David French | 18/02/2009 3:52:56 PM

This article was originally published as ‘Being slotted in the gloom’ in The Morning Bulletin on 23rd November 2001.

A lighter article this week. There is plenty of sage advice on offer, and financial markets being what they are, much of it is condensed into brief sayings. Here’s some of the better ones which apply equally to bonds, property and shares.

Buying in gloom, selling in boom is a sound investment strategy. It is human nature want to buy when prices are rising and sell when prices are falling. It appears to lessen your risk, because the market is traveling with you. But you may well be buying when informed investors are selling. Far better to have thoroughly researched the investment, and buy it well before others decide that they’re on a good thing.

You bought your investment when no-one else was buying and now you are thinking of selling. The best time to sell is when there are willing buyers, so feed the ducks when they are quacking.

But don’t stand in front of a train. Buying in gloom and selling in boom is fine, but you need to wait until the gloom or the boom is firmly established. In between times prices may be moving rapidly in one direction or another. Buying or selling into these market movements is akin to standing in front of a train – you will be run over.

Always remember that you are never bigger than the market. You might purchase an investment that subsequently falls in value. Buying more to try and prop the price up is not only an offence, it will end in tears - the market will still be doing what ever it will, long after you’ve run out of money!

Getting slotted is not a pleasant experience. Someone is selling a dog of an asset, there are few willing buyers. The seller dresses up the story with half-truths and soon you have bought the investment, which soon falls in value. You’ve been slotted. The way to avoid this is to know something about the investment you are getting into.

If a stock looks like performing well, you might be told to get on board, or fill yer boots, that you can’t have enough. She’s going up so don’t ask questions and back the truck up. These are all short hand ways of selling a “good thing” in three words or less. Taking this type of talk too seriously will lead to you being carted out. You might be being slotted or being sold a dog with fleas. The investment might be run by Spivs and you could be on your way to blowing up!

Perennial dogs often stink and buying a recovery story is risky because leopards do not change their spots!

Above all don’t be greedy - Do the deal while you can, and you will be a happy man. Those who try to finesse, always wind up in a mess - If you have done your homework and think its time to buy or sell, then just do it. Experienced investors know the angst associated with hanging out for that little bit extra, only to see the price move against you in a big way.

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