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Diary of a Dumb Investor: 10 big problems for novices like me

I have gleaned some investment truths. Some might even be useful for fellow greenhorns.

Diary of a Dumb Investor: 10 big problems for novices like me

Watch anyone under the age of, say, 30 pick up a Sunday newspaper in the pub, on the train, in a café or whatever. As part of the standard multi-section purge, alongside the gardening section, the personal finance section will get ditched. Without fail. Guaranteed.

Pensions, mortgages and savings eventually skulk miserably into everyone’s lives, but investment will remain snubbed by most people.

It is, after all, not easy. Here's why:

1: Not enough money

Not everyone has a great uncle who’ll slip them 10K. I do. But it’s not enough – I have had to let some opportunities pass me by because I don’t have enough cash spare and don’t want to sell out of my other holdings.

2. Prohibitive fees

If you don’t have enough money the fees make it prohibitive to diversify – ie, if you’re a funds investor you might just have to get a few. Richer people can invest better.

3: Too much choice

I can’t concentrate. There is too much out there and I don’t know how to narrow it down. I flit between ideas and don’t always see them through. There, I’ve said it.

4. Not enough time

And because there are so many different things to invest in, you need lots of time to research them. It is incredibly time-consuming to research investments like shares. For that reason, collective investment funds seem sensible.

Therefore, add time-rich retired people to the list of investors with a big advantage, alongside the rich.

5. Lack of knowledge

I am amazed by how clued-up some of the readers are on this website are. Bravo!

To start investing you must understand what a share or fund (for example) actually is. Then, which ones to choose. If it’s a share you might need to understand the company’s own prospects, as well as the broader economic outlook. That’s tough.

Then you have to know how to go about investing in it – platforms, tax-efficient wrappers and the like.


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23 comments so far. Why not have your say?


Nov 05, 2012 at 12:52

does this mean you are giving up? Let me take over your portfolio I can at least TRY to turn it around!

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Brian Pearson

Nov 05, 2012 at 12:55

Oh by the way, there is an 11th problem for us investors. None of us have a crystal ball!

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Rob Walker

Nov 05, 2012 at 12:56

Problem no 11: Not enough patience.

There is a disconnect between the everyday tripe that gets pushed out by the financial pages and the years it takes for enterprises to generate real wealth. Failing the temperament to sit tight on existing (prudent, long-term) investments, the best option is to hold cash , wait for the crash , then have a big splash !! - easy.

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paul kaye

Nov 05, 2012 at 12:59


no I am not sending you a kiss,most know this means "keep it simple stupid"

I have been buying and selling shares for over 30years and have learned a lot.

If it helps,I follow the following.

Fact there are no experts,so called have advised people to buy or sell.EG an expert some months ago said sell Talk Talk,I ignored them and retained my shares and made on paper another £2000 another said sell William Hill,again ignored by me and I made an extra £4000

I read all I can on the net about companies and invest in those I feel will grow and make me money,better still most of mine pay dividends too.

I do subscribe to The small company SHAREWATCH and have made many times my subscription,quite a few of my shares have doubled! I hold most of my shares one or 2 years some longer,some I buy and sell in less than a year,but mostly if I need the money,for example my daughters wedding,which I paid for from share profits(thankyou William Hill !)and then they went on to get my wedding money back and some! both these shares were my choices and I have many more bought on Sharewatch reading/advice

good luck!

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Nov 05, 2012 at 13:05

also, your attitude to risk is a bit out... firstly the cash is not yours and you are relatively young (a guess)... there is no point buying and holding an unvolatile share/fund as half the readers suggest so as that would make for a very unintersting column.

Time to ride the waves of the AIM and small caps and take some punts, you might get your fingers burnt and lose the lot but at least you will learn a lesson... for example CPP went up 400+% last week and there will be plenty others out there capable of doing the same!

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Nov 05, 2012 at 13:08

Hi D.I.

I very much go along with what you 've said.

I also look forward with interest and a great deal of respect to any reply you

may obtain from regular contributer Tony Peterson. With butterflies in the tummy!!!!

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Nov 05, 2012 at 14:11

There is always a time to buy and a time to sell , that is the market way.

There is always a time to die and a time to live , that is a way of living.

So dont knock the market or the living , learn a lesson to deal and a lesson to live. Money is the matter you deal and food is the matter you live . Just be happy you are living .

Patience is always the best remedy in volatile condition .

