The Rules

Sell as soon as I decide to do so, don’t wait for that bit extra.

Prior to the credit crunch I had a sizable chunk in RBS. Following the crunch, I was looking to get out but was waiting till the price was nearer my buy price – BIG MISTAKE. Eventually the share started dropping 3-4% a day, each day I was looking to get out a price of the previous day. This resulted in my watching the price going down every day and doing nothing about it. I guess this is what a bear market is like. Had I taken this advice I would have got out at around 550p, instead I pulled the trigger at 422p for a large loss. Its annoying to be right about the prospects but still take the anticipated loss.

Set an initial limit on the amount I will invest on a share and DONT EXCEED IT regardless of how good value it may become..

This didn’t happen, but could have. At around 500p I was considering putting all my money into RBS to catch a bounce to recoup some of my losses. I didn’t and subsequently saved myself a stack as the share went down to around 400p instead of bouncing back up to its previous 550p trading range. I read this on the fool, and believe it, “There was another lesson here: it’s dangerous to ‘top up’ after a big price fall. This is something I have never been tempted to do, having been told by pros that ‘averaging down’ is the biggest mistake that retail investors make“

No farm bets.

Although I have still to decide on my maximum exposure I’ll be prepared to take, I don’t intend to put huge percentages into one share. In the last few months apparently value shares (Northern Rock and RBS) have lost huge amounts and large losses could have resulted. Maybe 25% max in one share (as long as its FTSE), AIM stocks maybe 5%????

Beware the Fool

The fool boards are full of great investors and good advice, however ’sure bets’ such as RBS still went on to lose significant sums.   Falcon oil (no position) went on to lose huge amounts. In short, keep a level head even when others are farm betting and maintain my limits.

Invest only for the long term, never quick trades

I have invested in several companies with the intention to make a quick buck and in every case the quick profit didn’t materialise and often the price went down. Examples include investing in Soco for immenent drilling results (and still waiting 6 months later), investing in ACE awaiting a report that was to show profitablility (it didn’t) and investing in RBS waiting for a bounce that never happened. These trades caused me pain as I general I saw I was losing money, with my long term buy and hold I don’t monitor daily prices and fluctuations go unnoticed.