Profit and risk
Jan. 28th, 2009 02:23 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
andrewduckerLast week, when RBS shares were at their lowest point (having dropped from 700p to 10p over the course of two years), I bought £100 worth. £100 being an amount of money I could afford to have vanish into thin air if it all went horribly wrong.
The thinking being that the low price was based on people having a total loss of confidence in the bank, and didn't reflect their ability to make money in the long term. Either they would go back up to some level of heir former value (thus massively increasing my investment) or they would be nationalised (losing me £100). I would _never_ have put money into this that I couldn't afford to lose in its entirety.
That £100 is now worth £182.
Part of me wishes I'd put in £1000. But I know that I don't have £1000 that I could afford to lose, and thus, although making £820 in a week would be nice, the risk level is much higher than I would be comfortable with.
I'm holding on to them for the mid-term anyway - at least a year, if not two. I don't expect them to announce a profit this year - and possibly not next. But there's not much point selling them on until they are back in profit, so that seems like a reasonable point to consider it.
The thinking being that the low price was based on people having a total loss of confidence in the bank, and didn't reflect their ability to make money in the long term. Either they would go back up to some level of heir former value (thus massively increasing my investment) or they would be nationalised (losing me £100). I would _never_ have put money into this that I couldn't afford to lose in its entirety.
That £100 is now worth £182.
Part of me wishes I'd put in £1000. But I know that I don't have £1000 that I could afford to lose, and thus, although making £820 in a week would be nice, the risk level is much higher than I would be comfortable with.
I'm holding on to them for the mid-term anyway - at least a year, if not two. I don't expect them to announce a profit this year - and possibly not next. But there's not much point selling them on until they are back in profit, so that seems like a reasonable point to consider it.
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Date: 2009-01-28 02:29 pm (UTC)no subject
Date: 2009-01-28 02:32 pm (UTC)no subject
Date: 2009-01-28 02:38 pm (UTC)PrudenceGordon Brown for buying up all the American dross that collapsed the market in the first place!no subject
Date: 2009-01-28 02:39 pm (UTC)no subject
Date: 2009-01-28 02:42 pm (UTC)no subject
Date: 2009-01-28 02:48 pm (UTC)no subject
Date: 2009-01-28 02:56 pm (UTC)I"m glad you did so well. With all of the upsanddowns, there's no way that I'd invest in any bank stock, but the only time I ever invested in any stock was some women's contraceptive thingy (http://www.veos.com/) that never went anywhere. Crashed and burned, last I heard.
I know a good deal about general economics, but I know nothing about the dips and turns of the market, and it's not something I ever feel comfortable with.
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Date: 2009-01-28 03:07 pm (UTC)I'm largely betting based on my view of market sentiment and knowledge of the sector. This puts me a good 80% ahead of most investors, it seems :->
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Date: 2009-01-28 03:22 pm (UTC)Nearly nobody beats the index over the long term without inside knowledge - BUT (and this is never stressed enough by tracker fans) your entry and exit point do matter a lot even so. No use buying in at record highs, buying in regularly and selling out too soon at a loss/not much profit.
I tend to buy the FTSE index within an ISA when it hits one of my magic (low) numbers (nearly jumped in last week, but technical issues with my debit card stopped me so I took that as A Sign) and sell X years later (where X >5 ) when it's at a conveniently profitable point. Have done the buy-in regularly on the way up/down. But you have to be able to wait for that point no matter what.
I rode 1999 [quite high there hence the long hold] - 2007 and 2002 (much better!) - 2007 this way and made er, well, an amount that I am not comfortable to quote here.
I didn't get into property then though, so I am no genius and thus ended up buying my flat about 1.5 years before peak...
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Date: 2009-01-28 04:38 pm (UTC)They have taken over a week to process my account. Thus, I didn't get the chance to buy the 10p shares.
Sod. Sod sod sod.
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Date: 2009-01-28 04:47 pm (UTC)They're at 22.6p now.
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Date: 2009-01-28 04:52 pm (UTC)Not that I'm complaining, as I'm expecting them to go a _lot_ higher.
Looking at the graph here I'd be surprised if they didn't hit at least £2-3 within two years.
The reasont they're radically depressed at the moment is that an awful lot of people are fleeing from any kind of risk at the moment, including (for instance) pension funds, who can't be seen to be investing in a bank that's possibly about to be nationalised. Once they become interested again I suspect it'll go back up.
Of course, when they get nationalised next week you can point and laugh at me.
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Date: 2009-01-28 04:53 pm (UTC)Seduction of Penny Shares
Date: 2009-01-28 05:41 pm (UTC)Given the time it takes to buy and sell shares, though, it's very easy for a short delay to mean that you pay more than expected for the shares, and then when you sell them, you get less than expected. And, obviously not the case with the RBS, you run the risk of owning a small but significant chunk of a moribund company....
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Date: 2009-01-28 06:28 pm (UTC)http://www.hoodlessbrennan.com/
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Date: 2009-01-28 06:41 pm (UTC)I was very tempted to buy even more when they hit 10p, but enough was enough...
It's nice to know people are still buying them somewhere though. I reckon this year's AGM will be very very interesting. But there might not be free tea and shortbread this time round!
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Date: 2009-01-28 06:47 pm (UTC)no subject
Date: 2009-01-29 10:13 am (UTC)no subject
Date: 2009-01-29 10:15 am (UTC)no subject
Date: 2009-01-29 11:29 am (UTC)