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Diary of a Dumb Investor: ouch! Time I had a plan

I’ve started to think more seriously about my stock market strategy having watched my first investment lose money last week.

Diary of a Dumb Investor: ouch! Time I had a plan

I’m slightly embarrassed to announce that my first investment has got off to a rather ignominious start: the £999 I put into Jupiter European Opportunities is now only worth £953.62.

I lost almost fifty quid in a week!

Okay, so that £45.60 loss – or 4.56% – on my investment comes after £19.85 in charges (£14.95 commission, £4.90 stamp duty). And the shares were hit during a pretty rough week for stock markets – what with Libya imploding and oil prices going absolutely mental. They went from £2.81 a share, when I bought them, to £2.74 at the close of trade on Friday.

Tough week for JEO: click to enlarge

And I don’t want to make a fortune this year (although it would be nice); I just want to make long-term investments in a manner that will prove to my great-uncle that I can put his £10,000 money to good work.

As Mike88 commented on my column last week, this really isn’t about trying to get rich quick or making a quick buck. And I’d like to assure La Mamma, another reader, that I do intend to buy funds on the online platform I’m using, Hargreaves Lansdown.

Although I realise now more than ever that I really need a solid plan for my portfolio, which needs to be diversified so that losses like this week’s will not cause me to dribble coffee onto my keyboard in disbelief. I’ve decided to hold off investing this week to allow me time to put such a plan in place.

So, as I said last week, I’ve bought and borrowed a whole load of literature to help demystify the whole investing thing for me. I’ve made pretty good progress in the Tim Hale book, Smarter Investing, but haven’t touched the others yet. I do feel slightly guilty about that, since my ignorance will probably cost me real money, but then again – I’m a busy guy!

Tim Hale's risk spectrum

Hale outlines a number of portfolio models for investors along a risk spectrum, where one is the least risky and six is the most. I’m going to pick the fifth level and use it as a rough guide for my portfolio. As I keep saying to myself this is a long-term investment and I’m trying not to worry too much about short-term ups and downs.

Sliding shares: click to enlarge

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61 comments so far. Why not have your say?


Feb 28, 2011 at 12:59

Oh dear 'Dumb Investor' You lose a tad in a week that the market does not do well.

This is investing , take the rough with the smooth. If you can't take the heat then find another pastime.

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Robert Rayner

Feb 28, 2011 at 13:01

You could buy 1000 shares in GWP and watch them double by next year

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a h

Feb 28, 2011 at 13:05

Congratulations to the Dumb Investor on their highly professional use of expressions normally used only by professionals working in the investment industry.

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Feb 28, 2011 at 13:11

Looking at performance one week later is exactly the the behaviour that will cost you money. Long term = 5-10 years, not days!

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Feb 28, 2011 at 13:13

Your are not a dumb investor.

With such a short term view you are not even a dumb speculator, you are a dumb gambler (though most of us suspect you are a dumb - or was that damn?- journalist).

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Feb 28, 2011 at 13:16

Just a few observations as a day trader of some 20 years. Hope they help.

1. It takes years of studying, practice and experience to SUCCESSFULLY educate, qualify and practice as a doctor, architect, engineer, lawyer, accountant ... Please don't think you can turn up to a rigged casino and expect to beat the house and win from day one. It's up to you how much you want to lose to the markets, but treat each loss as a lesson and learn from each one.

2. Taking a loss on your first trade is the best thing that could have happened to you. The worst is to gamble and win. Then it's 'easy' and before you know it you've lost half your capital. The early winners tend to bust out.

3. In 2 years JEO went from 100 to 284. Does that strike you as sustainable? Do you think it is the smart or the dumb money buying that right now? Even if you drew a simple line up, you'd see that you could wait for JEO to retrace to the trend line before buying. Buying at the channel highs puts your under water immediately. On the equity markets generally, historically they have a range of some 5-10% p.a. You now seem to be entering after a 40-50% bear rally. Does that sound like a good time to go long equities? Do you think institutions are loading up or distributing here?

4. Use stop losses. On everything. If you learn nothing else, ever, just learn to use a stop loss.

Better luck with the next one.

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Long Gone Expat

Feb 28, 2011 at 13:17

30 years of investing has taught me that there are times when the perceived low risk assets are actually the highest risk and times when the so called highest risk, ie the EM's etc are actually the lowest risk, like say 2003-2008.

