Forum Archive Index - January 2001

["G Stolwyk" <stolwyk@wave.co.nz>]

 

Hugh,

 

 

Please to refer to my post of Dec 13, 2000.

 

Let us classify some of the sharemarket investors:

 

1. Those who suffer from " Investors' shock syndrome ".

 

These are people who cannot bear the -often sudden- losses incurred. It is akin to a form of depression.

 

Large losses can have a severe impact. Examples: the 1987 and the dot com crashes.

Some will return to the sharemarket albeit with less confidence than shown before: a crash can present an opportunity to retrieve some of their losses.

 

Others will deposit their income at the banks - who loves them -or stick to real estate.

 

2. Those  who have the " Greed syndrome ".

2.1 The investor selects one company from a set of well performing entities and puts virtually all his cash in this stock.

By not splitting his risk he may double his money or go broke and not have the money to win the next battle.

 

There are many examples where 'dead certainties' have gone wrong:

Salmond Smith Biolab closed down because the Chinese suddenly cut off their paua imports. Warehouses have burned down; dishonesty or disasters have bankrupted companies.

 

2.2 People with inside information. Yes, we envy the Hoggards and others who can't go wrong ! They will have high returns on their investment!!

 

2.3 Some analysts / brokers who mislead the market and  benefit from doing so: they actively encouraged and misled the 

' tech. stock '  investors: refer to my post of Dec 31, 2000.

 

3. Those suffering from the " Following the herd syndrome ".

Most of us have this ailment from time to time. It is an easy way of making a decision and we can always blame somebody else if investments 'go belly up' !

 

If analysts and / or brokers suffer from this disease and act in tandem, then a market crash can be an outcome! 

 

4. Persons inflicted with the " Invincibility syndrome ". Most of us have suffered from this problem at some stage !!

 

At the apex of some investment cycles, investors become overconfident; they think that they are infallible and praise their own judgement.

There is a feeding frenzy and prices keep rising regardless of stock valuations!

 

There are plenty of parties and the champagne is flowing freely. Participants loudly praise their selections.

Others think that a crash will not yet occur and if it ever did, then someone else will be left holding the baby! 

A painful market crash will cure this symptom!!

 

5. The " Willi-nilly " investor.

This person considers the market to be a lottery but would blame the advisor or his friend if the investment turns sour.

They don't understand the market but think they do. This dreaded disease cannot be cured! 

 

6. Those who don't recognize a potential gravy train and nothing will convince them to board it.

However, we deal with competing investments and we shall have this problem from time to time!

 

7. The diligent investors who try to learn about the variables affecting investments, eg. interest rates, the economy.

 

They study the various types of investments, the companies, the weighting of an investment, the potential risk / reward levels and other desirable features, eg. timing.

Many 'sharechat' contributors do just that and manage to stay afloat!

 

8. Persons with the X FACTOR :

One of our most successful investors: Mr W. Buffett !!!

 

These are our opinions,

 

Gerry