Happy New Year
Happy New Year!
Most of us columnists are lazy. Otherwise we'd do real work for a living. And so, of course, the start of a year can only mean one thing for a writer: write a New Years resolution list!
It's nice, quick and easy and it takes care of one column every year (which you can probably recycle from last year's).
So here we go! Hang on - I wrote some resolutions for my website last year. Let me just cut and paste it in and I'm done
No. Stop! I'm going to make a stand and take the harder option, and not write about financial resolutions. Instead, I'm going to do some work and write about something else.
So let me tell you about an e-mail I got from a reader because I think it's quite interesting. Adrian wrote to me with this:
"I've been a reader of your site for well over a year now, and this is the first time I've decided to drop you a line. I'm afraid I've been scared, so I'm not sure what has changed.
I thought I'd get your views about my share trading strategy. I bought Marconi at about £4 and just sat and watched them go down to nothing. From £10,000 to £3, plus a couple of warrants, and I don't even know what they are.
I bought 20,000 Retail Decisions for 4.5p and, of course, today they are about 28p a profit of some £4,800. But, for some reason, if they start to drift lower, I will probably just sit there again and watch them go lower and lower. Why am I seemingly incapable of selling them for a profit?
Maybe it's greed or, I suppose, it could be that I'm very inexperienced with shares generally."
Adrian has been going through the teething stage of any new investor. That is, it's easy to buy shares but not so easy to sell.
It's a well known stock market cliché. Fear and greed. Happens to us all. The inability to sell Marconi was fear. Fear that if he sold and took a loss, the shares would immediately rebound and he would be kicking himself. The greed was Retail Decisions. He was making a great profit and couldn't bear to sell the shares in case they went up more.
It's quite obvious to me Marconi should have been sold at £3.50 (using a stop loss) and Retail Decisions should be sold now! With a profit of £4,800 - take the damn thing!
Selling a share is the hardest thing to do. Selling one that's turning into a big loser is tough because the loss becomes a reality. Selling a good winner is tough because you might be selling it too early.
Look, the answer is blindingly obvious. If wondering whether to sell a share is keeping you up at night, sell the damn thing.
There are thousands of shares out there - take the profit or loss and move right along.
Just think how many months of anxiety Adrian would have saved himself if he'd sold Marconi and Retail Decisions.
And now, Adrian, here's a little secret. I bought Retail Decisions too for 7p and sold it far too early at 18p. So it's 28p now. Do I care? Not in the slightest.
I made a profit of around £6,000. That's lovely. So, if I'd stuck around a bit more I'd have made more, but so what? I've made more with the money in other shares.
There is probably another answer for Adrian: sell half of Retail Decisions. That way you've taken some of your profits while hanging onto some of the shares. However, I don't think this works so well with shares on the way down. The whole lot of Marconi should have been sold.
So, one day when you're sweating over whether to sell a share that's hit a stop loss or is giving you a big win, just sell! You'll feel a lot better and will be quite pleased with yourself. Now go use the money somewhere else.
Talking of selling, that's something I don't feel like doing right now. My portfolio has soared away in the first few days of the year and I'm hanging on to my winners grimly.
In particular, shares that have sent my portfolio into orbit in 2005 are Get Group, Dart, Northern Recruitment, Carrs Milling, and Isotron, among others. I don't want to sell because I think they all have more upside.
What? You thought that was a load of drivel and you'd rather I'd written some resolutions?
Oh all right then. Here's a resolution for you. I'm going to start smoking. That should help shares in Gallagher. Hmm, maybe I should buy some....