Your Biggest Investment Blunder!! & lessons learned!

[smoothsatin]

Shares: DPL, now PPN floated at 50 cents per share a few years back, its sole business was being the owner of the freehold of a large brothel. Yield approx 8%, with lease and CPI increases for decades. People may recall the mayhem at the time, they went to about $2 within a couple of days, which meant you owned a peice of commercial property with no development opportunity at a yield of 2%! Anyway, their business changed track, it slowly started sliding and i bought in around 80 cents.

I was very new to the game at the time (eagerly handing over my first 5k saved out of uni to my spanking new commsec account) and didn't know what convertible class B shares were, turns out management had 3 class B shares for every one normal tradable class A share. Thus ownership was diluted 4 fold when these were exercised.

I got out at 40 cents, when i worked out what was going on, the class B shares have since been converted and the shares currently trade at 15 cents.

Lesson 1) Read the fine print and never assume management are honest or ethical, they might be....but they might not be as well. This is particularly important for situations where the capital structure/# of shares on issue can be affected. This is especially true for smaller companies where management may use a publically listed company as their own toy. Note: These guys at PPN have done several other things to carelessly destroy shareholder value.

Lesson 2) Once a manger has acted dishonestly, stay away from any company they act for in the future. No i will not be buying back in to this company, nor will i the guys who span out BXP.

Lesson 3) NEVER catch a falling knife, there is usually a reason why there are long term downward price trends.

Lesson 4) Act on what you learn for your own financial benefit not out of spite.

 

[noirua]

My biggest investment blunder was staying fully invested in 1987 - the crash followed. It took 17 years to make up the losses. I'm now 75% in cash, so it can't happen again.

 

[krisbarry]

I have to vehemently disagree with this.

Who put the trade on?
Who ignored their stop loss?
Who listened to a bad tip?

Answer: WE did. There's no one else to blame.

Who mislead the market with a poorly scripted announcement?
Who ramped a share?
Which bank had technical problems and wouldn't accept a trade?
What suburbs had a power outages?
Which bank left you on hold over the phone?
etc etc

A whole range of other events happen that are out of our control so its not always a cut and dry case of failing to follow trading rules.

I reckon we have all been victim to some of the above.

 

[bunyip]

I was bent over and rogered by JPR shares.

Down from 17.3c to 7.4c.

I still hold the bastards. Dunno what to do, but probably have to bite the bullet and sell. As soon as I sell they'll no doubt skyrocket.


If something sounds to good to be true - do not buy it!!

Sell???? Realist, I can't believe what I'm hearing!! And here I was thinking you were a 'hold for 30 years' man!

I'm made heaps of blues in trading, but due to stop losses none of them was ever a serious loss. But I must confess to one trade in which an 'experienced' trader convinced me to cancel my stop as price approached it, because 'this thing is going higher'!
It was a futures trade (can't recall what commodity I was trading). The bloke who advised me to remove my stop was holding a long in this same commodity. He formerly traded futures for two grain organisations, but once he started trading his private account he lost money hand over fist.
Anyway, the contract came down to where my stop had been before I removed it, but kept going down much lower. When the pain got too great I bailed out and lost 2 grand. It was back in my early days in the trading game and I only had a 10 grand account, so to lose 20% of my capital in one trade was a big hit for me.
But it taught me some lessons and I've never repeated the mistake.
1. If you take a long position, never lower or cancel your stop.
2. Never listen to someone who is supposedly an expert. In fact, never listen to anyone.....trading should be very much a 'lone wolf' occupation where you make your own decisions without influence from other people.

Reading some of the other posts on this thread, and looking at the stocks that hammered you, reminds me of Stan Weinstein's rule....."Never buy a stock that's below its 30 week Weighted Moving Average. Never short a stock that's above it 30 week Weighted Moving Average".

I've sat in front of a computer screen with dozens of different people over the years, and we've looked at stocks they've lost money on. One theme keeps repeating itself.......they could have avoided those losses if they refused to buy anything that was below the 30 week average. And they could have hung on to most of their profits on trades that went their way, if they'd got out or at least tightened their stops, once their stock went below the 30 week average. So often I've seen people make big gains from a trade, then give it all back because they don't take measures to lock in their gains.
A point of interest......a 100 day EMA on a daily chart is a pretty good substitute for a 30 week WMA on a weekly chart.

Bunyip

 

[CanOz]

Is the Moving Average the same as the Weighted Moving Average? I only the the choice of MA or EMA on Power Etrade.

