Forum Archive Index - June 2003

["Gavin Treadgold" <gav@rediguana.co.nz>]

Time for me to chime in. I don't really feel there is much need in
identifying individual losers of mine, I will provide some lessons that I
have learnt the hard way.

I have been investing since 1998, so still relatively new to it.

1. Knowing when to sell is the hardest decision. It is easy to buy but
extremely hard to know when to sell. Greed plays a part here but is not the
only factor. Much as you may have a predefined loss of say 10% to sell, I am
getting inclined to have a predefined level that forces me mechanically to
sell _some_ shares of a winner, so as to lock in profits and reinvest
elsewhere. Naturally I'm not going to sell all. It reduces your potential
gain, but this is only an issue if you are greedy. There are a number of
factors to consider here, such as general state of the market, opportunity
costs, etc.

2. I had a fun rollercoaster ride on the tech boom in the US, and to a
lesser extent here in NZ. Significant gains, but not knowing when to sell,
and not selling, and before I knew it I was down below where I started. As
we all know hindsight is a wonderful thing, and I beat myself up about it
for a little while. But, then I had the realisation that if I had sold and
taken a profit, I would have reinvested it in the market anyway and still
would have been caught out! So, my next lesson was that you have to have
different investment mechanisms to invest in, be it sectors that are
negatively correlated (when ones up, the other is down, so can sell high and
buy low), or even a different class of investment - such as property (don't
get me started on the current boom ;).

3. Related to (2) - you don't have to fully invest in the market. If there
are bigger picture economic issues going on, be prepared to sit on the
sideline with some cash in the bank. And always have some cash on hand - you
never know when the market is going to dip. Always have some capital ready
to go.

4. Monitor, monitor and monitor. I had some good and bad life events occur
that made it difficult for me to monitor my portfolio for a while, and keep
on top of the current market prices. I got a suprise or two when I next was
able to check in on them. Lesson learnt. Monitoring is not only about
prices, but also about news. One of the reasons I came back to this list.

Naturally, lessons are still learnt the best when you make the mistakes
yourself. I'm just glad I learnt them young and it won't have cost me much.

I'm sure it will make me a better investor in the long run.

Cheers Gav


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