Right now I'd think maybe they are changing again but if you really are a dumb investor why not use funds like Ruffer Total Return and/or Miton Special Situations and let an experienced fund manager take all those decisions for you, including when to buy or sell as well as what to buy or sell. Those are also a good way to get exposure to a wide range of assets with a smallish amount of capital. Use ISA allowances too and then put your feet up.

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Colin Gregg

Feb 28, 2011 at 13:23

Obviously, no one likes to pay the Stamp Duty on share purchases, but I question the brightness of this Dumb Investor in choosing the HL share account to trade shares and funds with.

True, the account has no on-going management fee, but nor does the Interactive Investor account (and it charges a £10 fixed trading fee), nor JPJ, which only costs £5.75 (fixed) trading fee.

Could I suggest that your loss to date would be a lot less if you chose your trading account more wisely?

...but then you are a Dumb Investor, after all!

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busy bee

Feb 28, 2011 at 13:35

Oh come off it ! - have all of the above never made a loss ???!

We all do, but just get better at it (or some just sell quickly and dont admit they made a loss)

And . I would rather use a trading platform that is easy to use than a cut price one that is a nightmare.

We are all on a high when 'our' shares go up - but we have to take the rough with the smooth.

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Grumpy Old Man 2

Feb 28, 2011 at 13:44

Ignore the insults from some of the foregoing points of view. At some point in our investing lives any investor could be regarded as dumb, even the experienced ones. We all gain or lose at some time throughout our investing lives. Judge yourself in the longterm, but make sure you have a balanced portfolio to give yourself a good chance to make money overall. Rebalance your portfolio as necessary. Good luck.

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Feb 28, 2011 at 13:50

I average 15 - 20% of my trades being losers.

The Goldman Sachs' prop team had a perfect last quarter last year - not a single losing day - but even they had losing individual trades along the way.

You can have perfect trading quarters if you have the ear of the Fed. The rest of us mere mortals simply swim in their wake.

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Lyndy H

Feb 28, 2011 at 14:01

Just to say that even the most experienced investors more than often get it wrong. In today's volatile and troublesome markets you do need nerves of steel. We have all made losses and you have to start somewhere. I would also ignore advices from those advising low cost trading accounts. These do not offer quality and ease of service and can be a real headache - stay with HL and you will be OK. Diversify your portfolio so losses are limited and go and make money! Takes a lot of experience and upsets until you can make that leap to success! Also look at it on a long-term basis.

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Feb 28, 2011 at 14:09

I use HL and the online trading is as much as 30% less than phone [which I suspect you may have used].

I would not worry about a small loss, certainly not with what is happening in the Middle East - You do seem to have suffered a dangerous side-effect = "I’ve decided to hold off investing this week to allow me time to put such a plan in place". Yes the plan should have been in place before starting but it will always require a degree of fluidity......truth is this could be the week to invest and catch lower prices - A small change in Libya and things could quickly revert to an ongoing climb!

Happy hunting and sleep well lol

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Feb 28, 2011 at 14:46

If you are going to use HL to trade in shares / ITs outside an ISA, sign up to their 'active investor' scheme. It costs £12.50 per quarter but then trades are a flat rate £9.95 (+ stamp duty to buy). There are cheaper operators, but you have chosen HL for ease of use, so at least use their cheapest facility. Of course, if you are going to buy unit trusts or funds, this will not be a major consideration. But I agree with those who say you should use your ISA allowance - for this year (to April 5) before investing outside and ISA.

Bad luck with JEO - it's a brilliant IT, with an excellent record of sustained performance and resilience, but you bought in when it was trading at an historically narrow discount, so you may have to be patient to see it outperform others trading on larger discounts (FEV, MTE, for example).

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Robert Lake

Feb 28, 2011 at 14:55

Your £50 is nothing like the £4k I lost when ROK went into administration - I hope that makes you feel better!

The lesson there was check out the facts carefully for yourself and don't listen to the advice of others especially brothers. I just hope my wiser decisions can recover the losses in the long term.

The experience has certainly changed my attitude towards risk and I feel rather concerned about my other dodgy deals particularly Antisoma which seems to be heading for more loss which I can't escape/ I think stop losses must be part of the investing process from now on for me.

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Feb 28, 2011 at 15:10

Welcome to the club,

Try centamin Egypt if you want a scare.

