| In my previous message about investing for | | | | couple that I bought years ago. Broadly, I was right |
| beginners, I tried to convey some of the realisations | | | | to buy. Of all the development stocks I could have |
| that a new investor needs to make to help him or | | | | bought, these actually did develop and do make |
| her become successful.This time, I am going to offer | | | | products. They just don't make profits yet - years |
| a few thoughts on what I believe helps me to be | | | | after I bought.One of my development picks actually |
| successful and a few examples of what can and may | | | | dominates the bluetooth market. That's right, I |
| go wrong. As ever, I hope that this isn't below your | | | | invested in the company that developed much of the |
| level of either confidence or competence as I don't | | | | bluetooth technology we use today! How could it not |
| wish to insult. However, I have found that there | | | | make a bundle of money? Am I a genius or what? |
| seem to be far more people that want to | | | | Years later, I am still down 65%.Another has an |
| understand finance 'a little better' than there are | | | | amazing fuel saving device for gear boxes in cars, |
| people who can lecture on the subject.Firstly to an | | | | lorries and off-road vehicles. In this age, you'd think |
| example. Back in the mid 90's I joined an Investment | | | | that fuel saving technology would be all the rage. |
| club in the UK. I knew a couple of the members from | | | | Over the years, I have bought more shares in the |
| a local health club I was a member at. Knowing that I | | | | lows and sold them in the highs to make some |
| was (a) keenly interested in investment and (b) more | | | | 'trading' profits. But still my initial investment (I think 8 |
| knowledgeable than most of them, I was invited | | | | years ago) is down.Though I may not have realised it |
| along.Suffice to say that on the first evening, I | | | | at the time, these were not investments, they were |
| realised that I had been invited along to do all the | | | | gambles. So is the stock exchange really a place for |
| work! I enjoyed the work so that didn't actually | | | | beginners?An investment is in a company that has |
| bother me. I also could purchase some additional | | | | products, a defined market and notable market |
| investment tools 'for the club' which I couldn't justify | | | | share, profits, a track record and much more. |
| for myself.The main work of analysis was carried out | | | | Remember that. Think about Warren Buffett - he |
| by myself and another member who is a long-time | | | | makes investments, good ones at that.I'm also quite |
| friend and no mug in the world of shares and | | | | traditional about investing. I have never spread bet, |
| investment himself. We were using as our template a | | | | used an option or future or sold short. I don't use |
| theory offered by Jim Slater which centred around | | | | leverage. If I can't figure out what might go wrong, |
| price / earnings growth ratios. In short, it was highly | | | | FOR CERTAIN, I'd rather not do it. I buy, I hold and I |
| successful.At the end of the first year, we were 'up' | | | | sell. That's it.I have no doubt that these admissions |
| by around 80%. Admittedly, this was during the | | | | mean that I miss out on all sorts of possible |
| tech-boom bull and any idiot could get 30% pa | | | | investment opportunities. There are all sorts of weird |
| without trouble or effort, but still we were very | | | | and wonderful investments out there, but I invest |
| impressed. The second year started well too and | | | | and I don't like to gamble.If you think about it |
| within 6 months of year two, our small company | | | | though, what I just said doesn't really hold me back. I |
| growth share portfolio (the only portfolio) was up | | | | own some coins, stamps, comics, unit funds, shares, |
| comfortably over 100%. Nice work if you can get | | | | books and art - I did mention that I speculate didn't |
| it.For those of you that haven't been a member of | | | | I? And if the world suddenly has a crisis, it means |
| an investment club and don't know, they are a | | | | that I own actual, physical assets as well as just |
| democracy. Every opinion counts equal in a vote to | | | | share certificates.So that brings me to another point |
| buy or sell, whether they understand investment - or | | | | ... can you focus?Ideally, you need to know quite a |
| not. Here was our trouble. If you can believe it, | | | | lot about certain areas and use that knowledge for |
| making an enormous profit was 'boring' and they | | | | your investment benefit. The art and books I own |
| needed 'excitement'. To me, making money as | | | | are mostly related to cricket. I love cricket and know |
| quickly as we did was not merely exciting - it was | | | | a lot about the game and it's history - which means |
| thrilling!! But, when we wanted to sell they wouldn't | | | | that I know when I see something of value. If it has |
| and when we offered rock solid buy predictions they | | | | value now, it probably will have for some time to |
| disliked something and again, we wouldn't.I think our | | | | come. Whether I buy at a good price or not, value |
| lowest point was not buying shares in a UK pizza | | | | and scarcity count.Who'd imagine ME telling you that |
