Will my Bank Shares ever be worth what I paid for them?

Glacier

5 years ago, I bought E10,000 worth of Boi & AIB each. Now they are worth like E5-6,000. Will they ever be worth what I paid for them again?

woodseb

there's no guarantees, but if you are willing to hold on for about 3-5 years when the economy is expected to pick up again they may get back to that level. it's probably unlikely in the next year barring a takeover of any of the banks

Reyman

You need to look at what the share price was 10,15,20,25 years ago to get an idea of the normal fluctuation of share prices - thay can be quite sharp.

My own personal view is that we're not going to see Bank of Ireland back at their 18 Euro February 2007 level for another 10-15 years.

Glacier

Would anyone else agree? Will they ever be back at their 2004 level?

pocketdooz

Glacier wrote: »

Would anyone else agree? Will they ever be back at their 2004 level?

Yes, on February 18th, 2011 - they will be back at that level. No earlier though

pocketdooz

Sorry for the sarcasm but to be honest it's a guessing game. You have 2 choices. Cut your losses and look to put your money somewhere else that offers a better return at present or wait it out and see what happens. I personally think that it will be a medium to long-term play to own bank stocks now. There are better places for your money at present.

The upside is that you will be getting approx. 10% dividend payments on your 5000 - 6000 euros per annum.

PS - you should have sold long ago. When you buy shares you should have a get-out price. Mine is 8% below what I bought them at. If you buy shares and they fall 8% - you can be pretty sure you made a mistake and should get out. This would have limited you loss to €800, as opposed to €5000. A stop loss is something you should learn about if you're going to continue to invest in shares.

Good luck tho, I hope they bounce back for you

Diarmuid

pocketdooz wrote: »

When you buy shares you should have a get-out price. Mine is 8% below what I bought them at. If you buy shares and they fall 8% - you can be pretty sure you made a mistake and should get out.

I think this is misleading advice. Whole markets have fallen over 8% a number of times in the past (and will in the future). Following your advice, anyone who would have invested in the top Euro 50 stocks during 2007 should have sold by now

pocketdooz

Diarmuid wrote: »

anyone who would have invested in the top Euro 50 stocks during 2007 should have sold by now

I agree completely. The other option would have been to hold onto these losers.

It is possible to sell and then buy again. Transaction costs are low.

That is of course, unless you like hanging on to stocks as they are sinking because "I shouldn't sell at a loss"

It is important to avoid huge damaging losses. Never average down in price.

Avoid the disposition affect. It comes from emotion, not logic.

http://en.wikipedia.org/wiki/Disposition_effect

Diarmuid

pocketdooz wrote: »

It is possible to sell and then buy again. Transaction costs are low.

So when are you going to buy again? Are you claiming that you can time the market?

pocketdooz

Diarmuid wrote: »

So when are you going to buy again? Are you claiming that you can time the market?

Please don't quote things out of context to stir it up.

I never claimed I could time the market. Don't put words in peoples mouths.

My point is, as opposed to illiquid assets (e.g. property) - there is nothing to prevent you from creating a stop loss and then buying the shares again in the future. My point is that transaction costs are low and the asset is perfectly homogenous.

Diarmuid

pocketdooz wrote: »

Please don't quote things out of context to stir it up.

I never claimed I could time the market. Don't put words in peoples mouths.
.

Stir it up? I'm just trying to understand your logic

You are claiming that you will sell an asset when it is falling with the intention of buying it again. You must be planning on making a call in the future as to when to get back in.

eg: stock falls 8%, you sell, now what?
two options
1. It goes back up, (you have just missed the gain) now do you buy in?
2. it drops further. Has it dropped enough to buy back in, what is your criteria to buy?

You just claim "buying the shares again in the future" but you don't specify on what basis the stock you just sold is now a good buy.

pocketdooz

Diarmuid wrote: »

Stir it up? I'm just trying to understand your logic

You are claiming that you will sell an asset when it is falling with the intention of buying it again. You must be planning on making a call in the future as to when to get back in.

eg: stock falls 8%, you sell, now what?
two options
1. It goes back up, (you have just missed the gain) now do you buy in?
2. it drops further. Has it dropped enough to buy back in, what is your criteria to buy?