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Feb 28, 2011 at 15:43

It's not limited to penny shares. Try holding 'safe, dependable, dividend paying blue chips' like HSBA and ABF today.

There are only so many iPads, iPods and other iJunk that unemployed people can buy. Higher input costs = margin compression = lower corporate earnings = fanciful 60x forecast PER valuations will become even more ridiculous come H2.

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Always Wrong

Feb 28, 2011 at 16:27

CEY try Centamin Egypt for a large profit or loss. Risk and scaredom often accompany as normski knows. Look at the chart on page 2 here. Good uptrend in jupiter, periodic dips. Dips are shorter so Dumb I was less likely to invest at a dip time. 10-15% minus not unusual in such a tiny investment. 3-5k more practical, cost effective. Just take care choosing a smaller number but focussed profit makers. Risk averse this game is not!

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an elder one

Feb 28, 2011 at 17:52

All very contrived; I've no wish to join in the repartee. Is this supposed to be of use to someone.

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Anthony Tinslay

Feb 28, 2011 at 18:25

I think that it must be time to stop this silly continuing article.

Very clearly the writer is NOT a 'Dumb' investor as pointed out above.

All this makes it more likely that I will discontinue using this website as a source of information - perhaps that is what the CityWire people are wanting

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Chris Marsden

Feb 28, 2011 at 19:34

Dumbo, (in the nicest possible way)

Take a higher performing fund, and you get the ups and downs.

As was suggested earlier in your diary deliberations


With JEO over 5 years, 12m and 2 weeks to show how they compare and why it's down now.

It's a buying opportunity (?), so buy some more! (?)

Stop losses were suggested earlier. (J C) A sure way to lock in your losses. You don't get S/L on Funds (?) so what's the difference with ITs, they are collective investments, so providing you keep an eye on your portfolio, you should not lose 50% suddenly, if you had BP, Connaught or Micro Focus, S/L may be relevant, but as the sudden drops occurred overnight, they would not have helped.

So IF a S/L had been used, where would you suggest setting it, 3% 10% 15%?

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Ivan Kinsman

Feb 28, 2011 at 20:14

OK, I have been running my own private portfolio since 1998 and these are the lessons I have learnt:

1) My worst investment ever made was in the Aberdeen Technology Fund at the top of the internet boom in equities i.e. 2000. My investment went from £7,000 to around £1,500. The lesson - NEVER BUY IN A BOOMING MARKET.

2) There is very little point in buying funds now, when the FTSE is around - and has been for some time - the 6,000 mark. You need to wait for a CORRECTION before making another purchase.

3) To invest in funds, buy at the BOTTOM OF THE CYCLE a la Warren Buffett - look at the return he made on his Golman Sachs investment when the stock was caught in the headwinds of the financial crisis. In March 2009 the FTSE dropped down to 3,600 and this is the point when investors (or those with the guts) should have piled in. I was too frightened by all the bad news swirling around in the media and all the experts were very unsure if QE was going to work...

Now, I have my cash just sitting in a bank account until the stock markets drop right back down - My gut feel is that the Middle East crisis may cause some headaches over concerns about oil, and these concerns may be converted into fear in the markets.

Also, I worked for Fidelity Investments as an Investment Writer and the motto there is - if you are going to invest in funds, ensure that this is over a five year period if you expect to see any significant returns. There is no point in being SHORT TERMIST unless you are a day trader!!!

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Hilary hames

Feb 28, 2011 at 20:43

Chazza said:

Bad luck with JEO - it's a brilliant IT, with an excellent record of sustained performance and resilience, but you bought in when it was trading at an historically narrow discount, so you may have to be patient to see it outperform others trading on larger discounts (FEV, MTE, for example).

I dont understand this or where the information can be found. So would FEV or MTE have been a better bet?

Not dumb but very new, a lot to learn and certainly not investing yet!

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Feb 28, 2011 at 21:17

If you check Citywire pages on JEO, FEV, MTE (Investments - Investment Trusts), you'll find the discount / premium indicated and (usually) a graph of the discounts over time.

would FEV or MTE have been a better bet?

I can't be sure, but when bought, JEO was trading at only a 5% discount, which was unusually low, whereas MTE which has nearly as good a performance record, was on –9%.

FEV was on –15% which is rather high given its history. FEV has not performed brilliantly over past 2 years but has a new manager and an active buyback policy, so I expect the discount to narrow in the near term.

