Lessons learnt from a decade of delights and disasters

Lessons learnt from a decade of delights and disasters

Business
The Punter says to invest at least $2000 at a time. If the shares then fall 50 per cent, you can still sell them before they become an "unmarketable parcel".

The Punter says to invest at least $2000 at a time. If the shares then fall 50 per cent, you can still sell them before they become an "unmarketable parcel".

Aa

Over the past 10 years, the Punter has learnt some valuable lessons.

Aa

Ten years ago, when the Punter was writing his first column for The Land, the all ordinaries share index was 3,496.7. Now it is 6,159.1, an increase of 76 per cent.

The Punter began with a notional $50,000 and his portfolio is now worth $77,727, an increase of only 55 per cent. Oh dear.

If he were a professional share tipper, which he is certainly not, he wouldn't draw much attention to his ten year record. He'd prefer to point out that the all ordinaries has only risen 16 per cent over the past five years, while his portfolio over the same period is up 55.5 per cent.

The Punter would like to think this means he has been getting better at the game. He has to confess that in his first six months his portfolio rose 24 per cent. In the latest six months, he is down 6 per cent and the all ords is down 4 per cent.

Along the way he has learned some lessons. Investing in shares – even in well established companies – is a gamble (borrowing to invest in shares is a mug's game).

If you earned at least $250,000 a year for the past two years, or you are worth more than $2.5m, you are officially "sophisticated". If you are not in that bracket, accept that the game is rigged against you, by law (Section 708 of the Corporations Act).

Check often, trade occasionally. Brokers' commission plus the bid-offer spread can be 10 per cent or more of the cost.

If it doubles, sell half.

Don't be greedy. If you get a very quick profit, take it.

Doubling up can be dangerous. If a share falls 50 per cent, you need a really good reason not to sell.

Don't pay more than $10 brokerage on small trades. Anyone paying twice that gets free membership of the ‘Society of Suckers’.

Beware fashions, feel-goods and market darlings, they can fall hard. Think Geodynamics, Bellamy's or Murray River Organics.

It's still much more fun than the pokies.

  • The Punter has no financial qualifications and no links to the financial services industry. He owns shares in a number of companies in this article.
Aa

From the front page

Sponsored by