You just claim "buying the shares again in the future" but you don't specify on what basis the stock you just sold is now a good buy.

With all due respect, I didn't say either of these thing you claim I said.

Please re-read my post and you will see this.

Thanks

EDIT : Back on topic, sorry OP

Diarmuid

pocketdooz wrote: »

With all due respect, I didn't say either of these thing you claim I said.

With all due respect, you did:

pocketdooz wrote: »

It is possible to sell and then buy again.

If you are not willing to explain and defend your logic to buying and selling shares, you shouldn't be advising others to follow your methods.

For the original poster, no one here can predict the future movements of share prices. I wouldn't advise listening to anyone making claims to the contary. If you bought these shares as part of a balanced diversified portfolio then I think you should try and ignore market movements before you need the money (presumable not for another 10+ years if you invested only 5 years ago).

woodseb

Diarmuid wrote: »

With all due respect, you did:

If you are not willing to explain your logic to buying and selling shares, you shouldn't be advising others to follow your methods.

agree, i made the a similiar point in another thread

http://www.boards.ie/vbulletin/showthread.php?p=56791068#post56791068

you need to be very careful what you say in these threads as there are inexperienced people looking for advice who are not being appraised of the risks

pocketdooz

Diarmuid wrote: »

Stir it up? I'm just trying to understand your logic

You are claiming that you will sell an asset when it is falling with the intention of buying it again. You must be planning on making a call in the future as to when to get back in.

eg: stock falls 8%, you sell, now what?
two options
1. It goes back up, (you have just missed the gain) now do you buy in?
2. it drops further. Has it dropped enough to buy back in, what is your criteria to buy?

You just claim "buying the shares again in the future" but you don't specify on what basis the stock you just sold is now a good buy.

Please read what I said.

What I said was it is POSSIBLE to sell and purchase again in the future if you want because shares are perfectly liquid assets with low transactions costs ( as opposed to real estate / art etc. )

I didn't claim I could time the market or anything else ridiculous like that.

My point to the OP, is that it is a good idea ( in my opinion ) to have a stop loss on your trading account to prevent huge damaging losses (like what he has experienced) I then went on to give what I have ( 8% ) as an example.

All traders / market investors worth their salt know this. I don't really see what your issue is with it.

Why do you advocate hanging on to losing stocks ? ( In this case they are down 50 % ) ?

As for Woodseb - I did explain my logic = "have a stop-loss to prevent huge damaging losses" = That is my logic. Simple

pocketdooz

woodseb wrote: »

agree, i made the a similiar point in another thread

http://www.boards.ie/vbulletin/showthread.php?p=56791068#post56791068

you need to be very careful what you say in these threads as there are inexperienced people looking for advice who are not being appraised of the risks

Woodseb, that is a link to the Elan thread. You have an issue with what I wrote there ?

I said that Elan suffered a major setback too a few years ago and then gave their monthly closing prices since then to show how they recovered.

I then went on to say

"I have no opinion as to what will happen in the near term but I'm buying for the long-term (5 year horizon)"

I wasn't giving advice to buy or sell.

Diarmuid

pocketdooz wrote: »

My point to the OP, is that it is a good idea ( in my opinion ) to have a stop loss on your trading account to prevent huge damaging losses (like what he has experienced) I then went on to give what I have ( 8% ) as an example.

A simple thought experiment can show the problem with your approach.

If someone decided to start investing anytime last year (2007) and bought into a diversified portfolio of the 10 biggest companies in the US. This year, the stop loss would have kicked in (the S&P500 has dropped over 10% since last year) and the investor would have sold his portfolio.
Now what? Is that his investing career over? If not when should he buy back in? Should he ever?

You are not presenting your criteria for buying stocks, only selling following a loss. Again I ask, what is your criteria for buying stocks?

I am sure day traders and frequent traders use stop losses. However I thought most agreed now that the majority of traders/fund managers underperform the market (after costs)

pocketdooz

Diarmuid wrote: »

You are not presenting your criteria for buying stocks, only selling following a loss. Again I ask, what is your criteria for buying stocks?

