it's not seen as being particularly overvalued or particularly undervalued.So not a particularly dangerous time to be doing some investing IMHO.

Of course markets and share prices wobble up and down every day.They call this vilatility. You get used to it after a while. Some experienced investors see a slump in the share price as a "buying opportunity" - get in and buy some more while they're cheap.

But many investors IMHO do too much buying and selling - they rack up dealing charges which eat up all their profits. I like to buy a share with a good divi, and just sit on it and wait for it to go up.

Works for me

MrChips

"Of course markets and share prices wobble up and down every day.They call this vilatility"

Personally, I call it volatility

cheerfulcat

dunstonh wrote:

I can see where Pal is coming from. I have come across many in the past who have dabbled (some more than others) and have lost money. There are always going to be winners and losers. It is not a one way street.

Have these dabblers had a consistent, fully thought out strategy, or did they just blindly follow tips? Have they constructed solid portfolios of blue chip companies, or did they jump from one blue sky disaster to another? People who don't know what they are about, who simply hear that " there's money to be made on the stock market " and hop on the nearest bandwagon, are bound to fail sooner or later. Thinking about it, all of the people I know who have lost money, lost it by putting the lot in one ill-considered share, including one terryifing punt ( which is all it was ) on Marconi.

I have lost count of the number of people who dabbled as the market was high (based on past performance) then pulled out when the market was going down (after making a loss) and swore never to invest on the stockmarket again. The winners were those that continued to invest as the market dropped.

Yes; the people who make money from the stock market are those who understand that volatility means opportunity.

It would be very hard to have made a loss over the last 18-24 months. Returns have been very much on the basis of the more risk you took, the more you made.

Who knows how the next 18-24 months is going to be?

Returns have always been on the basis of more risk equals more reward! That is the whole point of investing in shares rather than government paper - the likelihood of a better return.

18-24 months is a very short time in investing, as you well know. I have been making money for 18 years at this, first in a small way and now doing it for a living. I can only say again: a well diversified portfolio of solid companies will, over the long term, be profitable. If you add a small amount of some riskier shares to the mix, you greatly increase its chances of being very profitable and slightly increase its chances of losing money. If your portfolio is heavily weighted towards dividend paying shares, and those dividends are reinvested, you are close to guaranteeing that you won't lose money.

EdInvestor

Hi CC

I can only say again: a well diversified portfolio of solid companies will, over the long term, be profitable. If you add a small amount of some riskier shares to the mix, you greatly increase its chances of being very profitable and slightly increase its chances of losing money. If your portfolio is heavily weighted towards dividend paying shares, and those dividends are reinvested, you are close to guaranteeing that you won't lose money.

This is certainly my strategy:it's really something I learnt more or less from my father: so far so good.

Very pleasing to hear from someone with 18 years experience of doing the same thing successfully.:)

cheerfulcat

Hi, Ed,

Very pleasing to hear from someone with 18 years experience of doing the same thing successfully.

Thank you, but I would not wish to mislead anyone. I have 18 years experience of investing, but my high yield portfolio was only started six years ago and I only committed totally to it three years ago. As you probably know, though, there are a few posters on the HYP board at the MF who have been doing this for a very long time...

dunstonh

Have these dabblers had a consistent, fully thought out strategy, or did they just blindly follow tips? Have they constructed solid portfolios of blue chip companies, or did they jump from one blue sky disaster to another? People who don't know what they are about, who simply hear that " there's money to be made on the stock market " and hop on the nearest bandwagon, are bound to fail sooner or later. Thinking about it, all of the people I know who have lost money, lost it by putting the lot in one ill-considered share, including one terryifing punt ( which is all it was ) on Marconi.

Its the casual investor that stands to lose. Tips are mostly useless. In fact, the minute i read Marconi, two clients came to mind. One in particular kept on saying to me that he was low risk and i built his portfolio round that. Then he whinged he wasnt making enough and that he could do better and he bought a small selection of shares, including marconi. Whilst my bits have consistantly given him over 12% a year he has lost tons on his own.

Its all about timescale and understanding the risk. This thread has shown that the experienced investors have no problem with risk and almost write off the fact there is any. Thats what comes with experience and understanding the volatility and making it work for you. A novice should take more care and not invest on the assumption that its all profit and never look at tips. Most tips are past performance (meaning you missed out) or internet scams to boost the share price.

Jeppo

Some excellent advice in this thread! I only started to invest in shares this year after much moneysaving & many many hours of research. Why didn't I invest in shares before? Because I thought it was a mug's game & far too complicated for ordinary mortals like me. So....i handed my money over to a friendly FSA who sold me a unit trust that has almost predictably 'underperformed' - I love that word. It almost absolves fund managers from any blame...

Had I had half an ounce of sense I would have realised that the paltry sums I was investing were already being devoured by charges & annual fees and it simply would have made more sense to have bought a tracker or just whacked it into a cash ISA. C'est la vie.

However, we all live and learn (hopefully). Now I know there is no excuse to be ignorant about financial matters.

cheerfulcat

dunstonh wrote:

Its all about timescale and understanding the risk. This thread has shown that the experienced investors have no problem with risk and almost write off the fact there is any. Thats what comes with experience and understanding the volatility and making it work for you. A novice should take more care and not invest on the assumption that its all profit and never look at tips. Most tips are past performance (meaning you missed out) or internet scams to boost the share price.

I agree; anyone starting out to invest must understand the nature of risk, and accept that it is a vital part of the process. It's not enough to know that " investments can go down as well as up " ( a daft warning if ever I heard one ); you have to know what to do when they go down, as well! [Answer for newbie investors - if it was a good choice, sit tight or buy more. If it was a bad choice, sell up and be grateful that you have a loss to set against future gains :-)]

Agree on the tips as well; even the well-meant ones in investment magazines and newpaper financial pages have a nasty way of dropping their value soon after...

Jeppo

Yeah, too true! I had a 'punt' on Partygaming (few hundred, nothing major). Got taken in by the hype, but after a few days I came to my senses when I realised I hadn't done my homework and accepted that the shares were overvalued. A lot of brokers were shouting 'strong buy' which got me suspicious. I decided to cut my losses - just a few quid - as I'd only had the shares for four days. Boy, was I glad I'd taken a small loss (a small tuition fee, as I call it) as the share price fell like a knife a couple of days later, down 33% after the interims. They don't look like they'll make much of a recovery, either.

Ignorance and greed can be very dangerous!

dunstonh

Some excellent advice in this thread! I only started to invest in shares this year after much moneysaving & many many hours of research. Why didn't I invest in shares before? Because I thought it was a mug's game & far too complicated for ordinary mortals like me. So....i handed my money over to a friendly FSA who sold me a unit trust that has almost predictably 'underperformed' - I love that word. It almost absolves fund managers from any blame...

A unit trust is just a collection of assets focusing on a certain area. So its wrong to say that a unit trust has underperformed. Its where and how the unit trusts are invested that matters. It is also important to look at the different timescales.

I have recommended unit trust funds that have performed significantly better than most UK shares. Equally, there are areas that still havent performed at all well in recent years (US mostly) but that will change. I have also built portfolios with a wide variety of investment areas including sectors which do not include stockmarket shares. This sort of diversification has meant that I have many clients who have ridden the stockmarket crash without seeing a year of loss once in that period.

So, you shouldnt rule out unit trusts when looking for variety and lower risk investors may well prefer to buy unit trust funds across the sectors. I mean, would you want to buy individual shares in a latin american company?

Its just a different type of investment and the returns on unit trusts can be better or worse, whilst offering a greater variety. Personally, I do both individual shares and collectives.