| delivery firm (that was growing very quickly and | | | | the stock market isn't everything?Investment risk is |
| would have turned into a great investment) because | | | | lowered by knowledge. Every time. If you are buying |
| (and I kid you not) one of the founding members | | | | shares on the stock exchange, what does the seller |
| didn't like 'Italian food'. Who cares?The club ended | | | | know that you don't? What do you know that the |
| rather badly with arguments and falling outs. Several | | | | seller does not? You can bet your life that the buyer |
| years later it still has a couple of holdings in shares | | | | or seller opposite you in any transaction has done |
| that might 'one day turn around'. Fat chance!!!!So here | | | | some serious research. If you don't do yours, who |
| is the tip: why do you want to invest? This needs | | | | do you think will win? You or the market?So of all |
| analysis.My friend and I invested because we were | | | | the things that I might have said about investing, I |
| willing to put in the effort, wanted to increase our | | | | haven't really made it sound 'sexy' yet. Have I? The |
| holdings, make money and frankly, we like winning in | | | | truth is, investing isn't really very sexy. Pop stars are |
| a global market against the nation's smartest | | | | sexy. Carmen Electra is sexy. Investing is graphs, |
| minds!!Our other members however, were there to | | | | moving averages, annual reports, company |
| gamble. It was just fun. Who cares about the result? | | | | statements, calculators and work. Not so sexy. It's |
| We all meet in a pub, have a meal, chat about shares | | | | kind of like being an accountant but with marginally |
| and throw some money at the market. We wanted | | | | more life and a few graphs.But the great thing about |
| profits, they wanted a social group.After being up by | | | | investment is that in the long run, you decide |
| over 100% after 18 months, we closed the club at a | | | | whether you'll be successful or not. The harder you |
| loss of both money and friendship. Ridiculous.What | | | | work at it, the luckier you will be. If you are just |
| about you? Why do you want to invest? If you | | | | starting out, think about YOU first, not the market or |
| want to gamble, take up sports betting. You get to | | | | companies. Decide on what you want to specialise |
| watch a game as well as be financially involved - that | | | | on, whether the stock market for beginners is a |
| sounds much better.Do you plan to follow the | | | | place to invest and how you will approach it.It might |
| market? If you don't, best to keep away.I'm not the | | | | help to find areas in which you have useful |
| world's greatest at tracking a market - I can admit it. | | | | knowledge already. Either that or decide on an area |
| Each day, I look at the shares in my portfolio, funds I | | | | and slowly become an expert. What do I mean? |
| advise clients about, prospective investments I am | | | | Well, if you worked in a bank for 10 years, you must |
| mulling over, general financial news and read a few | | | | know something about banking. When you read an |
| posts by other advisers / analysts online. And yet, if | | | | annual report from a bank, do you laugh and see |
| I'm honest, I worry that don't pay enough time each | | | | through the waffle or does it make real sense? If |
| day to the markets.If you want to make serious | | | | you can see through the waffle of some far off |
| decisions, with serious amounts of money and | | | | CEO and CFO, you can start to compare the relative |
| (hopefully) make serious amounts of profit, you need | | | | prospects in the same market of competing firms. |
| to be - SERIOUS!!!Personally, I don't like the idea of | | | | Hey - that could be an opportunity!If you really know |
| gambling much. I consider myself to be either a | | | | about banking, you can compare the product |
| speculator or an investor, not a gambler. When I first | | | | offerings and service as well as the annual reports. |
| started investing, I didn't know the difference | | | | You might still know some bank staff that are happy |
| (though I started at 18 and had no-one to guide me). | | | | to tell you honestly that they are being 'creamed' in |
| That meant that all my investments were gambles. | | | | the market or whatever. Before you know it, you |
| Mostly, they weren't so hot.These days, I assess and | | | | have a picture building of a competitive market. |
| analyse much more. I avoid 'turnarounds', since I don't | | | | Before long, you will REALLY understand the |
| think they turn around too often. Greater life | | | | investment potential of several companies. That will |
| experience has taught me to recognise that most | | | | put you far ahead of many other investors.As I said |
| companies that need to turn, or might turn, are | | | | earlier, investment risk is lowered by knowledge - |
| already dead - they just don't know it yet.I also have | | | | EVERY TIME.Stuart Langridge is a financial and |
| learned my lesson with 'development' companies. You | | | | investment adviser and an investor. He works with |
| know the thing, one great idea that 'if' they get to | | | | expatriates in the Benelux region. |
| market will make 'tens of millions'. I own shares in a | | | | |