The Wokingham Paper

MONEY MATTERS: Know the odds before you invest

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As a young man in the Royal Air Force, despite having a good social life and being involved in sport and athletics,

I found that I craved for more.

I needed an intellectual challenge and found that with horseracing.

Losing two months wages was not a good start for my new interest. I soon realised that I needed to study the form and get a better understanding of racing so that the odds were in my favour, before placing any bet.

I developed a system of following horses that tried very hard to win races but didn’t quite succeed, when they did eventually win, the odds were often very good. I began to make a very good living from my new hobby and even bought my parents a car from part of the proceeds of one of my winning selections.

Then the inevitable happened I got posted overseas to Cyprus, I was unable to continue with my hobby.

I continued with my athletic career, but had lost the intellectual challenge I needed for mental stimulus. It is actually a very short jump (no pun intended) from horseracing to investing in the stock market. I read anything I could lay my hands on that was to do with the financial world – soon I was buying and selling shares.

I telephoned my bank manager in England for a loan of several thousands of pounds. “Why did I want the money?” When I told him, it was for investing on the stock market – he turned me down, laughing as he did so.

My posting in Cyprus lasted three years. Within days of arriving back in England, I received a phone call from my bank manager, could I come and see him. I wondered what this was all about.

I soon found out, he wanted me to tell him how I selected the investments I had made, as I had made some outstanding profits.

Now it was my turn to say NO.

I found that, as with horse racing, the more research I put into investments the more money I made.

Many hours were spent studying the relative merits of each fund, this was time well spent as 80% of collective funds are useless.

My research into investments eventually drew me to investment trusts, these are often ignored by advisers. Often, they are on offer at a huge discount to net asset value, so I have made it my business to become very knowledgeable about this type of investment.

The late famous investor Jim Slater stated that any investment trust with a discount of 25% to net asset value needs consideration; whilst I agree, you need a good understanding of what is under the bonnet of any investment trust before you invest.

I have made very substantial profits for myself and my clients by including investment trusts within our portfolios.

We carry out a great deal of research before making our investment trust recommendations.  We are considering one now which has a 40% discount to net asset value and is a good performer; it’s believed that the capital value could jump 20% just to be at fair value.

Buying an investment trust like this, and others we have selected over the years, puts the odds in your favour. You then simply need to have the time and patience to collect your “winnings”.

Past performance is not necessarily an indication of future returns, and future performance is not guaranteed.

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