I hold all 3, but reduced my holding of JEO when the discount narrowed so much and will now wait and see before deciding where to put new money.

ITs trading on very small discounts or at a premium are higher risk because more vulnerable to market setbacks in which you can get the double whammy of falling NAV and widening discount (see what happened with the once stellar AAS).

I recently switched out of SLS into the equivalent unit trust when SLS started trading at a premium, just to manage the risk.

I still like JEO and SLS but would like to see a bigger discount before wading in again.

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Hilary hames

Feb 28, 2011 at 21:34

wow,what a useful explanation above, thank you very much Chazza, maybe this will be of use to 'Dumb Investor' too! Perhaps should have come to you for advice!

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Mar 01, 2011 at 00:06

Sorry about your loss but as mentioned at least youve gained a lesson!

If you'd have bought silver 3weeks ago as was suggested you'd be 18% up by now. See this article for fantastic advice

We haven't seen anything yet when it comes to silver! At least look further than mainstream media who (shock horror) just might have their own agendas?!research the short squeeze on the COMEX etc... Good luck

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Chris Marsden

Mar 01, 2011 at 00:27

Sqeeze? Short? Silver, Shurely not?

Some big entity playing about taking stops out? Now who would do that to Silver? Who could?

Yes them crooks!

When it does well it does very well, when it doesn't it really doesn't.

4% drop in a few minutes!

It's been touching $34 this evening!

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Ivan Kinsman

Mar 01, 2011 at 07:14

I would be very careful about silver and gold. I invested in silver via but found that the storage costs you have to pay for storing the physical bullion are very high and make a severe dent in any profits you hope to achieve.

Buying coins could be a better option, maybe.

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Chris Marsden

Mar 01, 2011 at 09:11

Day trading Silver or Gold has no storage issues, only funding charges, which are small by comparison to the losses or gains, if DT wants to see the profits or losses over a week, then CFDs is the way to go, but that is NOT a wise Investor, it is more a gambler!

The drawback being holding gold is not a hedge against inflation but fiat collapse, and to have the payback in $ defeats the main object.

Scalping is a potentially profitable roller coaster. Or can be done on the FTSE100 just as easily.

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Mar 01, 2011 at 09:42

Well now it's burst right through $34 with some confidence. Also, I think that's a bit misleading, suggesting that you have to sell PMs for $s! In a fiat collapse scenario one ounce could be worth an infinite amount of paper other words you wouldn't trade PMs for paper but for other assets. Look at Vietnam as an example where this has already been happening!their government has just banned private trading of gold in a desperate attempt to back up it's fiat currency! Who thinks it will stop though?!

Your other point that gold isn't a hedge against inflation is totally flawed. Either you have missed the point that the price is going up and so is inflation or perhaps I misunderstand you?!

It's also worth mentioning that PMs can be priced in £/€/¥ and as one currency becomes weaker/stronger, the price increases/decreases. If however one was to overlay the chart of gold priced in all the world currencies, you would notice that they follow a very similar pattern..... Up!

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Mar 01, 2011 at 10:14

@ Chris Marsden

"Stop losses ... A sure way to lock in your losses."

"So IF a S/L had been used, where would you suggest setting it, 3% 10% 15%?"

Not sure if this is forum based humour of some kind. If not, you don't appear to show much understanding of stop losses nor how to use them properly. Where to place a stop depends on several factors - the set up, trading system / pattern / fundamentals you are trading off, entry price, areas of support / resistance, where the institutions will 'run the stops', capital risked, risk reward ratio, time factor, acceptance of risk, volatility / range of the asset being traded and so on .... Using an arbitrary percentage SL for all trades can perhaps be considered a start, in that at least there is a SL in place, but unlikely to be successful in the long term because it is so lazy and ill-thought out. As for the comment about locking in losses you forgot to mention the actual purposes of stop losses - preventing the one bad trade from destroying the profit from the other nine winning trades and also utlising trailing stops to lock in profit. "SL only lock in losses" is a mentality I only hear from amateur retail, never from people who trade for a living.

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John Osborne

Mar 01, 2011 at 12:17


A lot of people have given their time and experienced advice in good faith thinking the investor really exists.

However, this dumb investor is clearly unreal and created just to stir everyone up and waste their time. Surely the same issues are covered in comment on real news without this resort to fiction and deceit?