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Nov 05, 2012 at 14:56

Basically what you are saying is you want to be in the market but without the hassle of trying to time the market or stock pick. In which case until you have enough capital built up and time to do the groundwork your best bet is surely to simply adopt an ETF/index tracker strategy. You may not be able to tell stories in the pub about you invetsment skill but you'll still be ahead of most that don't do anything and those that waste all their gains in costs and over trading.

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wayne roberts

Nov 05, 2012 at 15:11

I agree with P L that just putting your 10k into a index tacking ETF would have been the laziest and safest way to be in the stock market and you would be doing ok - beating most fund managers and you would have to only buy one thing so HL would not be getting rich off you. But I think you can do better if you just use your brain and common sense, ie what things do you think will do well in the future? Have you seen anyone with an iPhone? Maybe the fact that everyone has got one means the company that is making it might do OK? That information is not rocket science, I haven't read their annual report, I haven't been to analyst meetings or done anything clever whatsoever, I just realised a long time ago that I like Macs and I reckon the public will catch up one day, they did, so just look around you, what are people buying? What are they driving? What aren't they buying any more? It is not rocket science, you don't need to be a pro. Your portfolio is just a mess, look at how funds are composed - eg if you think healthcare may be a good place to put your money as people are living longer then look at how funds that focus in that area are put together, that information is not secret and you can construct a portfolio along similar lines. And try to buy the things that you have decided may do well in the future on days/weeks when the whole market is down due to macro events such as Greece - not when bad news about the company you are interested in comes out - that often means a change of sentiment for that company - you want to buy stocks in uptrends on pullbacks that aren't anything to do with that company. Thats my 2cents worth..

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Nov 05, 2012 at 16:34

DI, I have said it many times before, and I am going to repeat it, you might be a little less imprudent and 'deal' a little less (but that would not give you column inches).

Rather than rely on the dwindled amount from the gift from your uncle, to you/your alter ego, when are you going to drip your own money into the portfolio?

That would provide for your future, which you should already be doing (you are not getting any younger), add to your background assets (and the ladies love the idea of somebody who will be able to provide for them and has means so to do), make you look forward, rather than the instant gratification of immediate profit (I have often found that when I invest in a share, for the first time, it goes down and then rises into profit, not infrequently quite handsomely) you look to the long term gain, not forgetting the returns from the investments, which can also add to the amount you can plough back.

I started investing later than you did, age wise, and when I retired had a nice 'little' portfolio. which with the state pension provides nicely, and the SIPP income is an added bonus.

So, when are you going to add your own moneyI I suspect that one of the reasons your uncle turned his back on you, your alter ego, is because whilst it gave you the opportunity of learning about investing, you were only using his money, not adding yours into the balance.

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J Thomas

Nov 05, 2012 at 16:52

The conundrum you have D I is that the best way to invest is also the most boring.

Firstly you must educate yourself and do your own research so you can become your own wealth and fund manager and not pay others to lose your money. This is the Gotrocks paradox.

Then you can buy directly high yielding blue chip stocks, after 20 years the divi will have paid for the shares you bought.

The same is true for Corporate Bonds, after 20 years you should double your money.

Buy physical gold sovereigns, historically you should double your money after 15 years, just remember there is no divi or income on these, however there is no CGT to pay either.

Your probably noticing a pattern here, buy directly, buy quality, hold 20+ years.

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Tony Peterson

Nov 05, 2012 at 17:29


Many thanks for your kind words, and, although I intended to save my replies to DI1 and DI2 until we can do a worthwhile comparison of an earlier challenge, for your benefit I will try to dispense what I think is the best course DI could take.

DI is young. Barring rotten luck or nasty accidents, he will one day grow old. He may even grow older than me - I hope he does, and becomes as least as prosperous as I am now.

Most people understand aging. They understand bills, for goods and services they presently consume. They also understand the principle of ownership. And sharing things, including having a share in the ownership of the great corporations that provide the services we have come to depend on.

Why so many people are terrified of the prospect of sharing in a small part in the direct ownership of the companies that provide them with water, electricity, gas, telecommunications, medicines, food insurance, yes..and even banking, beats me.

You will still get bills when you are old. Inflation may drive those bills into the thousands. But if you buy now enough shares in your electricity or water or gas supplier for the dividend to cover your bills today, you will almost certainly be able to pay them in old age too with no extra effort.

This gives security of a sort no pension does. My share in the companies that provide me with the above services pays me now more than ten times the amount I need to pay all of their bills. I don't need to worry about inflation. I have invested since 1976, and every year since my investment income has risen, in spite of market blips.

