Wednesday, 19 January 2011

Short term gain, long term loss

Goal 3: To save enough to be able to retire

One of my biggest mistakes over the last year has been caused by greed. I have been fairly successful with some of my investments and at present am showing a 100% return overall. But, I have tried to squeeze more out of my investments by speculating that a share price would fall, then selling. Followed by speculating it would rise and buying back in.

More often than not, I have been spooked by the share price going in the opposite direction and ended up losing a fair amount of the gains I had made.

I have not tried to calculate what my returns would have been had I stuck to my original purchases, it may not even be possible since - where would I draw the line? But, if I had traded less, I could have been 150% up right now.

It has been my intention to build up a big enough pot that I can invest in a range of different shares and leave the money in for a longer period. I'm now able to start doing this and need to develop more patience with my decisions.

I have decided to invest 80% of my holdings equally in two companies: Anglo Asian Mining (AIM:AAZ) and Caza Oil & Gas (AIM:CAZA). Both are high risk companies currently trading on London's AIM market.

Anglo Asian Mining is a gold mine in Azerbaijan. They produced 67,000 ozs of gold last year and expectation is this will increase to 75-80,000 oz in 2011. I do have concerns over a profit sharing agreement with the government which does not appear to include tax deductions. I am waiting on their full year accounts to get a better idea of likely future profitability.

Caza Oil & Gas are exploring for oil and gas, strangely enough, in the US. They are currently producing a small amount and have big hopes for some ongoing drills.

It is my expectation these shares will go up by 50% in 2011. I am hoping for more but I think fifty percent is realistic. I need at least 40% since until I start working again, I am not able to save and need to both save and get a return to achieve my pension goal. (It is maybe worth mentioning that my pot includes savings for our children's future needs and they have done rather well out of me this year;)

The rest of the money is in an even higher risk share: Sound Oil PLC (AIM:SOU). This is one of those - "Why did I do this?" kind of investments that I have made in the past which may just provide a return but may equally hover between despair and calamity.

A quote from an episode of Silent Witness (BBC TV) resonated with me recently: "Gambling addicts tend to be optimists, they think every decision will pay off." I sense that I need to be far more wary of my instinct and far less quick to try and make a quick buck. So, I am going to use this blog for one of the reasons I started it, to keep myself accountable. I will advise you of every trade I make for the rest of 2011 and the reasons for doing so.

No comments:

Post a Comment