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Investor Sins

June 15, 2017 10:44
Investor Sins

Investor Sins

3rd May 2005

I read an interesting article last week by Martin Stacey (The Business) in which he identifies the seven deadly sins of the investor. And being me I immediately thought of the seven virtues as well, so today here are his seven deadly sins, and tomorrow will be my seven virtues – see if you can spot yourself!

  1. Greed – people commonly hold on too long to an investment- you never lose money leaving profit on the table for the next person.

  2. Gullibility – don’t just accept tips on face value – make sure you check everything before you ‘believe’ an investment tip.

  3. Loyalty – too often people hold onto an investment through loyalty – it was good once. Never let any emotion get in the way of your investment formula.

  4. Sloth – you’ll always lose money through laziness if you don’t keep an eye on what you have and what you are doing – get off your bum!

  5. Optimism – or at least false optimism – often people blindly look for the good news all the time – when realism and financial facts are paramount.

  6. Remorse – never wallow in what went wrong – learn the lesson and then just get over it.

  7. Recklessness – which is what people are when they get frustrated that a deal hasn’t come along = what they do is abandon their financial formulas and jump in blindly – oh dear!

Is the FTSE a Tory?

June 1, 2017 09:39
Is the FTSE a Tory?

The FTSE is a Tory?

10th April 2005

I started off this week saying that I wasn’t a political animal and yet I have ended the week as I started it by writing about the forthcoming general election.

But as usual it’s not the actual election that interests me, purely the effect it has on the wealth of the nation and so I was intrigues, when I read this week about some research from the Leeds University Business School. They have analysed the stock market before and after recent elections to see how it reacts. This was prompted by a jump of 87 points in the FTSE since Tony Blair announces the next election day as May 5th.

This jump in the FTSE in the period leading up to the election is a common effect of an election announcement but the market reacts more strongly to a Conservative win than a Labour one.

The stock market has risen immediately following 7 out of 8 Tory victories since 1945, but has fallen in 5 out of 8 Labour victories in the same period. In fact, the largest fall was of 7.1% of the index after Labour’s win in 1974.

I suspect that this is for two reasons: firstly, a Conservative government has traditionally concentrated on the economic policies whilst Labour has traditionally concentrated on the social issues (though they suggest that this isn’t really the case anymore): but secondly I suspect that this is partly due to the beliefs and behaviours of the people who run, manage, and effect the stock markets- because I suspect that there are a greater number of Conservatives working in that arena and their personal delight at the Tory win probably overspills into a greater confidence in the market- which pushes prices up.

Once again- and as I teach every week – financial movements are a balance of factual information combined with beliefs and behaviours of the people involved.

Have a great weekend.

Employee Shares Scheme

May 25, 2017 10:05
Employee Shares Scheme

Employee Share Schemes

3rd March 2005

I was delighted to read last week that about the 45,000 or so Tesco workers who have recently received money from an employee share scheme. What happened was that the staff were able to buy into an employee savings scheme which purchased Tesco shares at low prices. So there was a 3-year and a 5 year savings scheme which bought shares at £1.51 for the 5-year scheme or at £1.98 for the 3-year scheme. When the savings plans matured the shares were actually worth £3.

So the employee savers made up to £7,000 gain on their savings money.

Which is brilliant, and of course, what Tesco have realised is that employees are not really motivated to work just for money. We all know that the word JOB stands for Just Over Broke – and that’s all you ever will be if you work for someone else. But, if you work for yourself you get very much more motivated – and an employee share scheme gives the worker a sense of working for themselves, because the more profitable the business is, the more the shares are worth and therefore the more the employee saver gets as a return.

It’s a great idea and I would like to see all employees having some kind of profit or sales inventive as a payment choice in their salary package – it would make a huge difference to the working lives of many people, and it also makes a huge difference to the business – a great win-win situation.

Is 16.3% Enough?

May 23, 2017 10:13
Is 16.3% Enough?

Is 16.3% Enough?

March 1st 2005

There was an absolutely fantastic advert on the back of The Sunday Times this week for that old established investment group, M & G. The advert was brilliant; it included many of my own standard investment rules of thumb, it was interesting to read- and it had pictures in it (always a plus for us visual communicators)!

There were enough points to note that I could resent a whole course about it – in fact if you didn’t see it don’t worry as I have already cut it out and made 15 pages of notes on it- so it WILL be popping up in my future courses.

But the one I wanted to highlight today was the fact that the M & G Recovery Funds has returned 16.3% per annum since 1969. Staggering, and what a phenomenal performance, and the ad compares that return to that produced by the FTSE in that same time, which was a supposedly pathetic 11.7%.

I highlight these statistics because I am presented time and time again with people who compare the returns from property to that of returns from equities and they believe that equity returns are much worse than those for property. However, I know, and this advert proves to us, that the returns for both equities and property – over time – are generally about the same.

So most people accept quite easily that you can make 16.9% per year from property but don’t believe it can be done with equities – but as this lovely advert proved to us – oh yes it can!

Double Your Money

May 19, 2017 09:18
Double Your Money

Double your money

January 27th 2005

 

Eight is a very significant number in our house today as our youngest daughter celebrates her eighth birthday. And the number 8 is also significant in the world of investing as it is the time it takes to double your money invested. I say this generally, and of course, each investment is different and provides different returns over different timescales, but on average, investment returns in all three lanes of the motorway will give you a doubling of your money within the 7-to-9-year bracket. Specifically, property values on average doubles every 7 years, equities, over long periods of time do the same, an investment in an income generating account earning less than 10% per annum will double within 8 years, and reversionary property contracts mature, again, on average, after about 8 years.

 

I was thinking about that this morning as I looked at my lovely little girls, and as I was thinking about how quickly the time has flown since she was born, which saddens me a little, but the plus side of that is that since she was born I know for certain that many of our investments have doubled in value, and I think about the people who say to me – I won’t ever be wealthy because it takes too long. Well thinking today about the 8 years of my daughter’s life, I can tell you that 8 years will just fly by, so make a start on your wealth today.

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