This thread is not about presenting criteria for buying stocks

If you don't; or the OP doesn't, agree with what I said about a stop-loss on your trading account that's fine. It doesn't bother me.

Diarmuid

pocketdooz wrote: »

This thread is not about presenting criteria for buying stocks

If you don't; or the OP doesn't, agree with what I said about a stop-loss on your trading account that's fine. It doesn't bother me.

Ok if you are not willing to clarify, we are done.

However for anyone thinking of taking pocketdooz's advice, I'd recommend getting a second opinion.

pocketdooz

Diarmuid wrote: »

Ok if you are not willing to clarify, we are done.

However for anyone thinking of taking pocketdooz's advice, I'd recommend getting a second opinion.

By all means - get a second opinion. I wouldn't be buying or selling stocks anyway based on what people say on an anonymous message board. OP - sorry this drifted off topic. Best of luck with whatever you decide to do.

D - I don't really understand you to be honest. Clarify what ? A stop-loss on a trading account is a pretty simple concept to understand I think :rolleyes:

There are plenty of websites or books you could look at Diarmuid to get clarification of what it is, it's advantages and why it is so commonly used.

Idu

Everyone should be using stop losses to limit the downside of their investment. These stocks were bought 5 years ago for 10k and without looking for the historical prices I'm reasonably sure that they would have been worth a good bit more during that time(correct me if I'm wrong). So without a known figure where the OP will cut his losses he has lost 5k of his original investment and also retraced all of his profits. A properly managed stop loss would have avoided all that.

Emotion is one of the key reasons why people lose money investing because they allow their emotions to rule over logic. Before investing you should have an exit strategy - wn or lose you must know when to get out. How you decide that figure is up to you?

OP - unlucky with the investment. IMO banking stocks still have another few years of stagnation or even more losses. Hopefully they work out for you but I would advise having a better strategy next time you invest. Speak to a professional though rather than random internet advice

pocketdooz

janets_on_clubs wrote: »

Everyone should be using stop losses to limit the downside of their investment. These stocks were bought 5 years ago for 10k and without looking for the historical prices I'm reasonably sure that they would have been worth a good bit more during that time(correct me if I'm wrong). So without a known figure where the OP will cut his losses he has lost 5k of his original investment and also retraced all of his profits. A properly managed stop loss would have avoided all that.

Emotion is one of the key reasons why people lose money investing because they allow their emotions to rule over logic. Before investing you should have an exit strategy - wn or lose you must know when to get out. How you decide that figure is up to you?

OP - unlucky with the investment. IMO banking stocks still have another few years of stagnation or even more losses. Hopefully they work out for you but I would advise having a better strategy next time you invest. Speak to a professional though rather than random internet advice

Nice post - I agree completely. Well put.

radioactiveman

Hi OP just my two cents:
If you sell now you will turn a paper loss into a real one. These are two very good companies in their own right and are worth hanging on to even if the shares are unlikely to return to their previous levels for a few years. We are in the middle of a very nasty bear market at the moment and to suggest that there is no upside at all in BOI or AIB is going a bit far imo.

Remember BOI is keeping its overall dividend strategy unchanged i.e. keeping them relatively high even if they do fall a little in the next few years if there is a downturn. You might consider reinvesting the dividends and buying more of the stocks with a long term view? I would fancy my chances of recouping a loss much better this way than selling the shares and then trying to time the market and buy in at a later date.

Diarmuid

pocketdooz wrote: »

D - I don't really understand you to be honest. Clarify what ? A stop-loss on a trading account is a pretty simple concept to understand I think :rolleyes:
.

Actually forget it. Set your stop losses.


Yes it's easy to understand. It drops to a certain price, and you sell. It's the bigger picture you are not clarifying. :rolleyes:

Take this scenario.

1. pocketdooz thinks IBM is a good company and so buys 100 shares.
2. pocketdooz sets a stop loss at 8%
3. The credit crunch hits 6 months later and the whole market drops 15%
4. pocketdooz sells 100 IBM shares an 8% loss.

Now what do you do? IBM is still a good company. What are you going to do with your money? I see three options:

A. you reinvest immediately.
B. you never invest again.
C. you reinvest in IBM at some later date.

Is there another option here? What would you do?