 

[tech/a]

C

There are many ways to calculate a Moving average.
Simple moving average --SMA is simply the addition of (I'll use closes) closes devided by number of periods being averaged.
Exponential Moving Average places more weight on recient data and less on older data.
Weighted M/A is similar in that it weights todays price much more heavily that say that of 10 days ago.


I have the maths if you want it but this maybe of help.
http://www.investopedia.com/articles/technical/052201.asp

 

[michael_selway]

Ok.

By the way the young Broker held those 100000 DVT shares for ages I remember calling him when they were at $7 something and saying when are you going to sell these!! He said this is my one chance at $1 mill so $10.

Then came the tech crash and he sold in the high $3s,happy as a duck in a pond he moved to Sydney after being head hunted bought a house and got married.---Well done a good luck I say!!

Good enough story?

hey what hapenned to DVT? i cannot find it anymore

thx

MS

 

[Seneca60BC]

I reckon I've got most covered in the "dumb play" department. I've mentioned it a few times on different threads, but one more time will probably make others feel way less dumb than I was ......... in a nutshell, three bad trades on CDU at the height of the "panic" buying ............. I got caught "daytrading" (something I knew nothing about) when the Trading Halt hit. I had bought many thousands of CDU share with the intention of selling when in profit (to make up for a couple of thousand dollars I had lost the day before) Many days later I sold right near the bottom (thinking that I could lose everything if I held on any longer) And heres the best part. (At this point in time I am down about $60,000) I had one last crack to try and recoup something of my losses ......Guess what .........Lost another $8,000 ................... I reckon that will be hard to beat considering I was only a newbie with limited leveraged capital .............getting depressed thinking about it again Anyway I'm still learning and I havn't given up yet ............. Long hard road ahead ............ I deserve two of these!! :homer: :homer:

Sorry Barney to hear about this depressing story.

 

[bunyip]

Is the Moving Average the same as the Weighted Moving Average? I only the the choice of MA or EMA on Power Etrade.

A simple MA (SMA) gives equal weighting to every day (or week) used in its calculation. For example, a 30 day SMA is calculated by adding the closing prices of the last 30 days, then dividing that figure by 30.

EMA's and WMA's are 'front weighted', i.e. they give uneven weighting to each day or week used in their calculation, with the more recent days/weeks being given a higher weighting than less recent days/weeks. This has the effect of making EMA's and WMA's more reactive than SMA's to recent days/weeks, consequently they track the price action more closely than a SMA does.
A WMA is more reactive to recent data than an EMA because it's the more heavily front weighted of the two. You can use the 'two thirds' rule if you wish to use an EMA to duplicate a WMA. Say you wish to use a 30 week WMA but your software doesn't offer WMA's. Two thirds of 30 is 20. So if you use a 20 EMA it will be similar to a 30 WMA.
A weekly moving average can be multiplied by 5 to convert it to its daily equivalent (because there are five trading days in a week).
A 30 week WMA on a weekly chart would be roughly equivalent to a 150 day WMA on a daily chart, i.e. both moving averages would rise or fall or run sideways at more or less the same time, and both would be at similar levels.
If your software can do EMA's but not WMA's, you could use a 20 EMA as a substitute for 30 WMA on a weekly chart. Or if you prefer daily charts, you could use a 100 day EMA as the daily equivalent to the 20 week EMA.

Bunyip

 

[tech/a]

hey what hapenned to DVT? i cannot find it anymore

thx

MS

Think it eventually got taken over.

 

[Seneca60BC]

Well here is my story.

I bought CSM at 4.17 - yep right at the top - and watch her slide to something like 3.50 before bailing out - some $2000 loss. Luckly I got out when I did cause she went down to $1.80.

Anyway, the cause of this was the price of there primary product crashed as their was an oversupply and their MD retired after some internal conflict.

Sometimes, its hard to stay ahead of the market - and never buy at the top (on most cases)
Cheers

 

[chicken]

My biggest investment blunder was staying fully invested in 1987 - the crash followed. It took 17 years to make up the losses. I'm now 75% in cash, so it can't happen again.