If I am banned for saying this then good, I have better things to do than read this continuing useless saga anyway.

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Eileen Obrien

Mar 01, 2011 at 16:16

I am a real dumb investor and the more I read the more frightened I become.Does anyone know where I can put my pension for 5 years and forget about it (without using a IFA as been overcharged before) was going to try to invest myself but I realise now there is too much to learn.

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Chris Marsden

Mar 01, 2011 at 16:17

Why are you so certain he does not exist? however, there has been a useful exchange of views, and many will have learnt something useful.

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Chris Marsden

Mar 01, 2011 at 22:31

The highest rate fixed interest rate BS account you can find, Eileen.

Otherwise search for a fund with STEADY performance the Ruffer Eu fund mentioned for example, and keep checking it every month or two. Or spread it between several such funds. depending to some extent on the value, ie less than £2k ONE fund, more than £50k definitely two or more, perhaps 10, OR start taking an active interest

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Mar 01, 2011 at 22:46

Chris, are you the dumb investor or a mod? Just curious ta ;)

Btw silver $34.60 and looking strong

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Chris Marsden

Mar 01, 2011 at 23:56

You've sussed me. Yes I am a Dumb Investor. But not this one nor a Mod. It's now over $34.70 2.5% on the day, but about to fall I suspect. I'm out and ready to short.

There are those that say Gold IS a hedge against inflation, but there are more very successful traders that say not, Dan Norcini, Alf Field etc


As for PMs in other currencies, CFDs are (always?) in $

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Ivan Kinsman

Mar 02, 2011 at 06:40

Think too many comments here are by day traders who are there own breed and live off high risk/high returns.

I personally shun this investment style and prefer a funds umbrella approach where the risk is much more diversified. Rather than invest in gold, for example, I would prefer to invest in a fund that invests in a range of gold producers.

So, my basic funds start-up package would be:

- Fidelity's Special Situations

- Black Rock's Natural Resources

- F&C's Investment Trust

- Jupiter Emerging European Opps

- Henderson Japan Capital Growth A

- Black Rock Absolute Alpha

- Jupiter's (?) European Fund (Alex Darwall is the fund manager)

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Mar 02, 2011 at 23:38

Ready to short??! I'm no Warren Buffett but one would have to be rather dumb/naive to short silver during a bull run. Ok, I agree we may well see a miner pull back at some stage but this may be from $45 down to $38. I would strongly advise anyone to just buy and hold and use any dips to their advantage in increasing their stack.  The years of major price suppression are coming to and end and like a coiled spring the price will release to its natural position hard and do not want to be shorting silver! Ask Blythe Masters! Interesting articles btw, thank is a fantastic one comment says; great for joining the dots!

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Chris Marsden

Mar 03, 2011 at 00:41

No I am not really shorting, but mindful there could / will be another big correction sooner or later. Thanks for the link. I have compiled some others, bit off topic, but we have just about done the 'cautious' investments for DI.

As only 20% is used for investment, and Silver is non recoverable, there is likely to be a shortage. I hear of new uses every day like as an anti-bacterial in clothing. pv panels etc.

SILVER & GOLD (Sells Silver, but interesting info)

(Franklin Sanders)

I found this posting interesting:-

"Why are people claiming there's no backwardation in silver?


Apr-11 34.829

May-11 34.835

Jul-11 34.837

Sep-11 34.829

Dec-11 34.815

Jan-12 34.368

Mar-12 34.321

May-12 34.272

Jul-12 34.222

Sep-12 34.174

Dec-12 34.102

Jan-13 34.082

Jul-13 33.957

Dec-13 33.832

Jul-14 33.699

Dec-14 33.587

Jul-15 33.437

Dec-15 33.292


Apr-11 1437.7

May-11 1438.4

Jun-11 1439.3

Aug-11 1440.7

Oct-11 1442.2

Dec-11 1443.6

Feb-12 1445.4

Apr-12 1447.5

Jun-12 1450.1

Aug-12 1453.1

Oct-12 1456.6

Dec-12 1460.9

Jun-13 1476.4

Dec-13 1497.7

Jun-14 1522.2

Dec-14 1551.2

Jun-15 1583.1

Dec-15 1618.4

Jun-16 1655.9

Dec-16 1694.9

Notice the difference."

