I made one schoolboy error – and it cost me a fortune

Don’t sell too low

Fifteen years ago, I made one of the biggest investing mistakes of my life.

I was working in the City at the time. I’d got wind of a new stock flotation – a company with patented technology for queuing systems at theme parks.

Basically, users would hire a little gadget – a bit like a pager – allowing them to stand in a ‘virtual’ queue instead of the real thing. This allowed them to do other things like eat, drink and be merry – rather than wasting their time in a line.

Great idea. Indeed, the firm is going great guns today. Maybe you’ve used their devices?

Well, that may be how things stand today – but let me assure you, it’s been a long and rocky road.

The biggest investing mistake

Now, mistakes are unavoidable in this business. If you can’t cope with a loss, then stocks investing probably isn’t the right game for you.

Buying high is by far and away the biggest and easiest investing mistake you can make. We’ve all heard it, or at least we should have. The lunacy speaks for itself.

But a less considered mistake is the opposite, that is, selling too low. It mustn’t ever be a mere case of selling a position just because it’s showing a loss.

However, that’s exactly what I did, all those years ago.

The start-up that tested my patience

So, this ‘pager’ company floated at just over a pound, and I picked up a slug of shares.

Things went well for a while. But after a few months, the business started to struggle. It wasn’t meeting its targets, and investors were losing faith – even questioning whether this was such a useful concept in any case.

The stock drifted. I bought more.

Down, down, deeper on down. I kept buying, knowing that patience is required for these sorts of start-ups.

Soon enough, the thing was well and truly a penny share. And I was left holding many hundreds of thousands of the little bleeders. It all began to look like a miserable mistake…

But little did I know, my biggest mistake was yet to come!


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I didn’t stick to my guns

Soon enough I’d forced any thoughts about my problem child out of mind.

The thing struggled in a range below 10p, and I couldn’t care less. I was now beginning to agree with the City’s scepticism, and I’d stopped building my position – I was philosophical about my mistake.

The one great thing about doubling up a position at low levels is that it doesn’t take much of a rise for you to get your money back. I can’t remember now, but let’s say my average ‘in-price’ was something like 20p and the thing was trading in a range between 5p and 10p.

A rise to 20p and all would be well in with the world – at least, that was what I thought.

Sure enough, after a while, the stock started to move in the right direction. It hit my average ‘in-price’ – and I sold down.

And, might I say, it was with a massive sense of relief. I had turned a loss into a break-even: “Well done me!”

There was just one problem.

I hadn’t done my homework. I hadn’t followed the story. I hadn’t seen the fantastic progress these guys were making.

The fact is, the story was now hot, the shares were ridiculously cheap and I was well out of it!

Don’t make my mistake

I don’t mind telling you that today the stock trades somewhere north of £5. And remember, I’d had many hundreds of thousands of the things.

It was a classic schoolboy error – selling low without having done one iota of due diligence.

And yet the decision to get out felt good! I felt an unerring sense of moral superiority. But it turned out to be a shocking mistake.

The lesson is this: selling low is an error every bit as dangerous as buying high.

It’s true that you’ve got to be philosophical about losers. Knowing when to accept a loss is indeed part of successful investing. It’s often right to take a loss. In fact, it can be kind of cathartic.

But never be fooled into selling, without first doing your homework.

This article is taken from our FREE daily investment email, The Right Side
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11 Responses

  1. 18/08/2014, twotonetyrone wrote

    Is Agriterra in the same boat?
    TTT

  2. 18/08/2014, dlp6666 wrote

    @twotonetyrone

    Exactly – your post beat me to it by seconds ….!

  3. 18/08/2014, TRJW wrote

    Same question on Agriterra from me too – still a possible winner?

  4. 19/08/2014, mr clyde wrote

    Likewise with Fastjet – Is there a common theme here. Obvious business opportunities mired in African ‘politics’!

    • 19/08/2014, FR wrote

      HRT PARTICIPACOES PETROLEO was another mistake

  5. 19/08/2014, Patrick B. wrote

    This sounds very familiar except that I stuck to my guns and lost a small fortune. I used this strategy with Wasabi Energy, a Red Hot Penny Share company with a great idea that was already achieving things and that I believed strongly would do well in the long run.

    As the price dropped, I doubled my holding, then topped it up a few more times when the shares were really cheap. I ended up with 800,000 shares which I believed had great potential upside. I unfortunately hadn’t realised that I had invested 5% of my portfolio when the shares were suspended and then massively diluted. They’re still suspended and it seems that my holding has lost 99% of its value.

  6. 19/08/2014, Sherpa wrote

    I have same query on Agriterra…I’m still 50% down…and don’t recall any comments in quite a while.
    Bought Barrick Gold too when recommended by Fleet street Letter….just before they tanked…still 30% down.
    I have successes of my own too. Maybe this qualifies me to be a commentator and charge for my services? After all, if you look across this ‘stable’ of commentators it’s quite likely that one of them should be right…at least some of the time?

  7. 22/08/2014, dizpila wrote

    What I really want to read is you letting everybody know how wrong you were for pretending that you understand tech and AAPL… say in February 2015? And why not do the same exercise in 2016? Look, it’s over the pre-split £700 mark already… stick to tuff you sort of understand. Tech is simply not for you. All those that listened to you… I feel for them.

  8. 22/08/2014, FR wrote

    Stock recomendations from journalists/tipsters always come with a warning that you should get advice and never invest more than what you can afford to lose. I wish I could put the same labelling to the products I provide to my customers. But at least they are well above the gold pumpers that preaches doom and that would rather see a deflationary collapse to the middle classes. After all, you only get commissions from gold dealers if you promisse to the masses a 10000usd per ounce.

  9. 25/08/2014, IJ1 wrote

    Investing mistakes are one thing. But as most of the comments here suggest, your mistakes as a markets commentator / pundit have obviously not gone unnoticed by your readers. Making bad calls such as your senseless and groundless “short apple”idea is forgivable. But failing to follow up on them when they go wrong is not. Still waiting for the mea culpa on apple. Until then you have no credibility in this role.

  10. 29/08/2014, dizpila wrote

    Tell us how much did the AAPL short cost you? Or you were just “thinking of shorting” but you never put your money where your mouth is… no, you leave that for your readers… lots of happy folk out there long on Samsung, Google, and shorting Apple. I’ll come back in one year to remind you of your “short AAPL” call.

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