Buying Shares Is No Joke
In these times of volatile bourses, investors are increasingly looking for alternative investments. I would like to remind you of an anecdote that is attributed to Alan Greenspan, who by any measure is probably the most respected central banker since Andrew Mellon.
One Monday morning an investor calls his broker and instructs him to purchase $100,000 of stock in a little known company, ABC Plc, which is traded on an obscure index. The next morning he opens his Wall Street Journal and sees that shares in ABC went up 10% during the previous days trading.
Thinking that he is on to a good thing, he calls up his broker and buys a further £100,000 tranche of ABC shares. Opening his paper on Wednesday morning, he sees that ABC stock has gone up a further 10% and encouraged by the previous two days gains he buys another £100,000 of ABC.
So comes Thursday and once more he opens his paper and once more, the stock has climbed 10% in value. However, being ever cautious and mindful that these rises cannot go on forever the investor decides to realise his profit and sell his shares. So he calls up his broker and instructs him to sell. The broker replies,
“To who?”
Just remember, no one made you buy the shares in the first place and if you actually believed what the analysts wrote, more fool you. “Caveat emptor” .... let the buyer beware
Comments
I was taught early on that you only directly buy shares of stock in companies you want to own, you invest through a reputable, professionally managed fund, and when overwhelmed by the urge to speculate, find a poker game.
Posted by: Will Brown | May 3, 2006 1:57 PM