# Why hold shares for the long term?



## Odea (17 Mar 2004)

With the stock market falling over the past week due to a correction due in the market plus the terrorists attacks in Madrid I am wondering is it stupid to hold shares for the long term.


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## <A HREF=http://pub145.ezboard.com/baskaboutmoney.s (17 Mar 2004)

Nobody can say for sure but in general it is accepted wisdom that equities tend to deliver better returns than other asset classes (e.g. property, bonds, cash etc.) over the long term even in spite of volatility such as that exhibited by the markets in the light of last week's news. In general holding long term is also advisable since it minimises the eroding effects on gains of trading costs.


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## rainyday (17 Mar 2004)

I wouldn't say the market is 'falling over'. Remember for every seller, there is also a buyer, i.e. somebody who reckons it is well worth getting into the market at the current level.


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## <A HREF=http://pub145.ezboard.com/baskaboutmoney.s (17 Mar 2004)

> I wouldn't say the market is 'falling over'



I think Odea meant "what with the stock market falling, over the past week" as opposed to "what with the stock market falling over, the past week"!


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## Odea (18 Mar 2004)

*Ticker.*

Personally I think it best not to hold shares for too long. A friend of mine inherited Bank of Ireland shares about 100,000 pounds worth. I remember him telling me that he would never sell them. Yet he could have got 13.50 approx. for them in 2003 compared to 10.50 today. That's a drop of €3 per share approximately.

Another example is the UK share Kingfisher that announced a month or so ago a strong quarterly update. The shares rose on these figures/outlook. Today they announced their results and even though they were good the market didn't like them and the shares have dropped back.

All of the housebuilder shares in the UK rose today on the back of comments made by Gordon Brown in his budget. Before the budget CNBC had an article stating that he might do something to encourage housebuilding in the UK. If you were quick you could have nipped in and out and taken a profit. For example Wimpey up 30p, Bellway up over 40p etc  If I were a holder of these shares I would think it foolish not to take a profit. 

I think it is possible to look at individual sectors and when they are flavour of the month nip in and nip out taking a profit along the way.


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## rainyday (18 Mar 2004)

*Re: Ticker.*

Hi Odea - It's very easy to be wise with the benefit of hindsight. However, you really have no idea of the BOI/Kingfisher decisions you outline were the right decisions - because you don't know where those shares are going to go next week/month/year. 

And it also raises the question of what you are going to do with the money once you sell. If you have a particular need to spend the money for a house/car/extension/whatever, then obviously selling out isn't a bad idea. But if you have no particular need for the money - what are you going to do with it? Leave it on deposit with inflation eating away at the value every month?


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## Sceptic (18 Mar 2004)

*Stocks always make money??*

Excerpt from the Daily Reckoning Newsletter:

"Imagine that you do your maths (as they say in England)
and that you come to the realization that - as a scientific observation - stocks produce greater profits than bonds. If this were accepted as scientifically valid... it would be irrational for investors to put their money into anything other than stocks. Stocks would, then, rise dramatically - convincing even diehard skeptics, who would then buy stocks, too. Stocks would be hot... while bonds would cool down and ice over. Pretty soon, bonds would yield 10% or more (in 1978 you could get 15% from a U.S. government bond!)... and stocks would produce no yield at all... and no hope of capital gains, for all the world's money would be already invested in them.

"But the observation that stocks outperform bonds is based on investors' attitudes and reactions from a period when investors did not believe that stocks were better 
investments. Stock prices from the period - much lower -
reflected the belief that stocks were, on the contrary, risky... and that investors needed a greater return to make up for the risk.

"And so it doesn't take long for the sharp, cynical 
investor to see that the 'stocks are always better than 
bonds' idea is flawed. The smart money pulls out of the 
boiling stock market... just as Buffett, Soros, Rogers, 
Templeton, and Grantham have largely done already. Later, the mob of lumpeninvestors catches on... and may, in a moment of sudden panic, realize that its goose has been cooked. Stocks crash. In effect, this generation of investors rediscovers the risk that their fathers and grandfathers always knew was there - the kind of risk that 'science' can't measure... the kind of risk the Feds can't protect you against."


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## <A HREF=http://pub145.ezboard.com/baskaboutmoney.s (18 Mar 2004)

*Re: Stocks always make money??*



> Stocks always make money??



I don't think that anybody said that. On average, notwithstanding dips and crashes along the way, stocks have tended to outperform all other asset classes over the long term. This does not detract from the fact that some people do lose money on equities along the way. I'm not sure that the paradigm shift in relation to the equity markets implied by the above article has taken place to be honest. 

