Smart Investor: learn to ignore the market noise

Another great article, full of wisdom - thanks! I can give an example: one of my worst investments was Autonomy. I hung on, refusing to take a large loss. Now it is at last coming good - and it did take years.

I could never be a trader as I hate to sell at a loss. Thus far this policy has paid off, as even bombed out shares have come good eventually. However, I may have a long wait for Lloyds Bank, BT and Premier Foods, my other three poor investments. At least BT pays dividends, which eases the pain a lot. BT will come good longer term as the management is now getting a grip.

The same applies to Premier Foods, which has halved its debt pile. As for Lloyds - we will wait and see. Having lost five sixths of my capital I may as well.

Please forward your article to Dumb Investor.

Patience is always my watchword. Despite all downturns being driven by different parameters the longer I remain invested the more sanguine I become.

I have been investing since 1967 and this time round seems to me no more different than the 70's, 80's or 90's. My dividend income continues to grow above inflation and that's what counts to me.

Capital gain is the icing on the cake which provides me with a change of car or luxury holiday whenever...............it comes.........

I noticed that over the week end when the market was closed stock prices did not change thus avoiding all the angst that has been occurring. Eureka !

Why don't we close the exchanges down or at least suspend them for a year.

At least we'd get some respite and nothing material in the world would happen.

Alternatively why not just allow trading for an hour on Wednesday afternoons charging £10,000,000 for each trade. The effort and time thus released to the financial professionals could be used by them to get on treadmills and provide a virtually free form of alternative energy.

Or why not let me and my mate Jonathan monitor and adjust stock prices based on our reading of the situation. We'd have a team of 2 or 3 part time researchers ( only qualification is that they can read and don't trade) whose task it is to brief us via e mail on the competitive landscape and macro scene. We'd operate a default dividend policy of 5% except when the company is broke. We would only work on Wednesday afternoons.

Let us have a go and oh we would would on an hourly rate of £60. If you thought about the outcome of such simplification its got to be better than scary movie we're in right now.

2008 showed us what happens when people panic. Do you think that if all investors simply left their money in shares then the crisis wouldn't have been so deep?

Best advise; - invest with common sense which means having a long and short term strategy while taking the profits where the situation allows.

Simple as that because when it comes to trading you have to forget your emotions other words common sense and rationality will prevent you from having a fair assessment towards your objectives.

Don't let your fear paralyze you. Prepare yourself not only technically, but also emotionally advise any young trader receives the minute they take that first step on the trading floor.

Market challenges are not supposed to paralyze you, they're supposed to help you excel as a trader.

I agree with all of the above, an excellent, reasoned article. Maybe it explain why Dumb Investor is so less interesting. With his "£10K gift to invest", it is worth to him exactly what it has cost (i.e. nothing) and he is therefore trying to gamble (trade) without the skills.

I remain fully invested, never sell on bad news - as a simple private investor one can never truly tell what the market will do next - though taking some profit is a good notion since it leaves a little cash around for the exploitation of market falls. The only time I went wrong was in the dot com bubble, which was a different shambles altogether namely, gambling, for which one needed a trader's mentality I didn't have; there was no way all those start ups were going to succeed and it should have been obvious that it could all end in tears.

Michael Fenwick Peters

So " common sense and rationality will prevent having a fair assessment ...."? Sounds like nonsence to me - but quite unintentionally you're probably right.

and your sage like comment ' take profits when the situation allows " When would that be then. ? Right now I'm sitting on a profit over 3 years on Standard Chartered but they have fallen in 7 weeks by 25%. Sage - should I sell them ?

Poppycock tinged with misplaced arrogance.

Sir - Moylando, allow me to return this otherwise good typing error to you because someone has printed gibberish all over it and put my name at the top.

But to me developing a winning strategy often involves taking a small daily profit which can provide a large annual return while retaining the instrument.

I tend to look for good growth probabilities while also keeping an eye on risk through diversification as much as possible.

I sometime think no correct strategy exists but the balance is between risk Vs return ratio as the main fundamentals.

Often am reminded by Mr. Chuck Prince, former CEO at Citibank just before the credit crunch;

"When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing."

Sir, you can't direct the wind but you can adjust the sails that to is balance.

Smart Investor - These are noble words, but it all smacks a little of being wise after the event. Some companies do well for three or four years, and then fall dramatically and never come back up again. Some companies engage in "creative accounting", so you cannot trust their figures.

The unfortunate fact remains that the companies which have done best over the last 3 months tend to be the ones which do best over the next 3 months. If that makes me a trader rather than an investor, so be it. I appreciate it needs a lot of monitoring, but I am gratified to see that "my" high performers seem to be the most resilient companies during the recent volatility.

I remain fully invested, however . . . .

I broadly adopt similar principles as stated, however, I prefer Investment Trusts (IT's) rather than single shares and find these to be much better long term bets!

One thing I look at are the dividends, as these tend to be where IT's really do perform well as many of them can pay good dividends even in bad times, which single shares generally cannot match.

Go take a look at them, but stay away from 'splits' and go for good 'ordinary shares' in either 'Global' or 'UK' sectors. Only venture into overseas trusts after you have gained some experience & knowledge with IT's, as some of these can be high risk, so do your homework first!

See:

http://www.citywire.co.uk/money/investment-trusts/home.aspx

http://www.trustnet.com/

Thanks to all at CW for a superb site!

some of us were steadfastly "fully invested" ... and don't have very many years to watch the markets come back to life... I am now looking for some cash from the markets -- and much less excitement.