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Old 27-01-2008, 09:17 PM
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Default Case Study 4 - How High-Income Lady Lost $33k in Shares

It's very easy to lose money in shares. Just buy high and sell low.

In this lady's case, she hasn't sold her shares yet, but her shares are now worth $99k. She had bought them for $132k.

A paper loss of $33k.

The high-income earner makes $6k a month as a manager.

Unfortunately, she's caught up with the shares frenzy and bought at the peak a couple months back.

As far as we're concerned, the "peak" means share prices reaching all-time high in the short term. And one may have to wait for years before seeing another peak.

She doesn't save much. She spends her money servicing her car loan at $1k/mth and buying shares to "average down". She intends to "just hold" her current stocks.

Without much savings, it's not hard to see that when the really good investment opportunities come - at the market's bottom - she won't have the cash to invest in either property or equities.

This is reminiscent of one of our other case studies in which a couple also got stuck, but with property. They too are losing out to their luckier peers who invested during market bottoms rather than market peaks.

The story on the lady is reported in today's New Paper. I added some extra comments.

See other case studies.

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