Goodluck2me

Diarmuid wrote: »

A simple thought experiment can show the problem with your approach.

If someone decided to start investing anytime last year (2007) and bought into a diversified portfolio of the 10 biggest companies in the US. This year, the stop loss would have kicked in (the S&P500 has dropped over 10% since last year) and the investor would have sold his portfolio.
Now what? Is that his investing career over? If not when should he buy back in? Should he ever?

You are not presenting your criteria for buying stocks, only selling following a loss. Again I ask, what is your criteria for buying stocks?

I am sure day traders and frequent traders use stop losses. However I thought most agreed now that the majority of traders/fund managers underperform the market (after costs)

Diarmuid wrote: »

Ok if you are not willing to clarify, we are done.

However for anyone thinking of taking pocketdooz's advice, I'd recommend getting a second opinion.

LOL at the ridiculous reaction Diarmuid.
IMO Pocketdooz was giving very useful advice advocating the use of a stop loss to prevent you going busto on one stock or losing a large chunk of change. Asking him when he wouls reinvest is completely irrelevant to be honest.
You would need to weigh up why you invested initially and see if those reasons are still valid.
In your example, a person presumably researches IBM and gets the idea that they are good value at price X. With a stop loss they will get out at .92X a drop of 8%, whilst the stock continues to fall say to .85X, a drop of 15%. they have saved 7% of their portfolio's worth already just by the issuance of a stop loss.
Now the investor can re-think their reasons for believing IBM is a "good company", whilst being 7% better off.
They may invest immediately, after getting news reports of a rise coming shortly, or they may sit back indefinitely as they may not see any future gains in the stock.
There is a good saying "money not lost is as easy spent as money won". When you are an investor, you don't HAVE to be in stocks all the time. If sentiment is bad everywhere for example then you are better to take a break from it and re-enter the market at a more favourable opportunity. Finding out when that opportunity is depends on the credentials and the salt of the investor.
To go back to the IBM case, you buy IBM at €50, they fall 15%, you get out at €46, they fall to €35. If you re-enter IBM at €35 and it rises €10, you have now made a profit on the stock rather than a loss of €5.
the key thing to understand is that your reasons for REinvesting are completely unrelated to how much you have lost before, they are based on perceived future gains. These gains just happen to be bigger if you get out before monumental losses.

ircoha

Glacier wrote: »

5 years ago, I bought E10,000 worth of Boi & AIB each. Now they are worth like E5-6,000. Will they ever be worth what I paid for them again?

Am surprised Mods did not close this thread as most of the comments did not address the question.

To start with
5 years ago
aib were 12.5 and are now 9
boi were 11 now 6

OP your post suggests that u spent 20k and it is now worth 5 or 6k so check either the math or the facts or the dates.

Will they reach the purchase price at some point in the future?

Impossible to tell with 100% certainty because of the world we live in.

Why:

If oil goes to USD 500 a barrel and tens of millions of hungry, poor people cross over from Africa to Europe looking for food and shelter then ....... unlikely.

If Iran gets the N-Bomb, wraps it in swaddling clothes and lays it in a manger in Bethlehem then.....unlikely.

If a flu pandemic, or similiar, hits Europe and 25 to 50 million people die then...... unlikely.

If a few tropical storms spawn in the Bay of Bengal and thrash India and Bangladesh, killing upwards of 50m people, then... likely

It just depends.

The key issue here is what your investment criteria (long medium short term.) are and what your attitude to risk in investments is.

If your time horizon is longterm and you are not into actively trading shares then you have no need for a stop loss position.


In passing, if you decide to realize your losses now, keep all the paperwork as capital losses on disposal of assets can be carried forward against future gains so all is not lost.

To end on a happy note, in the long run we are all dead: you only get one go on the merrygoround of life so get out there and make an impact and have fun doing it.
Keep well.

pocketdooz

goodluck2me wrote: »

They may invest immediately, after getting news reports of a rise coming shortly, or they may sit back indefinitely as they may not see any future gains in the stock.
When you are an investor, you don't HAVE to be in stocks all the time. If sentiment is bad everywhere for example then you are better to take a break from it and re-enter the market at a more favourable opportunity. Finding out when that opportunity is depends on the credentials and the salt of the investor.

