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Don't throw good money after bad

Investment expert Giles Hargreave of Hargreave Hale gives his short but straightforward advice for making a profit from investing.

 

by Michelle McGagh on Mar 15, 2012 at 11:06

Don't throw good money after bad

This Money Master Class is given by Giles Hargreave, a leading smaller companies fund manager and chief executive of Hargreave Hale.

Giles started his career in investment in 1969 and runs a number of funds including the Marlborough Special Situations fund . He has some straightforward advice for those who want to play the market.

He says:

1) Run your profits, cut your losses

2) Average up, not down

3) Capture the mood, don’t fight against it

We say:

Giles has kept it short and sweet by choosing these oft-heard investment maxims, but they offer a good base for investing.

Investors should not be frightened to let their investment grow if it is doing well, there is always the temptation to take profits too early – it’s finding the tipping point between letting it grow and letting it turn into a loser.

Equally if your investment hasn’t done well, don’t let emotion keep you in – cut your losses and get out of there!

When Giles talks about ‘average up, not down’ he is talking about throwing good money after bad. Averaging down is the tendency to buy more of a stock if it is in a decline in the hope that markets will bounce back up. He advocates investing more in stocks that are doing well (averaging up) – just make sure the stock isn’t overvalued.

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5 comments so far. Why not have your say?

Franco

Mar 15, 2012 at 15:15

Very good advice. Excellent. Three lines from an expert, worth 3000 lines of platitudes from Citywire writers..

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Spiro Ozer

Mar 15, 2012 at 15:42

The best advice of all is to leave equities to professional investors who have access to far more information, and far earlier, than mug punters do. Amateurs will always lose their shirts in the end, simply because sooner or later they will be caught out by a disaster.

When I came to settle my mother-in-law's affairs after her death, I discovered that all her long-term gains on a portfolio of quite decent shares had been completely wiped out by her losses on the GEC-Marconi fiasco.

It's my opinion that events like that are carefully omitted from those graphs that show the stock market always going up in the long term. After all we don't want to frighten the easy money away do we?

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dereklkl;l hdjkaK;LL'a

Mar 15, 2012 at 18:07

"The best advice of all is to leave equities to professional investors who have access to far more information"

No they do not!!!

The problem is the reverse, their is now too much information available and the investment skill is knowing what "noise" to ignore.

Oh and experience and skill do not go amiss either.

I am on my third Porsche, how many have you had???

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Roydo

Mar 15, 2012 at 20:05

Might have had 3 Porsches pal, still cannot spell though.

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Jayanti Gandhi

Mar 16, 2012 at 14:10

Do not take his advise because market is casino and hence buying on falling stock may be good as the stock fall may be due to general market fall. In Sep and oct of last year if you had bought under falling market the average will have been lower and more profit now.

Take a judgement and buy or sell and hence willing to make money or lose.

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