Veritas filia temporis -- truth is the daughter of time

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Mar 03, 2011 at 19:03

Excellent post with much information! Let's hope the DI gets some physical as part of his portfolio...a wise move for anyone, only question is what percentage? Even bears suggest 10% as a minimum but lately I've heard figures such as David Morgan and Perter Schiff talk of 30% as being sensible.

I would suggest the more risk averse should have the majority of their stack in gold but as the gold silver ratio reduces from 42:1 where we are today to 15:1, the historical average, we are likely to see silver continuing to outperform it's yellow cousin. Nonetheless both have huge upside from here, just silver is likely to be more volatile as you mention Chris.

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Ivan Kinsman

Mar 03, 2011 at 20:05

Avoid gold and silver like the plague. Remember:

* The Amsterdam tulip bubble

* The US railway stocks bubble

* The Internet bubble

and next

* The gold and silver bubble

These are simply two metals that hold some value whiich is totally over-inflated and is being driven up by the hype we are seeing on this forum.

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Chris Marsden

Mar 03, 2011 at 22:31

Thanks for the salutory tip. That's what I like about this forum, no bigotory, just firm advice, backed with facts.

It may well be in a bubble, and no doubt good folks have been saying that for 3,000 years perhaps 8,000. Another bubble is stocks, and fiat currencies in a race to the bottom. From Sept 2010 Silver should be at $21 now, perhaps.

I liked Franklin Sanders daily comment:-

"Y'all don't know what an effort I have to make to keep from waxing bitter over these scabrous, scrofulous fiat currencies. They are the vampire fixed on the carotid artery of the whole world, roaches feeding on the world's pantry, damp, mangey rats ferrying their economic plague from one country to another. And the bristly swine that run them, the much bepraised central bank heads and experts? Yellow egg-sucking dogs, not worth the powder to blow them to a higher state of existence."

For info. this is the sort of post I found useful, looking back a couple of years:

They don't post them like this any more, projections and reasons for conclusions:-

"Gold chart triangle pattern poised for a huge breakout soon!

Gold is basing sideways in a triangle chart pattern. This pattern coils up tighter and tighter on lower volatility and usually lower volume too. Then all of the sudden, you will see a huge breakout come on huge volume.

This could be to the upside or downside, You have to let the price tell you which way it will go.

However, statistically, the break has a higher probability of breaking out to the upside because of several reasons.

1. The trend was upward before going into the triangle pattern.

2. The MACD is above the zero line.

3. Inflation is likely coming and that bodes well for gold going higher.

4. For any Elliott Wave followers out there, this is usually a wave pattern that breaks higher.

In the end, though, we need to let the price close beyond one of the triangle's lines to see which direction the breakout will head in.

So there's a trade set up waiting to happen for you."

And did it go up? You bet!

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Mar 05, 2011 at 15:32

DI, the downs are a fact of life, and the market did recover quite rapidly from the big falls. An adjustment in the offing?

There are also ups, and you may well find that your investment will rise. Panic and fret not.

I bought some more Lloyds and RBS 10 days ago, and they fell, on the other hand I also bought some International Ferro Metals, and AIM company, when they were 21p odd (have been as high of £1.50, before the crash and the downtrun in manufacturing), they rose within days to 27.50 p, and currently stand at 25.75p. I reckon will rise to the mid 30s and hang there for a number of months and then rising further as demand increases. The basic price of the raw material is moving off its lows to where they were before the fall and the stock piled ore runs out.

Gold and silver high at the moment, but given the instability of the market they will rise and as the market stabalises, likely to drop back. In time these highs will be surpassed, as currencies 'devalue'.

Ups and owns are a fact of life. Enjoy the roller coaster ride, but if your investments are solid, there will be profit. Your present 'ouch' loss is small beer. In a few months you well be satisfied with your foresight as it moves into profit. No forecast, I have not looked ito it. I avoid trust and funds, preferring to stick to shares. Read the papers, research and digest, but above all be patient and not pressured into investing. Buy on the dips, etc.

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Mar 05, 2011 at 18:12

BTW, if it is a solid company, there is likely to be a rise because the value will remain the same and must necessarily be reflected in the 'devalued' curencey. Just an idle thought.

