Many years ago my father invested heavily in the South African stock exchange, the JSE. He realised early on that his small pension due to him at the end of his working days would not be sufficient for my parents to retire on.
He spent hours on reading up about companies, investment opportunities and different options and he worked mainly in the stock exchange and in bearer bonds. His investments were mostly focused on blue chip companies whose shares were offered on the JSE.
His principle way of investment was to find a share that was providing a good dividend return and possible growth. He would purchase a considerable number of shares and stay with the company for years.
I often used to discuss investments with my father while he was still alive and I kept an eye on the world’s money movements ever since. More recently I have started studying the markets more closely with a view to investing myself.
In particular the market movements from September 2008 to current standings have been entertaining to say the least.
What also helped with kindling a renewed interest is the fact that my daughter has decided to try her hand at forex trading. Discussing her trades with her has given me a small insight into how this market works.
And it’s all based on waves of trends. Sure there are some external influences such as earthquakes and unexpected icy winters or Greece knocking the Euro value that effect trades. But in general forex movements appear to run according to trackable patterns.
This weekend I had one of those aha moments. I watched a video (you might have to sign up to watch this) interview of a trader who has been in the business for 37 years. And the aha moment came when he said that volatility in the market was an opportunity.
Suddenly it was crystal clear how the stock markets could rally so strongly after the whole ‘recession’ drama of September 2008. For instance even though the recession can hardly be considered entirely beaten in the USA, UK and Germany the bourses in these countries are looking quite healthy.
As an equities trader you can bet on the shares going up or going down. So it doesn’t matter what the trend is as long as you can identify the trend you can make money.
With other words the principles of investment in stocks is no longer based on whether a company has a good track record, a competent CEO, good dividend pay-outs etc etc. You have to track the Average Directional Index as per the trader interviewed on the video for instance rather than decide whether the stock is in an industry with growth potential.
What does that mean to the smaller investor who has been advised that he should place some of his retirement savings into stocks? It’s a big problem. Does he (or she) spend hours a day watching trends on his computer using dedicated software or does he go with a trader? Or maybe stocks is just not going to be the right option anymore.
Whatever the decision, one thing is for sure, investing in stocks is a whole different discipline to what it was during my father’s investment days in the 1960s to the 1980s. Anybody wanting to invest will need to be sure to understand the rules of this game.
on Mar 16th, 2010 at 4:36 am
My humble opinion as both a financial journalist and day trader - Forex trading is an absolute mugs game and I would stay a MILE away from it.
For 95% (if not more) of the people who engage in it, it is a sure fire way to lose money. The volatility is too great and one moment you think you are very clever and the next you are DEEP in hock.
It is far better to invest in quality shares like your fathr did. It might not be as glamorous as the quick or “easy” money attached to forex trading but its far better for the soul and for the wallet.
In fact the whole concept of socially responsible corporate investing is on the up and for many people it is likely to be a meaningful shift in investing in shares and companies which are kind to the economy and the community. Returns may not be as spectacular but they’re real returns not leveraged returns.
on Mar 16th, 2010 at 4:39 am
As somebody who trades forex, I can safely say that I would never recommend anybody I know trades forex with the intention of building long-term wealth.