Thankfully since typing the above I have made a lot more progress on the full draft and there is a reasonable chance that it might turn out not too dire. In fact, it might actually be quite helpful for many Readers.
I have noticed with regularity how even very highly experienced and successful and wealthy Investors I know seem to lack a final conviction / belief in their own ideas and often it just needs someone like me to say “yes, I like the look of that Stock and it is probably well worth buying” or to actually buy it myself, to get them to finally take the plunge and ‘Pull the Trigger’ to bring it into their Portfolio. In simple terms, some people need reassurance despite knowing what to do.
Presumably this is a ‘Confirmation Bias’ thing and with a large dose of ‘Halo Effect’ where my comments (and those from the usual ’Gurus’) are involved. Weird though isn’t it?
So I got thinking about this and trying to work out how I don’t seem to need such Confirmation myself and I am far more likely to find my own Investments and to make the Decision to act to buy them. This Confirmation thing actually seems to go a bit wider - rather than just myself or whoever making a strong positive statement on the Stock, sometimes these People need a Tip from a Magazine or Newspaper or something to nudge them into the Action to Buy.
It then dawned on me that I myself used to act in this way (and for many years) - perhaps not so much on the Personal Recommendation thing because I didn’t really know many people involved in Stocks (and probably knew only one great mate at the time who I would take the judgement of), but I used to use Tips from someone like Robbie Burns (The Naked Trader) or Tom Winnifrith when I used to subscribe to his T1PS Website which was excellent back in the day (ShareProphets is a very sad [and profane !!] departure by Tom from what he was good at in my view).
So then I made the next jump in understanding to appreciate that in my ‘Investing Career’ I have gone through various ‘Steps’ or ‘Stages’ of how I interact with the Markets and I decided that this was some sort of Continuum or Evolution of myself as an Investor. So then I figured out that if I could sort of encapsulate what each of these Stages was and the attributes and features of each of them, then this might be very useful for Readers - both in terms of where they sit on my own Evolutionary Path but also to get some idea of the Steps ahead of them when compared to my own Evolution. A possible ‘Roadmap for Learning’ if you like.
Of course my Route was not the only possible one and there are many twists and turns you can make on your trip - but at least by understanding my travels you can get a good idea of a route through the Forrest that might get you out the other side in one piece (you gotta watch out for those Bears as we know from this week - they are not cuddly in any way.)
If you have got to a certain degree of competence and sort of ‘Hit a Wall’ in your progression (I see Investing as very much a never ending Learning Experience but I have definitely had several periods in my ‘Career’ where I have in effect dried up and been treading water for quite some time with no obvious route to how I can progress), then hopefully this might give you some ideas on where you can go next and what you might be able to do to get your Learning moving forwards again. You might find the ‘M3 Manifesto’ page on my Website useful for this also.
Obviously the Stages that I will go through in a bit are merely how my own Investing progressed and of course not only will they be unique to me but I might easily have made errors of Memory and also errors in how I have described them - but it will be my best effort I promise and this is not a Blog that I have rushed into with no thought (unlike many of them, hey, Wheelie !!).
Because this is in essence a History of my own Investing Journey, I am hoping Readers will be able to view it as what would be my own Chapter if I was successful enough to be included in a book like the excellent ‘Free Capital’ by Guy Thomas (if you have not read this, I strongly recommend it and you can grab a copy in Wheelie’s Bookshop).
Before I get stuck into the Stages I will just outline below how I have divided my Investing Career up because this might help Readers with some scene-setting:
- Stage 1 - 1999 to 2003 - Dotcom Bubble Peak and the Bust, Innocent Ignorance and massive Overconfidence. Big Losses.
- Stage 2 - 2004 to 2008 - The Calm before the Credit Crunch - Starting to get a rough idea about what was going on. Discovered Value Investing. First Leveraged Trades.
- Stage 3 - 2009 to 2010 - The Credit Crunch - Important Lessons in the Merciless side of the Markets and the usefulness of Shorting.
- Stage 4 - 2011 to 2015 - Post Credit Crunch Recovery - ‘Retirement’ and Learning to Fly. Experimenting and codifying an Approach.
- Stage 5 - 2015 to 2018 - Well into the Bull Run - Here comes The WheelieDealer. More sophisticated Trading Tricks and focus on Psychology. Enforced Discipline.
- Stage 6 - 2018 Onwards - Where next?
Stage 1 - 1999 to 2003 - Dotcom Bubble Peak and the Bust
Innocent Ignorance and massive Overconfidence. Big Losses.
- Overconfident but unaware of this simple fact. Utterly clueless. Had graduated with a Business Studies First Class Degree about 2 years earlier, had a keen interest in Current Affairs and Economics and had already experienced 15 years of the Working World in various Roles and Industries and of course I knew everything. Sadly I knew nothing about the Stockmarket and it taught me an expensive lesson. I was caught up in the whole excitement of the Top of the Dotcom Bubble and of course there was no way I could possible lose !! (bit like Bitcoin just recently for a new generation of Lambs being funnelled eagerly towards the Slaughter House [Sorry Veggies !!)
- Realisation that using a Financial Advisor was pointless because I had to know how to do it myself to be able to trust them. That is my nature. This actually was one of my better deductions - I am very dubious of Financial Advisers even after all these years and the vast majority are completely useless. This Decision set me off to a path of learning how to do things myself.
- One Excellent Decision - a wide range of Diversification but this may have been dumb luck. This is an important principle that I have carried with me for all of my years - there is no doubt it has saved my Butt many a time and having a Core Holding in something pretty safe like my Prudential ‘With Profits’ Bond has been a very fortunate decision and this really helped me in the Credit Crunch where it retained its Value while everything else was gong down the Bog fast. Over time I have probably lowered my Diversification a bit as I am more Equity focused these days but it is a move I have made gradually and has gone along with me becoming more proficient in all aspects of buying my own Stocks and running my Stock Portfolios.