I am pleased that I was only suckered into small pensions. Pensions, as most retiring contributors have confirmed, are the most appalling scam.

You are far better off today securing your future real income by starting to build up holdings paying generous dividends in companies you will always need.

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gggggg hjhjkl;'

Nov 05, 2012 at 18:01

As a high yield investor at heart, I basically agree with Tony Peterson.

However the real diffiiculty IMHO is sorting he investing "wheat" from the much greater "chaff". No one can advise on this, it can only come from experience.

I have found that the best advice often comes from those who I most disagree with. Listen to those who agree with your point of view at your peril.

You someimes get the impression that the so called experts/pundits never make a mistake, their judgement is always impeccable and always,always one hundred percent right. Please treat such people with the contempt they deserve. They may well believe that they always get it right but believe me, like the rest of us human beings they do not!!!

Above all if you do not like this investment game ( and I think it is the best in the world) then give it up and do something else instead.

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dan cahill

Nov 05, 2012 at 18:56

Don't try to make a quick buck. Buy high quality shares in businesses that you know and trust. Buy some gold coins and/or index linked bonds to provide money in emergency. Above all, be patient!

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Dividend Income

Nov 05, 2012 at 19:01

May I suggest a few solutions:

re: your point 1: start as soon as possible

re: your point 4: join an investment club, share the load

re: your point 5: focus on passive income stream such as dividends

re: your point 7: subscribe to our free Dividend Alerts at

re: your point 8: read our endorsements at they are from real people and you can contact them if you like.

re: your point: use limit buy and sell orders once you know when a dividend paying company is nearing its historically undervalued and overvalued zones

Steven Dotsch

Managing editor

Dividend Income

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Lawrence Gray via mobile

Nov 05, 2012 at 21:46

Reading this and the titles of your three previous posts it sounds more like speculating than investing. Like many things in life, effort and time will always reward well; getting lucky may reward you better and sooner, but by definition, quite rarely and with far less certainty.

If you are really investing your 10 k then I think many of the barriers you raise are not relevant - they are for the speculators.

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andrew r

Nov 06, 2012 at 08:32

Don't be deceived by the idea that information is key, if it is why did some of the most informed institutions on the planet have gone bust in 2008?

Also, remember that everything about investing/speculating/trading (synonyms for most practical purposes) comes down to timing. You might see lots of people buying some widget, but how do you decide how much is already priced in. The only way price goes up is if at some point someone is willing to pay more than you did. Why would they do that? When might they decide that it has gone up enough and now they want to sell, forcing the price down?

In the financial markets you get to play with the professionals. It is their full time business to make money from people buying and selling at the wrong time.

Yes, keep it simple but realise it's not going to be easy.

And most important, do not think about the money!

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Half Baked

Nov 06, 2012 at 15:15


Chuck all your money into Vanguard Trackers- ridiculously low TER's and you can create a diversified portfolio for easily less than 1%

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Lee Whitehead

Nov 06, 2012 at 15:54

The way I see things at the moment is that you need a balance between safety (nice dividend yielding stocks) and some riskier elements (such as AIM stocks). I, like yourself, only got into this a short while ago (18 months) and have learnt lessons along the way, but at 37 years of age, I see myself having a bigger opportunity to get over some risker trades now, than if I was 50 and closer to retirement - hopefully increasing my pot more aggresively than if I had just been "safe" or "spooked"

That said, by risk I dont mean uninformed trades, gambles or lack of research, I just mean buying into oversold or distressed assets and companies with good fundamentals but poor sentiment (such as Range Resources)

Cash is always there to be made, how much do you want it?

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Just my opinion

Nov 10, 2012 at 09:22

Have a look at investment trust details online which may interest you. For example high yield, high growth, balanced or smaller companies trusts. Most will list their top 10 holdings. They don't always get it right but it may provide you with some share ideas which will have already been researched by so called professionals. Personally l too go for higher yielding companies now. Reinvesting the income back into more shares really produces results over time. I have gone for risky get rich quick shares in the past and it seldom works. If you are younger and time is on on your side go for safe and steady would be my advice.

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Dave P

Nov 11, 2012 at 08:59

So many have been young, made mistakes, and learned from their mistakes. So many more simply never learn.

And so it is with investment.

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richard hickman

Nov 11, 2012 at 18:06

Don't give up - your losses are my gains

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wayne roberts

Nov 12, 2012 at 15:25

And vice versa - he's doing ok on some of his investments so you must be feeling some pain from your losses..

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