Noirua..you said it cant happen again...LOLOLOLO...what happened in the great depression...MONEY WAS WORTHLESS..right....GOLD WAS WORTH A LOT...the jew had the right idea...have some Gold in your investment....as that is the only real currency should the US go belly up...it can happen...one way of clearing their debt..LOLOLOLOLOL

 

[nizar]

Sometimes, its hard to stay ahead of the market - and never buy at the top (on most cases)
Cheers

I wish we knew what the top was/is/will be when taking a position

Chicken - of course a crash can happen again but Noirua was saying that she cannot get burnt that bad this time because shes controlling her risk - 75% in cash instead of fully invested. Read the post properly before laughing. LOLOLOLOLOL

 

[Knobby22]

I have not had a big loss yet (fingers crossed) and have been investing for 15 years. I have always invested using fundamentals and have never geared except for an initial loan of $12,000 till 4 years ago. I think the problem with new investors is that they gear too early and get too involved emotionly. I am usually slow to sell and slow to buy. I am learning to be quicker to sell but have found out most of my mistakes have been caused by buying too quickly.

I have not taken profits when I should however and regretted it greatly. One was Qantas in which I bought a lot of shares at $3.00 and $2.88 and it quickly went to $5 after the Ansett collapse. I held on and eventually sold for $3.80. I have done this a few times with other stocks and I find I still find it hard to sell winning trades when I should.

I also lost $2000 of the float of Southen Pacific Airlines when it floated. The backer went to jail but it forced me to evaluate risk more closely. This is really important to long term success in my opinion.

I have always had a few losses a year (never more than 3% of my investments) but am learning to reduce the number of shares owned and to sell when things do not go as well as expected.

Some of my other big mistakes were caused by not buying enough when feeling sure. This is what seperates Soros and Buffet from the likes of me.
Tabcorp,Unitab, Woodside and Zenyth are good examples. I have 1200 Woodside but if I had been less timorous I may now have 3000.

I am happy though not delighted with my returns which have generally exceeded the all ordinarys returns and overall have done far better, and people are amazed when they see the size of my investments from the initial capital but I am still learning and feel the next ten years will be far more profitable.

I want to go to a more dynamic approach and though I dislike charting generally though the moving average method seems quite good. Instead of charting I try to understand the market psychology. It is often possible to get in and out and back in a stock quite quickly knowing the punters will panic, especially in the early stages of a rise. I plan to read Nick Radges book as it appears to be different.

 

[Knobby22]

Actually my biggest blunder was Metalstorm, bought at 40c, sold at 20c. loss $3000.

 

[Knobby22]

My biggest investment blunder was staying fully invested in 1987 - the crash followed. It took 17 years to make up the losses. I'm now 75% in cash, so it can't happen again.

I started buying in 1988 so I was lucky. Hardly anyone here has experienced a crash. I greatly fear the next one. The ease of which shares can be shorted and the many firms trading rather than investing makes me think it will be impossible to get out, stop loss or otherwise! Noirua, I am slowly reducing my gearing and am putting money in to pay my house off but cash seems a bit extreme in the present market. Why are you so cashed up?

 

[barney]

Sorry Barney to hear about this depressing story.

Hi Seneca60BC, ( enjoy a bit of Roman History I gather) I appreciate your sentiment. Hopefully in years to come it might prove to be the catalyst which "woke me up" so to speak ................. I still sit back sometimes and wonder how I put myself in that position ......... but thats life ......... my wife still thinks I'm OK ....... go figure that out ............ Like I said, if I ever get back to even "square", everybody is gona know about it ............ Party will be at my place ....everyones invited !!!!! ............ Lets hope that party eventuates ........ I'm determined if nothing else. Cheers Barney.

 

[nizar]

I still find it hard to sell winning trades when I should.

Me too.
I lost a pile in May because of this.

Im trying to tell myself that if i (ever?) see gains of that magnitude again would sell straight away...

 

[Seneca60BC]

Hi Seneca60BC, ( enjoy a bit of Roman History I gather)Barney.

Yes, I like history in general -

I understand how it is easy to get emotionally attached with the market - i remember I made $1000 in 2 days with the now defunct HWE and boy was I on a high - only to lose it all soon after on OEX - that taught me its no fun playing in the market.

All the best.

 

[Seneca60BC]

Me too.
I lost a pile in May because of this.

Im trying to tell myself that if i (ever?) see gains of that magnitude again would sell straight away...

I bought QAN at 3.07 and told myself that if she hits $4.00 Im selling - and before I knew it it hit $4.00 (much too quickly - I thought it would take at least a year) - anyway what I said to myself was - right now be a MACHINE and place a sell order - once I was a MACHINE - there were no emotions attched - so it was very easy to do. So when you have to sell and your emotionally attached - then become a machine - which has no emotions - this greatly and efficaciously helps you to sell.

Regards