View the article online at http://citywire.co.uk/money/article/a611001
Diary of a Dumb Investor: investing has bankrupted me
Morally that is. I now dream of profiting from scandal-struck banks and the ruin of people’s pension schemes.
Only a few months since I started investing I have already compromised any principles I started with: it’s just too difficult to invest for yourself otherwise.
Tempted by shorting
And a couple of days later, reading on Citywire about how one fund manager ‘shorted’ Standard Chartered shares before the stock market opened on Tuesday – ie bet on the shares falling after the US accusations about Iran – I thought ‘I want to know how to do that’.
Ergo I want to know how to profit from the decline of a business and the devaluing of people’s pension funds; I want to be a ‘bank robber’ as the Archbishop of York said of the short-sellers who undersold HBOS shares in the financial crisis.
I subsequently realised, after a bit of research, that it’s not the sort of thing you do on a Hargreaves Lansdown account anyway (my weapon of choice). Instead you need to get into spread betting or CFDs, perilous activities that I haven’t delved into.
That would most definitely please my critics who say I’m a gambler, not an investor. But wasn’t shorting Standard Chartered shares just an obvious thing to do, even to a dumb investor? If you hear bad news before the market opens, surely you can be fairly certain that the shares are going to drop?
So where was I? That’s it, holding shares in a company – thereby financially supporting it – that is accused of dealings with Iran.
When to sell Standard Chartered?
I can already foresee the accusations in the comments box below that I’m being wishy-washy from hard-nosed investors who think only in profits and losses. So onto another question: when do I sell? I have been agonising over this all week.
‘You aren't an investor in SC. You are gambling. SC is just the roulette wheel,’ a much more wised-up investor said to me after reading my article. That stung. I’m sticking with Standard on the basis that it’s a solid company to own, with a decent balance sheet and operating in the right markets: not the West.
And besides, the now-familiar sequence of events seems obvious to me: bank gets told off; outrage and share price fall; shares start rising again on the realisation it was an overreaction and as bank management takes action; share price gradually crawls back, at least enough to profit anyone who bought at the bottom. Hell, I probably should have hung on to my Lloyds shares.
The StanChart shares have risen by 16.6% since I bought in, making me a rare profit of £165 on my £1,000 investment. But still I cling on. The decision by the New York regulator does not seem to have garnered much high-level support – the regulator was ‘rogue’ according to an interesting piece by Kishore Mahbubani published in the Financial Times today – though whether that will make any difference to the ultimate outcome I do not know. Let’s see what happens at the hearing on Wednesday.
I’m reliably informed that buying is the easy part. It’s deciding when to sell that most amateur investors botch. I’ll reserve any further bravado until I have proved that I can successfully do both.
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by Gavin Lumsden on Oct 21, 2014 at 17:20