I’m not sure of the orgination of this chart, I clipped it from The Big Picture blog.
It neatly capturers investor sentiment in market cycles. Trouble is that I think the markets are going through the whole cycle in one day.
In 1999 I opened a savings account with Egg, Prudential’s new internet bank. They were then offering good rates of interest on savings, and I liked the idea of an internet-only bank.
I thought the share offered an opportunity for capital growth, albeit with some risk attached. I invested £750 in shares. In the early years I enjoyed attending the AGM’s and chatting to the founder directors. The tea and cakes were good, though the share price didn’t prove to be as exciting as I’d hoped.
When Prudential decided to buy back the minority interest in Egg in 2005, having failed to sell the bank, I could have sold the shares. But selling would have capitalised a loss. Not a huge loss, but my optimism remained undimmed about achieving a small capital gain on my investment.
And so, I converted my Egg shares in Prudential shares, fully believing that the Prudential share price would motor along nicely so that I could exit having made a profit. The Prudential share price rose and I could’ve sold, breaking even on the investment. But through indolence and optimism, I hung on.
Outcome:I’ve shares in one of the UK’s top and well managed companies. But, financially my investment is less than half the original value. Earlier this year it was about a third of the original value.
Moral: Look after your investments. Sell when the market is buoyant. Be hard on yourself as to the reason for owning shares. Fool offers good advice on shares ownership, and has the stories of success and failure to lighten one’s spirit or to depress them too.
Final Result: I remain an optimist. I know the market will come back, and when it does, I’ll hopefully sell just below the next market peak.