My second biggest financial mistake was buying shares. Although this was going on some 25 years ago, I still wrestle with it. While still in the introductory paragraph, let me say it wasn’t all bad as some valuable lessons have been learned.
Back in the late 1990s we clocked a company called Medisys. They had invented a new type of syringe with a retractable needle and this would lower the chances of accidents, cross contamination and so on. In America medical negligence was a thriving industry at the time, so this invention was very attractive. Further more, it was a cheap product costing hardly any more than a conventional syringe.
This was at a time when Rachel and I joined the World Wide Web, quite early on, and when our daughter had eventually gone to sleep, we would fire up the modem with its weird noises and use our phone line to connect to the world out there. It seems funny now to think of pre-broad band days!
We decided to buy a load of shares, each costing a few pence (probably about the same as one of the syringes). Their value went up quite briskly and we sold at about £1.20 and, as they say, laughed all the way to the bank.
At the same time the investor column in the Saturday newspaper started talking about an engineering firm which was undervalued. They made everything from buses to cranes, were a British company and although I’d never heard of them, they seemed well established. So I bought some shares, along with shares in a local builders merchants that some of our friends worked in.
The builder’s merchant trundled along okay and paid some dividends but it was never going to set the world alight. In truth, I probably got bored with their steady-eddy performance. After a while, we sold those shares and bought more of the engineering firm shares, which by now was starting to wobble. The rationale was to even out the price, buy low and look to the high that was supposedly still to come.
Alas there was no high, the decline continued and with a shrinking order book, they went bust. Even now I cannot remember the name but I do remember the hard lesson here. We lost quite a lot and yet gained a lot of experience. However, to keep things in perspective, this was money from my pocket money account, so it was all containable and didn’t affect our main accounts.
What about a strategy?
Back then, I guess the purpose was to have a bit of fun and make some more pocket money. Over twenty years on from that it seems such a juvenile attitude and, to be honest, I’m quite ashamed of my attitude then. It was not far from gambling, greed and the motivations were downright wrong.
Just as the motivation was wrong, so too was the strategy i.e. there wasn’t really much of a strategy at all. We live and learn I suppose.
Tough lessons
I also suppose I got there in the end but it was costly, both in pocket money terms and in my own self respect. I had made some bad decisions and had some questionable attitudes.
Now the strategy has to be about having a purpose, what are we trying to achieve in life and, with a fair wind, the finances will fall into place to allow us to achieve the right things. A means to an end, you might say.
It is important for me to dwell on those lessons. It is about defining the long term purpose, the aim and the principles that underpin those things. As a Christian I trust in God, even though I may not always understand his ways and why things happen. Listening to that little voice in the back of my mind saying “Hold on, are you really sure this is right? Why? How?” is so important these days, a kind of conscience perhaps.
Sure, I’m bound to make some mistakes but hopefully fewer and fewer as the years tick by. Those lessons, hard at the time, have to be immensely valued now.
So while buying shares was my second biggest financial mistake, it has taught me such a good lesson, so all is not lost after all. Make sure the goal is right, have the right attitude and let the money help you achieve those things.
Perhaps for me to learn that lesson has been the whole point of it? Praise God, I’m sure it is.
Related: My biggest financial mistake – buying a Saab
I expect that you know all that I am about to write, but just in case….
We cannot beat the market! So, the way to go about this is not to buy individual shares, but to buy units in a collective fund. The safest way to do this is to buy an index fund that tracks the whole world market. Vanguard sell one that is popular, see their global all cap, fund. It is so important to pay only very low fees – Vanguard are cheap. Time in the market allows compound interest to work greatly in our favour. Should get around 12% a year gross if kept in an ISA long term.
Hi Stephen
Thanks for your comment and yes, I know you are right, mostly. These days we tend to reply on funds which have many, many different companies and other funds within them as a way of spreading the risk. It certainly does work and you’re right about keeping as much as possible under an ISA wrapper in order to be tax efficient.