Stocks and Shares

Is it possible to make money from the stock market?

Of course it is, but whether the average man in the street will ever make any money is another matter.

Let's look at some hard facts.

The Barclays Equity Gilt Study shows that from 1899 to 1985 UK stocks actually lost money rather than made money and that it was only the years 1980 to 2000 that saw any real gains. Of course we all remember the 20 good years and we forget the 100 bad ones. The FTSE 100 now is at the same price as it was ten years ago.

Dealers meanwhile continue to make vast sums of money by making sure there is plenty of churn. Every buy and every sell results in a commission.

We are all seeing the results of this poor performance by the sorry state of our pension funds.

It is understandable that those of us seeking to improve our financial lot would be confused into thinking that this was a highly regulated and professional industry but unfortunately the truth is somewhat different. The expensive suits and confusing language hide a much more unpalatable side.

Those seeking financial freedom need to look carefully at the facts before they start writing out cheques for any sort of investment. Consider this:

The Financial Services Industry has seen at least five miss-selling fiascos in the last twenty years and it is the little man who has paid the price. Whilst there is much huffing and puffing whilst expensive compensation schemes are put in place, the amount returned to the 'victims' is a fraction of what was lost.

Mortgage Endowments mainly sold between 1980 and 2000 will leave three million people with a shortfall of around £40 billion. Compensation paid out so far? Less than 1 billion.
Personal pensions have been miss-sold to two million people. Over £11 billion paid out in compensation.
AVCs miss-sold to over 100,000 customers. Over £250 million has been paid in compensation.
Split Capital Investment Trusts miss-sold to around 50,000 people who have lost around £600 million.
Remember, this is all in the last 25 years. You have lived through this. You have read about this in the newspapers.

And all the time, millions of pounds have been paid out in commission fees – and still are.

In my opinion it is important to have a spread of investments in order to limit the risk, but for me, having my pension exposed to the stock markets is more than enough exposure to the stock markets.

That is not to say some stocks will not do well. Indeed anyone who has the skill to buy low and sell high will make significant profits. The problem is knowing enough about the company or companies that you are investing in to make it a intelligent investment.

Was the dot-com boom not enough to give us all the lessons we will ever need?

So does that mean I never invest in stocks?

No, after all that - I d.

I particularly like gold and silver stocks right now which I consider to be undervalued but I appreciate the risks involved. I am very much aware that my investment could be worth ZERO in no time at all, and as witness, I do have several stocks that I have bought that are worth exactly that - absolutely nothing. What other investment product has the potential to lose 100% of its value?

Now compare that with the so-called risky world of property investment.

I do not own a single property that is worth less than I paid for it. Admittedly not all have seen their values go through the roof, and I accept that they don't go up in value in a straight line, but at least I understand what I am buying. In my opinion the worst property investment will almost certainly be worth more than the worst investment in stocks and shares.

I put gold and silver in the same category. It is inconceivable that a gold Kruggerand will ever be worth be worth absolutely nothing at all. When you put it like that it is quite remarkable that we put so much faith in paper currencies and stocks and shares.

Those seeking financial freedom should understand the products they are investing in, and, more importantly understand the risks.