Nice post - this is exactly what I was getting at. There is no reason to always have your capital tied up. There are plenty of periods of time when it IS better to have your capital in cash (now for example)

goodluck2me wrote: »

Now the investor can re-think their reasons for believing IBM is a "good company", whilst being 7% better off.

This is the key point really. Being able to admit you have made a mistake either in the company you chose OR your timing. It is easy to get emotional and not want to admit to yourself you are wrong (I'm sure this has happened to all of us) or not want to sell at a loss. Stop-losses prevent this from happening.





.

Diarmuid

goodluck2me wrote: »

To go back to the IBM case, you buy IBM at €50, they fall 15%, you get out at €46, they fall to €35. If you re-enter IBM at €35 and it rises €10, .

:rolleyes:

The problem with your theory is if you get out at €46 and the stock rises to €50 the next day (or a week later) you have just tied in your loss and missed out on the 8% gain. (look at the last year of IBM and you will see that happening quite a bit)

However if you can predict when the market has bottomed or when is a better time to get back in (re-enter @ €35 and it rises) or even your initial sell when the stock is dropping, then by definition, you are claiming that you can time the market, and we have come full circle.

Fine, I have no problem with that (although I don't believe it can be executed successfully) but at least admit it.

pocketdooz wrote:

There are plenty of periods of time when it IS better to have your capital in cash (now for example)

But you are not claiming that you can time the market. Right.

Look I think we have fundamentally different approaches to investing. I follow the Efficient Market Hypothesis, where as you believe in some sort of Technical Analysis. We can never agree in stop losses if that is the case. No point discussing this further.

woodseb

i'm with diarmuid here, stop loss are effective to limit somebody's potential losses to a managebale level but it is not compatible with a purely fundamental long term investment view imho. there's not much point in arguing it any further

goodluck2me wrote: »

Now the investor can re-think their reasons for believing IBM is a "good company", whilst being 7% better off.
They may invest immediately, after getting news reports of a rise coming shortly, or they may sit back indefinitely as they may not see any future gains in the stock..

as for this comment....:eek::D

Goodluck2me

woodseb wrote: »

as for this comment....:eek::D

lol, obviously i didnt mean it as getting inside information! I meant you might uncover some information/a reason to invest in future.

Diarmuid wrote: »

:rolleyes:

The problem with your theory is if you get out at €46 and the stock rises to €50 the next day (or a week later) you have just tied in your loss and missed out on the 8% gain. (look at the last year of IBM and you will see that happening quite a bit)

Firstly with certain stocks, say IBM as per your example you might notice huge fluctuations in price as the norm, in this case you would simply insert a larger stop loss as perhaps you would expect to fall 10% and rise 20% etc. They key is that you can't simply let the whole value of the portfolio fall before you act. Even if your stop loss is 50% you will still at least have some capital saves. You can honestly believe that if you invested in a stock and it fell 50% that you could say it was a good investment. now what difference between 50% and 40% for e.g? At least you'd be 10% better off!

However if you can predict when the market has bottomed or when is a better time to get back in (re-enter @ €35 and it rises) or even your initial sell when the stock is dropping, then by definition, you are claiming that you can time the market

You don't have to know when the market has bottomed, you just have to realise that it's OK to lose some money on a single investment its not OK to lose ALL of it.
I'll say it again, that your withdrawal of money from the stock during the stop loss and your reinvesting in future is completely unrelated. I can't stress that enough.
I am not saying, get out when it falls and in when it rises, as that would be impossible following the random walk theory. What I am saying is, if your stocks value falls X% get out so that you don't have 0% left to invest in future.
You are basically just ensuring that you still have capital to invest in future!

diarmuid wrote:

Look I think we have fundamentally different approaches to investing. I follow the Efficient Market Hypothesis, where as you believe in some sort of Technical Analysis. We can never agree in stop losses if that is the case. No point discussing this further.