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William Hall

Mar 05, 2011 at 19:02

I have read all the sagacious advice which has been given, especially about viewing the investments as long term - 3 to 5 years. In the Sector Cautious Managed, over a 5 year period the best Fund average gain was 10.6% p.a. and the worst LOST 1,9% p.a.(total loss 9.5%)

In the Global Growth Sector the best Fund average gain was 20.6% p.a. and the worst LOST 2.1% p.a. (total loss 10.5%)

If a ship springs a leak and the leak can't be plugged, abandon ship and find another one.

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Chris Marsden

Mar 06, 2011 at 00:27

Re Gold, came across this FoI reply:

"This disclosure is correspondence, both internal and with the Bank of England, advice and statistics relating to the decision to restructure the UK’s reserve holdings by increasing the proportion held in currencies. A total of approximately 395 tonnes of gold was sold at 17 auctions between July 1999 and March 2002, run by the Bank of England on the Treasury’s behalf.

The proceeds of the sales (around $3.5bn or £1.9bn) were reinvested in dollar, euro and yen interest-bearing assets which remained part of the reserves. Gold is less liquid and the price of gold is more volatile than US, euro-area and Japanese interest-bearing assets. As a result of the sales a one-off and permanent reduction in risk on the net reserves was successfully delivered."

Now if Ivan is right, the $ yen or £ was a good move?

395 tonnes x 32,000oz x 1433$/oz is $18.1bn. Thanks Gordon, you plonker!

Another Dumb Investor - on OUR behalf!

If we were to reintroduce the gold standard, we could only buy about 76 tonnes back for that money!

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Chris Marsden

Mar 06, 2011 at 00:35

Correction, 1 tonne = 35,273.9619 oz, so £20Bn. An even dumber investment in fiat currencies.

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Chris Marsden

Mar 06, 2011 at 00:39

Oh. lets be pedantic!

Gold is measured in Troy ounces and 1 Troy ounce equals 1.0971428571 ounces.

1 metric tonne = 32,150.746 Troy ounces

Read more:

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paul armstrong

Mar 06, 2011 at 08:23

This is a very odd thread, have we got a ringer here ? Anyway, for the confused objectives and the impatient timescales, no use being in mutual funds I wouldn't have thought. Whats wrong with nice and cheap (long) ETF's ?

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Chris Marsden

Mar 06, 2011 at 11:37

Ivan says:

Avoid gold and silver like the plague.

If you wish to, do so. But for DI or others, some modest exposure is not so daft.

Sprott says he would expect it could see $100 oz in 3 - 5 years, China exported 100m oz, now imports 112m oz in a 800m oz market, etc etc

"BNN talks to one of the world's leading investor's and investment strategists Eric Sprott, CEO of Sprott Asset Management and finds out just how precious the metals are."

It's only a man on the internet, but he does dabble big time, and a multi billionaire.

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Mar 06, 2011 at 15:39

Dumb Investor - Ignoring most of the above, we should perhaps have warned you of the unbroken rule that a share will always drop in value just after you've bought it. It's called Sod's Investment Law. You just have to sit there and grit your teeth for a while.

In fact Jupiter European Opportunities has now risen again to nearly 279p. It's been one of the steadier performers over the last three years, but it won't be spectacular.

Now grit your teeth again and put another £1,000 into Standard Life UK Smaller Companies (code SLS).

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Mar 06, 2011 at 15:59


"Now grit your teeth again and put another £1,000 into Standard Life UK Smaller Companies (code SLS)".

Really? Good trust, but surely lousy timing as it is currently trading at a discount of barely 1% as against its usual 10-15%. BRSC, on the other hand, has performed a little better but is trading at a discount of 11%, and HLS, doing nearly as well, is at a discount of over 17%. I cannot see the advantage of buying SLS at the current price / discount level as SLS would have to have a sustained period of outperformance to justify the premium over its competitors, and there is so far no evidence of that. i've sold SLS and bought BRSC, HLS and HRI with the proceeds. It's working well for me so far.

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Mar 06, 2011 at 16:21

Chazza - Discounts schmiscounts . . . . A discount is only of any real importance when an investment trust winds up, and neither of those two look as if they're going to wind up in the foreseeable future. Aren't you assuming that an investment trust manager's sole job is to reduce his discount to zero? I don't think the manager would agree with that.

