Ways to be terrible investor

I enjoyed this tongue-in-cheek commentary from website Monevator.com. Only thing I have done is to replace references to British financial industry with Indian one so that we can better understand the points being made. First part of the article appears today, the second will appear next Sunday.

We’re always being told that inequality is the scourge of our times. But what, dear investor, are you going to do about it? By trying to elbow your way into the 1%, you’re only adding to the world’s woes. Yes you pay your taxes. Yes you’ve set up a Direct Debit to your favourite charity. But wouldn’t it be more helpful if you were less wealthy in the first place? It’s easier to cut down a tall poppy than to grow a tree. If all the rich became poor the inequality problem would be solved overnight. So here’s a public-spirited ten-point plan to undermining your investments in 2017. Money can’t buy happiness – so follow this strategy to get rid of it.

1. Invest in expensive funds The easiest way to start eroding your wealth is to pay a very expensive fund manager an outrageous fee for delivering returns below what you’d get from a cheap index fund. Over the long-term, the steady damage done by fees of 1-2% or more will gobble up a big chunk of your returns.

2. Start stock picking penny shares – One danger with using funds is most managers have some clue about what they’re doing. And as they’re paid on performance, they’re going to give it a shot. Even if you follow a ruinous strategy like continually chasing last year’s hot fund – buying high and selling low – there’s still a danger you could make money, albeit while likely still losing to themarket. Avoid this by stock picking obscure low priced shares, ideally listed on the regional stock market, perhaps operating in the mining or technology sector. Real investors know the price of a share doesn’t tell you anything about its valuation, of course. So look for companies with small market capitalisations – ideally rarely traded and reporting losses for years.

3. Don’t do any research : Once you’ve found a small, loss-making company to invest in, don’t do any more research. Buy blind. Okay, at a pinch you might check to make sure it’s on an outrageously hopeful P/E ratio – and perhaps drowning in debt. But don’t read its annual report or dig into its management or any of that.

4. Trade as much as you can: Adopt the attitude of an inveterate gambler reduced to the fruit machines in the seediest corner of Las Vegas. Continually shovel money into the market, pull the lever, and if anything goes well, dump it ASAP and swap it for a share that’s down on its luck. Thanks to modern technology you can now trade via your smart phone on the bus or in the loo at work. Keep your portfolio turning over, racking up costs and working your way into ever more speculative positions. 

I enjoyed this tongue-in-cheek commentary from website Monevator.com. Only thing I have done is to replace references to British financial industry with Indian one so that we can better understand the points being made. First part of the article appeared last week. This is the second and final part.

1. Peruse share price graphs and chicken bones: A great way to have absolutely no idea what will happen next to a company’s share price is to study a graph of its historical moves. Don’t be intimidated by the jargon of chartists. Invent your own price signals by referring to your favourite characters from latest Hindi films!

2. Always keep the news on in the background: In many people’s estimation, 2016 was one of the biggest years for political shocks for a generation. Everything from Brexit to Donald Trump’s victory roiled the market. Um, except it duly rose after those shocking events, regardless. Truthfully, it’s very difficult to predict how share prices will react to general news headlines, good or bad. A barrage of media speculation does wonderfully confuse matters at hand, however, so having the news channel on 24/7 should help you in your quest to lose money.

3. Spend your dividends: Studies show that while everyone focuses on share prices, reinvesting dividends makes up a huge portion of the market’s long-term gains. So needless to say, spend those suckers on beer, crisps, and foreign holidays. Whatever you do get them out of your portfolio, pronto.

4. Don’t track your returns: Finally, it’s important to avoid properly keeping track of how your strategy is performing. This gives you the best chance of avoiding learning any uncomfortable lessons, and boosts your ability to delude yourself that you’re doing really well as you steadily deplete your wealth.

So there you have it – Monevator’s best stab at helping investors have a rotten 2017. Of course, some wannabe Scrooge might decide to do the opposite of everythinhg he has written here. This would very likely to improve rather than hurt their investing. But there’s not much anyone can do about that!