In relation to trying to time the markets of apply specific investment strategies to stock selection and buy/sell decisions this article is useful:

www.arachnoid.com/stocks/index.html


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## Odea (18 Mar 2004)

*Can we help ourselves to make money.*

Interestingly enough the construction shares that rose yesterday are down today, no doubt some profit taking. Happy enough to take a profit. 

This year we have the US presidential election and Olympic games, should we be investing in shares that will be involved in the advertising and media industry?

If we have a hot summer as well as the Olympic games should we be investing in the beer and alcohol shares. Traditionally when we have a hot summer, shares in pubs and clubs generally do poorly. If we have a poor summer should we invest in the pubs/clubs shares?

What I am trying to say is, is it possible to predict sectors that will perform well?


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## <A HREF=http://pub145.ezboard.com/baskaboutmoney.s (18 Mar 2004)

*Re: Can we help ourselves to make money.*



> What I am trying to say is, is it possible to predict sectors that will perform well?



No. Timing the market is a mug's game.


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## Odea (18 Mar 2004)

*Let's try and time the market then.*

I'm making money doing it. If I were allowed I would list a half dozen shares that I think will make you money over the next two months. How about a friendly competition?


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## <A HREF=http://pub145.ezboard.com/baskaboutmoney.s (18 Mar 2004)

*Re: Let's try and time the market then.*

I'm not saying that nobody EVER makes money predicting the future but nobody can do it with any accuracy. When it comes to attempting to predict future events the law of averages applies. Apart from the fact that stock tipping isn't allowed I personally am not really interested in wasting my time trying to disprove a hypothesis that is statistically sound to be honest.


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## Odea (18 Mar 2004)

*Pseudo moderator.*

Who said anything about wasting your time? I was thinking about the wider AAM audience. There are other people besides you O, who might be interested and who might not agree with your views. It would be interesting if we could with the help of sound financial analysis, reasoning, logic, sentiment etc, bend the laws of averages in our favour.


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## <A HREF=http://pub145.ezboard.com/baskaboutmoney.s (18 Mar 2004)

*Re: Pseudo moderator.*

That's why I said "I personally"... :rolleyes


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## soylentgreenISpeople (19 Mar 2004)

*Dice.*

I would imagine that the laws of averages come in to effect when throwing dice or similar. The outcome cannot be influenced. 
However if a person is investing in shares using sound fundamentals, research and all the other tools available to help them, then it is possible to trade successfully and to move the odds in your favour.
I don't think the laws of averages come in to this unless you are picking your shares using a pin.


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## rainyday (19 Mar 2004)

*Re: Dice.*



> However if a person is investing in shares using sound fundamentals, research and all the other tools available to help them, then it is possible to trade successfully and to move the odds in your favour.


How come many fund managers lose money during market downturns then, given the great tools/technology/research that is available to help them in their stock picking?


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## <A HREF=http://pub145.ezboard.com/baskaboutmoney.s (19 Mar 2004)

*Re: Dice.*



> I don't think the laws of averages come in to this unless you are picking your shares using a pin.



www.arachnoid.com/stocks/index.html


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## piggy (20 Mar 2004)

*Re: Dice.*

*"How come many fund managers lose money during market downturns then, given the great tools/technology/research that is available to help them in their stock picking?"*

A lot of people think that these people don't use sound fundamental tools when picking stocks in the first place which is why you should never give your money to one of them to invest on your behalf.


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## <A HREF=http://pub145.ezboard.com/baskaboutmoney.s (20 Mar 2004)

*Re: Dice.*

While I would agree that fund managers, with all their fundamental analysis and technical strategising, can no better predict the future than you or I, I would not go so far as to say that one should NEVER hand one's money over to them for investment purposes. For various reasons some people may find indirect equity investment preferential to direct equity investment and, as such, a unit linked fund with reasonable charges - whether managed or index tracking - may well be a suitable choice.


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## piggy (20 Mar 2004)

*Re: Dice.*

*"For various reasons some people may find indirect equity investment preferential to direct equity investment and, as such, a unit linked fund with reasonable charges - whether managed or index tracking - may well be a suitable choice"*

Yes, that's a fair point 0. I tend to dislike fund managers myself so perhaps I'm a little bias about this.


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## evoke (22 Mar 2004)

*Stock exchage talk*

does anyone known about "bid" and "offer" for shares.what does this mean for a person holding shares.Is "offer" the amount of money they will get for the  shares and "bid"  is the amount you buy them for? 

Aswell as that does anyone know what the amount of deals does for a companies share price .if they have a lot of deals done does the share price go up normally? 

I have seen this stuff on the irish stock exchange website.this is the kind of information they give you about the companies.do you think it is any use for picking good stock that might go up???