I have a fairly complicated rating structure for investment trusts - yes, BRSC is doing marginally better at the moment, but I also track the trusts' performance against the FTSE All-Share over 1 year, 3 years and 5 years, each month, (if you don't beat the All-Share you're out of the list), and on that basis BRSC has 10 appearances in the last 4 years and SLS has 30. Dumb Investor is (or should be in view of his age!) in it for the long term, so SLS has the better track record.

Anyway Chazza, please explain to me how a unit trust's net asset value system works when the unit trust is invested entirely in companies where the share price far exceeds the companies' net asset values . . . .

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Chris Marsden

Mar 06, 2011 at 16:58

Maverick, love to hear more about the 'rating structure' and is it ONLY for ITs?

The comparison to the All Share is good, but that is primarily for UK Cos, and PMs commodities BRICs etc are much less comparable with the All Share?

Do you have a set value / continued underperformance at which you would normally sell.

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Mar 06, 2011 at 20:56

Chris - Right, here goes. You use Trustnet, and I produce the list on the same day every month.

1. Establish the 1yr, 3yr and 5yr rise in both the FTSE All-Share Index and the FTSE Investment Companies Index, and take the higher figures. Trustnet has a tab for Indices. Say the figures are 20, 24 and 28.

2. Call up the Trustnet performance figures for investment trusts.

3. Click on "Advanced Search" and click on ITs in the drop-down box.

4. Enter the figures in the boxes for 1yr, 3yrs and 5yrs, e.g. 20, 24 and 28.

5. You will then get a list of the ITs that have beaten all of those figures. You can print it off, or cut-and-paste it into Excel.

6. Keep, on another Excel sheet, a note of which ITs have qualified that month.

You can then establish which ITs are the most consistent outperformers. I have 40 months' figures now, and Edinburgh Dragon is the only IT to qualify every time. But it only produces ratings for long-term consistency, and you need another system to deal with short-term performance (say last 3 months), and look at the two together.

There may be another rating structure you could use for shares in individual companies, but if there is I haven't discovered it. (I do mean free on the net, I'm sure I could get all the information I want if I paid for it!)

My rule is that if a share (whether IT or individual company) doesn't rise for 4 months, I sell it. That's enough to smooth out short-term fluctuations. But I do keep the shares I sell in a separate watch-list, in case they start performing again. I'm not too proud to admit I was wrong and buy them again . . . .

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Chris Marsden

Mar 06, 2011 at 22:54

Thanks a lot for detailing that, very useful.

I think it is essential to monitor shares that have been sold, if it was considered good once, either it's a buying opportunity - or a small retracement on a falling stock! If you can buy it back cheaper, or there seems a reason to have dipped, they may well have further to rise rapidly. I guess ook at fundamentals and broker recommendations - although I have little faith in them!

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Mar 07, 2011 at 09:22

You sound inexperienced. You have 10k to play with. put 75% in Slater Growth or SLS or cherry pick some zulu stocks - e.g. CIU, AMS, MML etc.

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Ivan Kinsman

Mar 07, 2011 at 19:49

I think this forum needs to be split into two - one for the day traders and one for the funds investors as we are both very different investment species.

dasv above advises Slater Growth and I would advise a similar styel fund:§ion=wealth-manager

However, I would only put 2.5k in - as it is high risk - and put the other 5K in to more secure funds e.g. Europe, Emerging Markets. Not sure what 'zulu stock's are - are these individual shares. If so, I would avoid them and stick to umbrellla fund-type investments.

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Chris Marsden

Mar 07, 2011 at 20:27

I think it is

I've got some AMS - at the top, so hoping they continue up, but the past performance looks OK!

A 'higher risk' stock could be considered wise if the fundamentals were reasonable, but with only £10k, the line between charges and overexposure is very fine. Perhaps 10%.

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Mar 08, 2011 at 04:18

zulu stocks - see "the zulu principle" and "beyond the zulu principle" by Jim Slater - father of Mark Slater. Simply put there are tight criteria for stock selection - e.g. 5 years of EPS growth, pays a dividend, unique product/service, director ownership, strong chart, small-mid cap (elephants don't gallop).

Look at the ZULU thread on advfn for examples or look at what Mark Slater has bought and is buying - things like JDG, CIU, HCM.

Don't overlook resources though - JIm Slater made a mint from resources but sold out in 2007 when the "low hanging fruit" had already been picked. Right now there are still opportunities in resources but the market is catching on fast.

Legal and General alpha trust buys good UK stocks - not a bad fund.

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