HomeShare PricesShare ChatFinance NewsBlogsMember Blogs
Expert BlogsLive PricesShares BookshopFinance ToolsMembers
Expert BlogsLive PricesShares BookshopFinance ToolsMembers
Latest Share Chat
Naked Trader Blog
Risk & Reward…Avoid win-or-bust trading!
Thu, 8th Apr 2010 - Author: Robbie BurnsI've seen some real heartbreak stories on the bulletin boards and mailed to me regarding the huge markdowns in some of the Falkland Island oil shares.
For instance, shares such as Desire Petroleum which halved on some not-so-great drilling news.
Stories included one guy who lost £70,000 and wailed: "Now how am I going to tell my wife?"
Another said that he had his whole Pension fund in Desire and was shocked to lose half of it. Many other stories abound of investors who have, at the moment anyway, ‘done their money’.
While I do have some sympathy for them, part of me is also unsympathetic.
First off, they didn’t seem to realise that putting money into small oil exploration companies is a real gamble.
If they find good oil, fantastic, you make a mint. However, if the oil isn't there or it's not good oil, the shares will sink faster than the Titanic.
But, above all, the one thing that shocks me is this - so many investors put nearly EVERYTHING they had into one or two of these risky shares.
It's amazing really. I mean, would you go to a racecourse and put your life savings on a horse?
You've got to have a balanced portfolio to make consistent money on the markets.
Putting everything on small oil shares is simply asking for trouble. Remember, a lot of ‘hope’ is already in the prices of oil shares, so any disappointments and the shares get hammered.
It's fine to have small oil shares and I sometimes do - but only in small amounts compared to my overall portfolio.
Indeed, a small punt can be fun…but it should never be more than that.
It's even worse than people losing money they had. Many had these shares with spreadbetting firms on credit. Their positions would have been closed out, and a chilling phone call would have been made.
"Sorry, sir, your account is in debit by XXXXX, and we need the money now..."
Don't have the money? Too bad. See you in court. Watch out for the bailiffs.
Another point is what tends to happen after investors lose their shirt on any share, oil or not, is they hang onto them.
At seminars I run there are always many who hold portfolios with shares down by 50% or more.
I just think it's crazy - it's bad psychologically to start the day with a bunch of stinkers. Much better, in my view, to get rid of them and start from scratch. A hard thing to do because there is nothing harder than crystallising a bad loss.
It is human nature to hold on to losers because you "haven't really taken the loss yet." But it is bad practice. After all, you can always buy back in.
I don't advise people and I wouldn't personally know whether these Falkland Island shares will come back. They will if the oil is there. If not, they will retreat further.
If it had happened to me, I'd have been gone by now.
The main thing always is - a cliché though it may be - never ever ever put all your eggs in one basket.
Otherwise, get set for a very uncomfortable talk with your Partner.
For more from Robbie, please check his website www.nakedtrader.co.uk
Have something to say or ask about this blog entry?
Then use our comment box to tell us and everyone else about your thoughts.
The contents of all 'Comments' should not be construed as advice and represent the opinions of the authors, not those of London South East Limited, or its affiliates.
You need to be a member to comment on a blog entry
Login here, or click here to register for our free Member Services.
Blog Calendar
Most Recent Blog Entries
Datafeed and UK data supplied by NETbuilder and Interactive Data. While London South East do their best to maintain the high quality of the information displayed on this site, we cannot be held
responsible for any loss due to incorrect information found here. All information is provided free of charge, 'as-is', and you use it at your own risk!
The contents of all 'Chat' messages should not be construed as advice and represent the opinions of the authors, not those of London South East Limited, or its affiliates.
London South East does not authorise or approve this content, and reserves the right to remove items at its discretion.
"I accept that I am new to share trading / investing but I wouldnt even put all of my savings in one bank during todays times let alone one share company. Expensive lesson to loose half but luckily the person didnt lose everything."
- mikey99
"I think the F isles raise a jingoistic sentiment because of the war , people think they wouldn't have gone to all that trouble if there wasn't oil there and this I believe drew more investments than the prospect should have . thanks N.T"
- everhopeful
"The saying never ever ever put all your eggs in one basket.has been around a long time and will be here much longer, good advice."
- Stillster
"Sorry Herring, but it is unlikely that Robbie will answer comments as he is such a busy fellow. We know that he is working hard on his next book - about Spread Betting - which will be published shortly. Regards."
- Admin
"You sometimes win big but most times lose big on speculative oil shares the only people who make good money are the brokers these shares are a dream come true for them."
- lunatic
"So easy for a Share to get hyped up by boards but it allways comes back to basics DYOH = do your own homework. Am now taking a course on HINDSIGHT "
- Snapdragon
"Hi Robbie, do you think a lot of this share gambling is brought about by the press continually harping on about low savings rates and the fortunes that can be made on the markets? it gives the impression that making money by trading is easy and people are therefore skimping on research when investing and are being caught out when the share moves against them? I noticed you mentioned about cutting your losses and investing elsewhere when share prices drop, i'm not sure thats always appropriate with AIM shares where short term volatility could cause your stop losses to trigger when the fundamentals haven't changed. ATB Herring"
- Herring