Mary Holm
Money Matters
Q. From reading your column in last Saturday's Herald there seems to be general encouragement for investors to place their trust in the sharemarket, including the New Zealand market.
While there may be good reasons to do so, it is hardly surprising people are wary of so doing
when articles such as Brian Gaynor's on the Brierley fiasco are published.
Is it any wonder that a more attractive investment is seen as one where people have some measure of control, such as a second property for rent, rather than putting one's faith in the self-serving management of companies such as Brierleys?
Unfortunately it is not the first time investors have been let down and almost certainly will not be the last.
P.S. I do not hold any Brierley shares.
A. Ask a landlord whose rental property has been wrecked by a tenant party - or who is phoned at 3 am and told the roof is leaking; or whose property value falls because of changes in the neighbourhood; or whose tenants disappear into the night, owing rent, and new tenants can't be found - how much control they have!
Still, I have to acknowledge that landlords generally have much more power over their investment than the average shareholder. But they also have much more responsibility.
One of the beauties of owning shares in a listed company is that you've got lots of fellow shareholders. They include people like the fearless Max Gunn, who has taken on many a chairman at annual meetings, and big financial institutions, some of whom closely watch what the company is up to and make a fuss if they don't like what they see.
Stockbroker's analysts, the stock exchange, the Securities Commission, journalists and the likes of Brian Gaynor are also keeping tabs on what's going on, and reporting to you on anything amiss.
If you have a rental property, though, and there's something wrong with it, you won't read about it in the Herald. You have to find out yourself. And fix it yourself, or arrange to have it fixed.
Another point: with shares, it's much easier to spread your risk, by investing in a lot of companies or investing in a share fund.
Even if things go rotten in one or a few companies, your total investment won't be badly affected.
Remember, news is the unusual. The Brierley fiasco has been big news because its management has been unusually poor.
Most companies are run pretty well most of the time. That's why people who invest in a wide range of shares generally do pretty well.
Q. Re share trading software: My wife and I purchased a programme in 1998.
We were assured of regular "get togetherness" with other users, a monthly newsletter and on-call support.
None of these eventuated. We did call on the back-up support to get a keen young man willing to sell a "better money making software program" on horse racing. We didn't buy.
We ran the share program for the first four months on a trial period and would have made some profit, but not nearly enough to justify the figures presented. (Plus, they did not advise us as to the tax requirements. When they are included, the returns are lower than proposed.)
We followed their advice to the letter as far as downloading daily data (we paid $40 a month) and "buying and selling" according to the dictates of the program.
When we were satisfied that some returns would occur, and that we just had to adjust from two years to get our money back to possibly three or four years, we set about to actually trade.
Our computer crashed. Not enough memory. We upgraded. Then when we tried to set up the program again, the codes didn't work. It took ages for the company to respond to our phone calls with new coding.
The computer crashed again and we had to get the hard drive replaced. By the time we were ready again ... no response from the software according to the new coding and back to the company ... to find out that it had moved.
Eventually we found that it had gone into liquidation. Too late for us. However, if someone can work with the software and discover the code to activate it, we are prepared to run with it again, just in the hope that there is a few dollars to come from trading.
A. I don't know whether to applaud your optimism or to chide you for never learning. Haven't you heard about not throwing good money after bad?
Your four-month trial period was far too short. It takes several years before you can judge how a share investment is going.
I loved the bit about the bloke offering you a better program - on horse racing.
In a similar vein, the company who ran the share trading seminar I attended a while back (under a false name) recently sent me a letter, headed "Here's How to Save $5,681.25".
It made me "a much more exciting offer" than the $12,000 deal I had turned down at the seminar.
For just $6950 plus GST I can get "Module One" of a new program of training courses.
"Each course is designed to teach you everything you could possibly ever wish to learn about international share trading."
Then I would pay $115 a month to get daily information, and more later if I wanted further training. (I've got a funny feeling that anyone who doesn't do well on this program will always be told to take further training. But why, when each course teaches "everything"?)
This company is using a classic market segmentation ploy. You catch those who'll pay full price first. Then you catch the less enthusiastic at a lower price.
The letter went on to offer me a loan to buy the program.
"It makes sound financial sense to borrow the entry price and put all your capital into the stock market," using their system, the letter said.
Sound sense? About as sound as putting up more sails on stormy seas. It's bad enough seeing people buying into these schemes. If they borrow to do it, there's a frighteningly large chance that they will sink.
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