Forum Archive Index - December 2000

[Phil Eriksen <phil@acepay.co.nz>]

Lyall Taylor wrote:
 
> I also disagree with your apparent view that loosing money gets it out
> of your system, and helps you focus.  Personally, I cannot see any
> correlation between the two.  Focus, and good investment techniques are
> something that should be developed before commencing trading, not
> after.  Research - reading books, and dry trading should be adopted
> first, so one can enter the world of trading with a decent shot at
> success immediately.

I completely agree, at least in theory.  Certainly one should try and
learn the ropes *before* investing and throwing a large amount of your
money into the market too early in the learning process is plain dumb. 
However, I personally find that focus is something that is, in part at
least, related to real money.

I tend to make a small initial investment in a share, and then buy more
a little bit later after I've done more research on the company.  I find
that the decision to make a large investment is made a lot easier by the
doubt, stress and mental tossing and turning that I sometimes experience
after making the initial investment.  If I have these feelings, having
done more research, and made a small initial investment, I have
invariably lost money if I make the larger investment, so usually I
don't.  On the other hand, if I'm feeling entirely comfortable with the
prospect of having real money invested, and the extra research doesn't
reveal something negative, putting more in tends to work out ok.  I
don't think it can doubted that "focus" has been assisted by having real
money in the game.

The "guess next years big winner" contests show the problem with make
believe money.  People invariably go for penny dreadfuls such as AQL and
ITC, because these shares *may* experience big gains.  I fail to see
what knowledge and experience can be gained from this, because in most
cases what the investor will do on paper and with real money are
entirely different.  This is the limitation of theory.

Cheers,
Phil


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