I think it's pretty clear that a strong efficient market hypothesis doesn't exist. There are many reasons for this, including the experience, efforts in research and skill of the investors. There will always be a sucker regardless of price.

Technical analysis and efficient market hypothesis arent exclusive either, how do you think the market becomes educated?
I believe Investor A and investor B will not always produce the same results as one in an emotional investor who is afraid of tying in losses (otherwise known as protecting the capital investment), and the other who still have money to invest!

von Neumann

It is very interesting what is happening to the Irish Fins

http://uk.finance.yahoo.com/q/ta?s=BIR.IR&t=2y&l=off&z=m&q=l&p=m200&a=&c=

I would watch the dividends very closely....Currently the market is pricing in the loss of all dividends for several years/forever (bank going bust).

I suppose you have to ask yourself what would it take for all the dividends to disappear and how likely is that to happen.......then stick to your guns and don't expect the market to always see things your way.

As far as the coversation goes on stop losses I had one for ILP at 13 euro and it saved my skin! Just a little wiser and poorer.

ionapaul

von Neumann wrote: »

It is very interesting what is happening to the Irish Fins

http://uk.finance.yahoo.com/q/ta?s=BIR.IR&t=2y&l=off&z=m&q=l&p=m200&a=&c=

I would watch the dividends very closely....Currently the market is pricing in the loss of all dividends for several years/forever (bank going bust).

I suppose you have to ask yourself what would it take for all the dividends to disappear and how likely is that to happen.......then stick to your guns and don't expect the market to always see things your way.

As far as the coversation goes on stop losses I had one for ILP at 13 euro and it saved my skin! Just a little wiser and poorer.

The markets disagree with the Irish banks with regard the actual value of the assets on their books - the market believe that the value of Irish and British property is sharply lower than what the banks are saying in public. You'd love to hear what the top guys are saying to one another behind closed doors, though, wouldn't you?!

amen

I've been reading this thread with interest and there are some interesting points in particular to stop losses and what to do.

In general I think the idea of a stop loss is good but depending on the circumstance i.e
I think the market is at the bottom and I buy at 10 market rises to 15 then drops to 14 exceeding my 8%stop loss so I should sell and take my profit

Market is on the way up (or near the top based on OP) buy at 19 and decrease to 18 exceeding my stop loss. Should I sell or not depends on
A: If I think its a short drop then no and ignore my stop loss
B: on the other hand it it looks like a steady drop and other similar stocks are also dropping then its time to sell

To my mind while a stop loss is important its more the timing of the purchase and in order to maximise profits before selling

of course AIB was only 19 relatively recently unless you are day trading stocks should be seen as a long term investment (years vs months/weeks)

Personally I think AIB will take a long time to recover (if ever)

Time Magazine

ircoha wrote: »

Am surprised Mods did not close this thread as most of the comments did not address the question.

I work 9-5. The other mod is away this month.

Plus I way prefer a light-handed approach to modding. Heated debates are great.

zod

indo article today

Another way that market participants put a value on bank shares is to compare the market value of the bank with its capital and undistributed profits (book value). There has been an historic relationship, again in normal times, that market value is approximately one and a half times a bank's book value.
When the economy normalises, then bank shares should move significantly higher. They currently range between €5 and €8. I would expect them to be in the range €10 to €15 within five years.

Glacier

So, you think I should hold on, at one point my €10k shares were worth 4 something, I mean how bad can it actually get?

ionapaul

zod wrote: »

indo article today

Another way that market participants put a value on bank shares is to compare the market value of the bank with its capital and undistributed profits (book value). There has been an historic relationship, again in normal times, that market value is approximately one and a half times a bank's book value.
When the economy normalises, then bank shares should move significantly higher. They currently range between €5 and €8. I would expect them to be in the range €10 to €15 within five years.

The problem here is that the market does not believe that the value the banks are estimating for their book value is correct! Most of the banks are not acknowledging that they will have significant writedowns resulting from the likelihood that many of their property-related loans will go bad and the land / apartments / offices that were used as collateral for the loans are not worth what they currently claim they are!

So you can either believe the banks (all is rosy in the Irish garden) or the market (there may be trouble ahead) IMHO

Idu

Glacier wrote: »

So, you think I should hold on, at one point my €10k shares were worth 4 something, I mean how bad can it actually get?

