I was fascinated by an interview with two Cardiff schoolboys on Radio 4 this morning. Their school team had won a national “Shares for Schools” competition and two of them were interviewed in the business slot about how they’d outperformed the FTSE 100 by 34% — well above the highest rated fundmanagers. It made me wonder what had changed since before the economic crash that was blamed on macho culture in high finance.
“Well obviously, we went for high-risk”, said one of the students, when asked how they’d done it. Both young men were charming and refreshingly no nonsense about their strategy. They said they’d put the bulk of their £1500 initial sum into high risk shares, pulled big profits and then moved the gains into safer stocks for the rest of the competition period. Commodities attracted them, because their high prices confirmed to the children that natural resources for making stuff were “scarce.” They also said they tried to avoid buying and selling too much, keeping close to the minimum of at least 1 trade a month, to avoid losing money on fees.
To be fair investment adviser, David Buick, tempered his praise with a note for listeners about the potential pitfalls of investing in very small high risk companies. And we are all familiar with news stories of the senior citizens’ share clubs that outperform the City dealers,too. We all delight in that. But is a fundamental principle unchanged? Is it still perfectly logical for the self-styled Masters of the Universe to gamble big, because that’s the only way you win? The rules of the school competition — with a fixed sum to invest, a fixed time frame to aim for give the whole exercise the feel of a game.
One of the students said he was definitely planning to go into share investment as a career. We all wish them well. But I wonder if anyone could come up with a simulation about how their generation is going to negotiate building up a pension while trying to buy a first home, and paying off tuition fees? That’s not something the pure linear gaming of share dealing answers. Super Mario as opposed to Chess?
News coverage of their win in the Penarth Times
Listen to the interview on the Today programme website.(about 8.36am)