- Top of Dotcom Boom - could not have been a worse time to start Investing. Looking back with the experience I have now this is so flippin’ obvious and I like to think that if a similar situation arose again I would realise what was going on and avoid leaping into the Trap with such enthusiasm. In much more recent times I am pleased that I had the good sense to figure out quite quickly that Bitcoin is a classic Speculative Bubble and being very much a Value Investor I tend to have the discipline to avoid buying into Overvalued Garbage - if the Numbers don’t make sense then I am not interested.
- Totally reliant on Tips - most of these would be from Magazines and stuff and of course at that time the Internet was still pretty young and the Information available on the Web was a fraction of the amazing tsunami of Information we have today - of course it is arguably too much now and that is a whole problem in itself.
- No critical scepticism - believed all the Fund Adverts etc. which said “We have turned £1 into £8729 in 10 years with our Technology Fund” (of course they had, but £8698 of that was in the last Year of the Boom !!). I am sure many Readers ‘of a certain age’ will remember such Advertising.
- Moth to a Flame on AIM Trash - Mining, Resources, Oil etc., you name the garbage, I was a willing buyer and of course I was going to make an absolute fortune in no time at all. This was really after the Dotcom Bubble had popped but even though I had been brutally milked on Tech Stocks I then lined up to get abused on another exciting way to lose money fast !!
- Voracious reader of stuff about Investing and Business - not sure how much helped and many ‘Investing’ Magazines were really propaganda for the Fund Companies. Watched CNBC and the ‘Money Channel’ and Bloomberg a lot - mostly it probably did not help but there were snippets of things that perhaps even help me to this day. For instance, I first came across Tom Winnifrith on ‘Show me the Money’ the TV Show he was involved in and I first discovered Robbie Burns during this period with his column at the back of The Sunday Times called ‘My DIY Pension’, and I discovered David Linton who had a huge impact on my love of Charting from watching Bloomberg I think.
- Subscribed to Shares Magazine which back then was a bit of a comic - it is far better now. This was probably a bad influence at the time - lots of AIM Junk and rampy type Stocks and Tips - it is far superior these days and the odd copies of Shares Magazine I see now are very useful and if you have the time it is well worth subscribing to or if you have an AJ Bell ‘YouInvest’ Account you can get it for nothing.
- Being so clueless I inevitably made huge Losses on many Tech Stocks such as Marconi and things like Baltimore Technologies, Logica and TrafficMaster and all that. Worst loss was £14k on Just Group (Butt Ugly Martians) - that one was a ‘Wake up Call’ in a huge way and really shook me. It was the classic scenario where everyone in the Office I worked at was buying it and it was total ‘Group think’ but of course no one was thinking. I suspect that there were 1 or 2 Ringleaders who were helping to throw petrol onto the raging inferno.
- Years to 2003 were awful - continual Losses and my Portfolio evaporated from perhaps £180k down to below £100k in that period - not pleasant, but I guess it was part of the serious ‘Wake-up and sniff the Nescafe’ moment that I clearly needed. I have no doubt that being in a well paid Full Time Job helped me get through this period and perhaps one of the best things I did was to hold on to what I had (particularly with the Unit Trusts), although this was probably an accident as in truth I was a ‘Long eared furry rodent with a taste for carrots mesmerised by the Headlights and soon to be Rabbit Stew‘.
Having a Job and a degree of Human Capital no doubt helps with the whole Investor Psychology thing - now I do not work and I feel that with my Health my own Human Capital is quite low, I am definitely more cautious and more focused on lowering Risk. I simply cannot let my Account ‘Blow-up’ and of course at the age of 53 Summers (actually, despite my official age being 53 I might only have done 52 Summers !!!), I do not have as much time to recover if I do screw up. At 35 you have a lot more time to make up for the idiotic trades you have made - although I would recommend that the Cautious Low Risk approach is probably far more successful for most ‘ordinary’ Investors and those who take High Risk rarely succeed.
- After a few Years I realised that I could not go on like this and I needed to learn what I was doing. This was probably when I started subscribing to Tom Winnifrith’s T1PS Website which was extremely useful and taught me a lot (yes, he was a very good Tipster back in the day and in later years even had some very good young Tipsters working on the team), but probably the most valuable aspect was that he introduced me to the Writings of Benjamin Graham and this weird old bloke in the US called Warren Buffett who seemed to live off Cherry Coke, Steak and Peas and Ice Cream (and they say you need a ‘healthy‘ diet to live long and prosper !!)
This of course got me reading lots of books around Value Investing and at some point Robbie Burns produced his first ‘Naked Trader’ book and this had a profound impact on how I do things and I know this influence is still helping me today and this is one of the few books which I have read over and over and I have bought every new edition he has produced. Pure Gold. I also read Robbie’s Website all the time and he used to update it Monday, Wednesday and Friday and it was outstanding. Funnily enough, when he stopped doing so much to his Website this was part of my inspiration for starting my own Website because I realised that new Investors starting out today would not have something like this they could go to - and it also dawned on me that I could create something really helpful by putting my knowledge built up over many painful years into something based very much in reality - although of course I realise I will never be even a fraction of the amazing Trading Talent that Robbie is. I will provide a lot more detail on the birth of WheelieDealer later in the Blog Series.
That’s it for Part 1 - I hope Readers found this a decent start and I will try to get the next parts out in stages over the coming Weeks.
PS. Sorry about the dodgy formatting towards the end - the limitations of the Website Builder unfortunately.