SELL - but BUY!

I mentioned below my recent past-time of playing the markets.  I hasten to make clear that I do not sit here in my dressing gown tapping away buy and sell orders on an hourly basis like those courageous day-traders, that's much too much like hard work, and even worse, high risk. However, in the last 3 years I have used an on-line dealing service here which allows one to buy or sell as much or as little as you like at the flat rate of £10 a deal.  They provide an excellent back-up service of files that show all your dealings plus dividends or interest received so that end of year results can easily be printed off for the tax man. Regrettably I am not on a commission basis for selling their service so I can tell you that there are many others doing the same thing. Also I should make clear that I have only been doing this for 3 years so I am very definitely not an expert!

Happily, not being an expert has never stopped me from voicing an opinion, so here are my thoughts on the current situation - SELL! Or to be more precise, SELL NOW! Of course, you should have sold at least a week or more ago (as I did, he remarked smugly!) because shortly it will be time to BUY!  Don't bother asking how long or short "shortly" is because I haven't a clue.  What you need to do is read the financial pages daily and if you have satellite TV tune into the Bloomberg financial station and leave it running with the sound off, just keeping an occasional eye on it and turning the sound up if something looks interesting.  Gradually you will get a feel for how the market is moving and come to a tentative conclusion whether or not it is the right time to BUY.  For what it's worth, in my opinion it will be next year before the time is right to for me to go back in.  I would like to have at least two quarterly reports from our High Street Banks showing exactly how much bad debt they own before I commit to anything.  Also, in Q1 (see, I'm beginning to learn the lingo!) next year we should have a better appreciation of the American economy whose strength should never be underestimated, but just at the moment, should not be wagered on with the deeds of the house!

Still, the important point is that some one else's loss is possibly your gain.  For example, I sold Lloyds bank at 525p on Monday 29th and bled on the floor, but today they were down to 497p and with all the bad news surrounding Banks they could go even lower, at which time I will buy and with a bit of luck and a following wind they will rise again taking me with them.  I should stress that it is impossible to guess the bottom, or the top, of a market but you can take a reasoned view as to which way the arrow is pointing.

I have developed a policy of building my little portfolio - and it is little, £10k max - with a mixture of FTSE 100 shares in good, solid sectors like Oil, Banks, Utilities and Pharmaceuticals, and in companies that pay good dividends which I tend to treat as the bunce which helps to pay for the dealing costs of £10 in buying or selling the shares.  In addition, I like to have a punt on small and more speculative shares and for that purpose I subscribe to a monthly Share Tip magazine, Momentum Investor, which, whilst it hasn't always been right, has been right a lot more often that it has been wrong.  You can make some spectacular gains with these - I still think fondly of Peter Hambro Mining whilst kicking myself for selling too early - but you have to be ruthless in selling if things begin to go downhill - as they did with an outfit I nicknamed my 'Spanish grocers' which cost me double dear!  Once things begin to slide, SELL, swallow the loss and use the money elsewhere to BUY and hope to make back your losses.  This year the stock markets of the world have become increasingly volatile and the gaps between the volatility shorter and shorter thus requiring me to watch my stocks on a daily basis.  However, in smoother times (and provided you are not heavily into speculative shares), you can cruise along checking in every few days. Frankly, the waters are too choppy for my taste at the moment but next year - who knows!

Incidentally, I would add this piece of advice.  My hobby, for such it is, is suitable for a retiree with time and a little bit of spare cash. However, if you are young with many years in front of you, then I would urge you to seek good advice in choosing an investment fund - or three - or more - which will work your money for you in the markets over the years.  They will charge a commission but if you buy them via a money-supermarket like the one I use then at least you will avoid the extra commission demanded by an IFA.  If you can invest like that for 20 or 30 plus years you should enjoy an excellent return even if (in fact, especially if) the markets see-saw up and down, as they always do. Early next year, when the markets are likely to be down, would be an excellent time to start!

As for my own credentials, I can tell you that in almost exactly 3 years I have made £2,450 employing an average of £7,500 capital.  That's about double what I would have earned if I had put it in a savings plan at 5%.  And I am a rank beginner - and dim, as well! Anyway, who else has a hobby that makes a profit?

Comments

[dearieme]

What I want to find is a way of taking out insurance against my occupational pension fund going pop.

[David Duff]

Hmmmn! Tricky one, that. Mind you, it's possible to insure anything at Lloyds and the price you pay will tell you the risk level. I remember years ago a very shrewd old boy I knew who was chairman of a company that did an enormous amount of sub-contract work for the old (and at the time, venerable and ultra respectable) Rolls Royce. Realising that on any given month they owed him an enormous amount of money he decided to insure the debt and was shocked at the premium required which was way over normal rates. He ordered his MD to insure the whole debt immediately, and about nine months later they went broke. Obviously these city boys (and girls) have their sources!