How I became a share investor

After I graduated from Uni in early 1960 I decided to travel overseas. I left Australia and after some adventures in the Polynesian islands I finished up in London. I worked there for several years and spent a couple of months camping around Europe before moving to California. I loved working in the USA but regretfully decided to resign and return to Australia as my father was very ill.

I soon found employment, married, bought a house and started a family. At that time Australia was a booming economy and we made just about everything we needed. This included, cars whitegoods, machinery and even radios and TV’s. I decided to get a slice of the booming action and ‘get into’ Australian shares but I knew nothing about share investing. A good mate was profitably dabbling into shares and used a large and well respected firm of brokers so I followed his example and became a customer. In my first contact with a broker I asked him to recommend shares suitable for me. He unhesitatingly replied that BHP was a prosperous Australian company and although the shares were highly priced he believed there was still upside in them and ‘I couldn’t go wrong with BHP shares.’ So I heeded his advice and invested most of my small kitty in them.

In those days there were no personal computers or internet and you kept track of sharemarket action from daily newspapers. I checked the share price of BHP from time to time and to my dismay it had usually fallen. I rang the broker several times and asked him what was going on and his reply was along the lines of ‘don’t worry they’re just going through a bit of a downturn at the moment but they’ll come good’. Because of my faith in his advice I then committed the classical blunder of trying to catch a falling knife and bought some more BHP shares. Guess what – the price continued to fall and after a while I’d had enough.  I ignored the advice, sold them and invested my depleted funds into other shares.

So that’s how I became an Australian share investor. Since then I realised I made two classical mistakes (which are discussed in my books in greater detail).

• I blindly followed the advice of the broker.
• I tried to make up for a falling share price by buying some more shares while the price was still falling.

Footnote

There’s a footnote to this story. Because of my initial experience with BHP shares I avoided them until fairly recently. They were paying a good dividend and looked solid so I overcame my prejudice and bought some. Once a share gets into my portfolio I keep a close track of it and I was pleased with the share performance so I decided to buy some more – this time as the price was rising (which is generally a good strategy). A couple of weeks later two things happened: the price of iron ore fell as China tightened imports and the BHP board decided to divest themselves from their heavy dependence on petroleum and move toward renewables. Needless to say the market didn’t like either of these developments and the share price dropped rapidly from about $54 to about $37. Oh dear, a touch of déjà vous! However because my first purchase of the shares was at a good price I was just breaking even on my combined transactions. I recently bought another parcel as I felt they were oversold and the price had started rising again.