MICHEL PIREU: Why it is difficult for most of us to make money on the markets
As the old adage goes, the market can stay irrational a lot longer than you can stay solvent
In the first week of April 2000 some 8.4-million shares in Scharrig Mining changed hands at between 14c and 15c a share. In November that year the company embarked on a share buy-back at more than twice that price. If our April buyers were among the sellers they would have been pleased with themselves, having doubled their money within a few months. But by the end of 2004 Scharrig Mining was trading at over R2 a share and the decision to sell at about 30c wouldn’t have looked nearly as good. By August 2007 the share price had reached a high of R23.60 and the company was issuing new shares at R22. Those April 2000 buyers who’d held onto their shares would have seen every rand invested grow to R168 over a seven-year period. Buy-and-hold advocates will be sagely nodding their heads. But what are the chances our April buyers wouldn’t have sold? Not very good, it seems. By all accounts it is difficult for people who buy shares at the bottom to hold on to them for very long, one of the ma...
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