View the article online at http://citywire.co.uk/money/article/a584010
Diary of a Dumb Investor: time to reload my short gun
I'm happy to take a profit on my bet against France's CAC 40 stock index and plot my next move. I don’t want to get greedy here.
Brup brup! I’ve just closed the most successful trade I’ve made in my year-and-a-bit investment career, a bet against France’s stock market, and now I’m looking for something else to sell short.
A brief recap: three weeks ago exactly, I bought a leveraged, synthetic exchange-traded fund (ETF) designed to give me twice the opposite of whatever France's CAC 40 stock index does each day. What with Europe wobbling again, and the upcoming French election, I smelt blood – or should I say garlic?
It went pretty well, as I had for once made a timely investment, instead of repeating my knack of buying high only to sell low.
Since pouring £1,068.25 into the fund, the CAC has lost about 8.6%, and I’ve made over 10%, or £109. Which does, of course, vindicate all of the nay-sayers who warned that the pledge to try to give me double the French stock index’s losses was no guarantee that the ETF would actually manage to do so.
But because of those cautions, I’m far from disappointed with the ETF’s performance; in fact, I’m positively thrilled with it.
This morning, after reading the results of the first-round vote in the French election, I chose to sell out. As I had hoped, my man Sarkozy was edged into second place by Hollande, who is slightly to the left of Lenin, I believe. Markets are running scared as I write this, also hurt by some bickering in the Dutch government.
‘Buy the rumour; sell the news’, is something I read in an FT column a while ago. And that is more or less what I’ve done.
Who knows what will happen in the two weeks before the next round of voting in the French election? And is the European Central Bank going to step in again to support Spain’s bond market? I just don’t know... so am happy to take a profit and plot my next move. I don’t want to get greedy here.
‘DI, subscribe to the following Golden Rule – Success is 10% inspiration, 90% last-minute changes when trading these instruments,’ advised Michael Peters Fenwicks, a Citywire reader. ‘Take the profit daily/weekly as motivation while constantly readjusting your position to hedge risk.’
Well, as another reader pointed out, it’s probably too expensive to keep nipping in and out of the ETF, due to all the charges I would incur along the way. Yet I think I’m still adhering to the spirit of Michael’s advice by selling out of the fund after holding it for three weeks, even though I don’t plan on going back into it in the near future.
Of course, it’s all well and good that I’ve made a hundred quid on that punt, but the rest of my portfolio is looking rather pathetic, with Lloyds (LLOY.L) and BP (BP.L) unsurprisingly being the biggest offenders.
News sponsored by:
Here at BlackRock, we help investors make more out of commodities with a range of innovative, flexible and resilient investment strategies.
From Brazil and Mexico, to Vietnam and Nigeria, the rapidly developing economies of Latin American and frontier markets, which are some of the smaller, less developed economies in the world, provides investors with a wealth of potential opportunities. Discover why BlackRock's investment trust range is well placed to help you make more of these exciting regions.
In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.
More about this:
Look up the shares
More from us
- Diary of a Dumb Investor: fail, Sarko, fail!
- France election: shares hit as Hollande wins first round
- Diary of a Dumb Investor: shorting the Frenchies
- Dumb Investor: the story so far
What others are saying
Tools from Citywire Money
From the Forums+ Start a new discussion
Weekly email from The Lolly
Get simple, easy ways to make more from your money. Just enter your email address below
An error occured while subscribing your email. Please try again later.
Thank you for registering for your weekly newsletter from The Lolly.
Keep an eye out for us in your inbox, and please add firstname.lastname@example.org to your safe senders list so we don't get junked.