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## <A HREF=http://pub145.ezboard.com/baskaboutmoney.s (22 Mar 2004)

*Re: Stock exchage talk*



> does anyone known about "bid" and "offer" for shares.what does this mean for a person holding shares.Is "offer" the amount of money they will get for the shares and "bid" is the amount you buy them for?



If you are a buyer then you will pay the offer price to buy shares. If you are a seller then you will get the bid price when selling. Obviously these are "of the moment" figures and market dynamics mean that they are only indicative for subsequent trades. The difference between these two prices represents the bid-offer spread. This often applies to actual shares as well as units of a unit linked fund. Some markets or brokers may not quote bid and offer (or ask) prices but simple the "last trade" price instead.



> Aswell as that does anyone know what the amount of deals does for a companies share price .if they have a lot of deals done does the share price go up normally?



Brokers normally charge per trade. Note that purchases also involve 1% stamp duty on Irish shares.

www.askaboutmoney.com/clu...OCKBROKING



> I have seen this stuff on the irish stock exchange website.this is the kind of information they give you about the companies.do you think it is any use for picking good stock that might go up???



Nobody can time the markets or predict the future with any accuracy (short of illegal insider trading...).


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## daltonr (23 Mar 2004)

*Re: Stock exchage talk*



> this is the kind of information they give you about the companies.do you think it is any use for picking good stock that might go up???




Before you even think of buying shares do a bit of groundwork on shares in general.  Browse the Finance section of a Bookstore,  I'd reccomend Buffetology, or one of the Bernice Cohen books.  But there are many others.

Once you've done that, you might like to pick a "fantasy" portfolio, give yourself say...€100,000 and see how you do over the course of a year or two (it's not that long).

If you want to get your feet wet immediately, look up some Mechanical Investing stragtegies (I don't reccoment doing this without at least reading the books).

Don't just think of it as investing.  If you don't enjoy reading these books, and you don't think of investing as a hobby of sorts then you're most likely better off handing you're money over to a professional.

It's a bit like trying to build a Conservatory even though you hate building and DIY.  Better to just pay someone to do it because you won't have the interest in working out the right way, and you won't be able to handle the set backs.

-Rd

-Rd


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## Sceptic (23 Mar 2004)

*"Professional Analyst??"*

0

The link that you gave us merely illustrate that there are good fund managers and bad ones. Just like me throwing a rock onto the street and hit a cab. Can I therefore conclude that rocks have affinity for cabs?


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## <A HREF=http://pub145.ezboard.com/baskaboutmoney.s (23 Mar 2004)

*Re: "Professional Analyst??"*



> The link that you gave us merely illustrate that there are good fund managers and bad ones.



Yes - but (a) statistically this year's "good fund manager" could just as easily be next year's "bad fund manager" and vice versa (b) past performance is no guide to future performance/returns and (c) things arguably tend to balance out over time so that the one generally reliable (over the long term) way to benefit from stock market growth is to simply buy and hold long term rather than depending on somebody else's supposed expertise in timing the market and selecting the "right" stocks. Obviously this does not obviate the need for assessment of the underlying company fundamentals when selecting stocks in the first place (so that you don't buy something really dodgy/risky - unless that fits the risk/reward profile of your investment strategy!) but ultimately there is no magic and NOBODY can predict the future.



> Just like me throwing a rock onto the street and hit a cab. Can I therefore conclude that rocks have affinity for cabs?



Just like one fund manager picking a high performing stock at one point in time. Can I therefore conclude that s/he will continue to do so into the future?


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## evoke (24 Mar 2004)

*Irish stock Exchange Building*

has anyone been on the Irish Stock Exchange website.They give you information about what is going on with the company.

But there is one certain information i don`t understand.
It says number of "DEALS" and "turnover".

Is the number of deals done by the company or are they talking about the number of share deals done.

When they talk about turnover is that the of money they made on the day???

Also does anyone know where the Irish Stock Exchange is in Dublin and is there a "floor"  where the day traders can trade between each other.  Is there a cost to enter if there is such a place??

Thanks


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## <A HREF=http://pub145.ezboard.com/baskaboutmoney.s (24 Mar 2004)

*Re: Irish stock Exchange Building*



> But there is one certain information i don`t understand.
> It says number of "DEALS" and "turnover".



Perhaps the glossary might help?

www.ise.ie/index.asp?locI...d=GLOSSARY



> Also does anyone know where the Irish Stock Exchange is in Dublin and is there a "floor" where the day traders can trade between each other.



Their contact details should be on the website (isn't responding for me or is very slow right now) but they used to be in Anglesea Street. I think that the exchange is largely electronic nowadays but they may still have/use a dealing floor. However this is generally restricted to brokers or their agents and retail daytraders (in the sense of members of the public who trade frequently) need to go through brokers as normal.


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