Forum Archive Index - October 2000

[Brian Gale <brigale@i4free.co.nz>]

Very sound advice Hugh. The new book by Mary Holm " Investing made simple " 
is also worth reading - lots of good common sense re investing in general, 
highlighting the pitfalls.

BG

At 19:03 23-10-00 +1300, you wrote:
>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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