Simple Pound

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What is the most difficult thing about investing? Picking shares? Timing the market? Evaluating funds?

Actually, probably neither of those. This time the golden buzzword is not diversification, but patience. Hanging in there and trusting your own decisions. If you are investing for the long(er) term, you will probably have researched whatever investment you thought was best for you. Leave it at that and relax.

Kevin @ Fool.co.uk suggests a holiday in Barbados.

Yes, the market might experience a downwards trend for a few weeks, sometimes even months. But thinking back to stock indices, which are commonly seen as indicators for a country’s economy, you should now know that in the long run you’ll gain - if you can keep a cool head.

Even if one of your investment options should go bust, you obviously have a diversified portfolio that evens out the losses you’ve made in that particular position… And optimistically seen, you can even learn from your mistakes, understand why you made the wrong choice (accepting that sometimes particular circumstances that made a share crash could not have been foreseen) and avoid it in the future…

In my case the experience I take away from such a mistake is not to blindly trust someone else’s advice without double-checking it is built on solid grounds. In April 2000 Nokia’s shares underwent a stock split of 1:4 which meant that a share previously priced at 200€ could now be bought for the bargain price of 50€ (every investor who had owned shares in the company before the stock split found the 4-fold amount of shares in his investment account the next morning…).

My mum told me that I simply had to buy now. Since one of the bonds my parents had bought for me previously had just matured I followed her advice (blindly). Initially happy to see my new shares increase to 65€, I soon had to learn what it feels like to observe a solid value decrease. Suddenly priced at 10€, my shares had lost 80% of their (original) value - but I held on to them.

Today they are still trading at under 20€ but for some reason I just can’t let go of my very first investment mistake… I’ll report back in 10 years time whether I am still making losses…

Note: The scale of the chart is logarithmic which makes the losses look much less dramatic than they really were (or felt?). Also, the chart prices are stated in US-$ rather than Euros (thus the current closing price is approaching $25).

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