Cover of MoneyWeek magazine issue number 418, 15 January 2009

Find your way around the bond market

16 January 2009 / Issue 418

PLUS:

  • The tobacco firm set to profit from anti-smoking laws
  • What we can learn from the Great Depression
  • The $1bn tech fraudster who rocked India

Excerpt

Use your head, not your gut

I’m not a big fan of reality TV, although I’ll admit to a sneaking fondness for Masterchef. But the other night, I caught the BBC’s latest contribution to the genre – and I was hooked. Million Dollar Traders takes eight members of the public who’ve never been on a trading floor in their lives. A hedge fund manager, one Lex Van Dam, gives them $1m of his own money between them, and with just two weeks’ training, he sets them loose to see how much money they can make – or lose – for him in two months.

Unfortunately for Mr Van Dam and the team (although I imagine the TV producers were beside themselves with joy), the two months in question coincided pretty much exactly with last year’s financial meltdown. The raw recruits were left staring at red screens at a time when the best trade most of them could have done would have been to whack all the money into a high-interest Northern Rock savings account and then spend the rest of the time relaxing in the pub.

But while the market turmoil made viewing fascinating in a car-crash kind of way, most interesting of all was what it revealed about how people invest and the sorts of mistakes they make. We’ve all read about how your emotions can scupper your chances of making a decent return (we’ve written about this several times in MoneyWeek). But it’s only when you see this being acted out in front of you that you realise just how much keeping emotion in check matters.

Read the full editor’s letter here: Use your head, not your gut