Unlikely as it is they could be worth 0 if something really out of the ordinary happens but these are the two biggest banks in the country so the chances of them going bust are slim.

If you hold on long enough logic would dictate that you would get your money back at least but wether or not 10k will be worth the same then might be your main concern

TommyGunne

Can anybody give a good logical explanation for a stop loss on investments? I've always wanted to here one.

Glacier

The banks are the most safest & reliable though, right? It should balance itself iout eventually though, right?

daveirl

This post has been deleted.

pocketdooz

Glacier wrote: »

The banks are the most safest & reliable though, right? It should balance itself iout eventually though, right?

Glacier wrote: »

So, you think I should hold on, at one point my €10k shares were worth 4 something, I mean how bad can it actually get?

Glacier wrote: »

5 years ago, I bought E10,000 worth of Boi & AIB each. Now they are worth like E5-6,000. Will they ever be worth what I paid for them again?

Glacier wrote: »

Would anyone else agree? Will they ever be back at their 2004 level?

Glacier, for some reason I get the impression you're just going to keep on asking the question until you get the answer you want ?

The future is uncertain. There is no guarantee that they will rebound. It might take a long time (longer in real terms because of 5% inflation). Banks sometimes suffer badly - they are not immune to colapse. See below :

Barings Bank

Northern Rock

Countrywide Financial

Bear Stearns.

REFCO

and on . . .







.

TommyGunne

daveirl wrote:

This post has been deleted.

A lot is complicated about that in terms of the logic you provide.

Surely the decision is to buy a share when it is underpriced/expected to rise, and sell when it is overpriced/expected to fall. A fall of 10% most definitely does not imply that the share is underpriced or due to fall more.

The other argument implied in this thread was that you do not want to lose everything in one stock falling. You shouldn't be putting this much of your value into one share anyway.

So why is a stop loss good if we assume your not retarded enough to overcommit to one share?

pocketdooz

TommyGunne wrote: »

Surely the decision is to buy a share when it is underpriced/expected to rise, and sell when it is overpriced/expected to fall.

Yes, - But sometimes we get it wrong.

Stop-losses are more appropriate to active traders as opposed to long-term / value investors. You research a stock and decide to buy but if it drops by more than 10% of it's initial value you have a stop-loss procedure in place to limit your portfolio's overall loses.

If you research a stock and expect it to rise and it doesn't, it falls by 10% a stop-loss is an emotionless mechanism that 'admits your mistakes' for you, to avoid the disposition effect.

It also helps when unforeseen events affect your share holdings (e.g. - it saved me a fortune recently when ELAN collapsed)

Again, Tommy - it is more appropriate to active traders than long-term investors. If you follow the value-investing way of thinking (Ben Graham / Warren Buffett etc.) then it may not be as appropriate for you as you have done huge amounts of research to ensure your decision making is correct IN THE LONG-TERM.

I hope this helps.


EDIT - they can also be used to lock in a realised gain, they need not only be used to limit loses. When the value of the shares you are holding increases you have an unrealised gain. Setting a stoploss can , in this case, ensure that at least some of this unrealised gain can be locked in. Again - more suited to active traders than LT investors.







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TommyGunne

Cheers. Makes sense and a good explanation. Thanks.

MortgageBroker

have you received dividend on them? if so how much? if they are paying out nicely then factor that into your loss as so far you only stated that you were down on the purchase price.

daveirl

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pocketdooz

daveirl wrote: »

This post has been deleted.

+1

pocketdooz

pocketdooz wrote: »

Glacier, for some reason I get the impression you're just going to keep on asking the question until you get the answer you want ?

The future is uncertain. There is no guarantee that they will rebound. It might take a long time (longer in real terms because of 5% inflation). Banks sometimes suffer badly - they are not immune to colapse. See below :

Barings Bank

Northern Rock

Countrywide Financial

Bear Stearns.

REFCO

and on . . .







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. . . . .

Lehman Brothers

Washington Mutual

AIG

Fannie Mae

Freddie Mac

Merrill Lynch

. . . . .










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