Forum Archive Index - October 2000

["hugh webber" <hugh.webber@clear.net.nz>]

Well I guess someone needs to say a few words of 
caution before everyone sings Pollyanna so I'll stick
my neck out again.
Point (1) if people are new to the game then they need
to do some reading so they know what its about and 
how to best play it.
The best two books are 'Buffetology' by Mary Buffett, 
and not so good but adapted to the NZ market 'Making
Money on the New Zealand Sharemarket' by Frank
Newman and Phil Briggs.
When you've read and understood those two you're 
ready to play. Even the old hands and the names fall
into traps - I note an NBR article that Eric Watson's
fortune has halved...shades of Aquaria...and if you had
bought Telecom IR's when launched and paid your instalment
then you'd have about 60% of your money left. 

Point (2) don't mix it all up e.g. Buffetology with chartism
(technical junk that's worthless in practical terms) with
new issues and dewy eyed tech speculation and rumours
about a horse and diversification. Stick to Buffetology its
the only one that works.

Point (3) expect to take several years to make an impact.

Point (4) decide what your objective is. Most people make the
mistake of assuming that its to make as much money as fast 
possible - that doesn't work and if it did IRD would destroy you.
A better one is to go for good sustainable gross yields and to 
take the capital gains as a welcome incidental. You'll do better
than chasing new issues and techs.

Point (5) stay out of commodities - goods and services that
compete completely or mostly on price - hotels, airlines,
forests, & & see Buffetology.

Point (6) Recall an amusing anecdote from a man who got rich
who when asked how he did it replied 'I always sold too soon' -
although Buffetology relies on carefully picking the best shares
(not in a hurry) and holding for years.

Funds don't work because they diversify like mad and achieve
the lowest common denominator. Buffett sees diversification as
a way of trying to hide your mistakes instead of not making any.
Funds do worse than market indexes on upturns and slightly
better than market indexes on downturns.
You become a prisoner of the group instead of being able to do 
your own analysis, your own timing and jump when you decide its
right. You're guaranteed, even starting with the best of intentions,
to have blistering arguments, lose friends, make enemies.

Hence my advice is to do your own thing rather than trying to start
NZ Buffett Funds or Focus Investment Groups.

cheers,
hugh



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