A new tactic

On 17th August 2015 I found a link to a report on shares that had hit an all time low price. Surely these must be a great buy? They are bound to go up at some point aren't they? I repeatedly kick myself as I look back at this crazyness.

Convinced in my logic, I transferred another £1050 from my savings into the share account and looked for rock-bottom bargains.

The first was PTY:Parity Group. I was surprised their share price was so low, as we had used them at work for developer aptitude tests and found them to be very good. Without bothering to research why their share price was low, I merrily purchased 4000 of them at 7.5p for a total cost of £312.50. Subsequent research showed that until this year they had made a loss for the last 3 years and had been through a major re-structure. Dividends dried up in 2004 so things hadn't been great for a while. Until there is some sign of turning to reasonable profit, the low share price looks justified. Oops!

Then I moved to TRK:Torotrak who make KERS systems for vehicles and whose shares were trading at 6.2272p - a bargain. I snapped up 1500 for £106.38 without even considering how much they would have to increase in value just to pay the commission. Unbenown to me at the time, I was "over trading". A common mistake for rookie investors buying small quantities of peanut shares, a tactic only likely to benefit the stockbrokers. If I'd looked more closely at the accounts, I would also have seen that the company had been making a loss every year, so the low share price had no imminent prospect of improving.

To counter balance the speculative investments above, on the same day I decided to buy 100 shares in BDEV:Barrett Developments. The house building market was looking good, with demand far outstripping supply, and Barratt's shares had been increasing steadily in value and paying dividends every 6 months. Thank goodness not all my decisions at this point were mental. The share price was 656.82p and there was £3.28 stamp duty, so the cost was £672.60 and left me with just £55 in my trading account.

I was beginning to develop a portfolio. One with widely differing prospects, but I was very proud of my list of shares, despite them all showing a loss thanks to the commission and something I hadn't appreciated at the time - the spread between buying and selling prices. Every time I bought some shares, I was immediately losing even more money than I thought. At this point I was still focused on the share price, not realising that if I wanted to sell my shares, I wasn't going to get the share price - oh no - I was going to get the bid price. That realisation would take a while yet to dawn.

Over the next few days, things were about to go spectacularly wrong...