Profit from losses

Investors who have lost out as share values plummet should turn the experience to their advantage, writes Elaine Williams

The current instability of world stock markets and recent nosedives on the Dow Jones and Footsie have left few investors unscathed. But, as stoical educators, most teacher investors are turning the downward swing into an upward learning curve.

Roger Scott is an economics teacher at Thornden School in Eastleigh, Hampshire, who opened his own shares portfolio about six years ago specialising in small, growth companies in the technology sector. For years he had been running an investment club with pupils in Years 10 and 11, which in 1995 had come second in a national competition. When he realised his pupils were regularly outstripping the Footsie, Mr Scott decided to have a go himself, turning an initial investment of Pounds 1,000 into a Pounds 25,000 portfolio of between six and 10 companies.

But over the summer months the value of his portfolio more than halved, just when he was thinking of cashing it in to buy a new car.

He says: "Shares in small technology companies started to go down. I didn't sell, because I thought the market would correct itself, but instead technology shares started to plummet. I had never been involved in a market going down before. It was the end of term, I was busy and I just left things a week too late."

Shares in one of Mr Scott's companies fell from 140p to 20p. "Small companies on the fringe that have a good product, but profits two or three years away, can go down very quickly," he says. "What I won't do any more is sit on small company shares for sentimental reasons. You tend to believe that if they are good companies they will survive, but for no good reason they are being smashed. I have realised that if companies start issuing profit warnings, the best option is to dump the shares."

A group of teachers who form an investment club at the City School in Lincoln (they call themselves the CIA - City Investment Associates) have fared no better but are sanguine about their losses. For a club that views dabbling in the markets as a welcome distraction from the national curriculum and spends its dividends on meals at the Thorold Arms in nearby Harmston, recent market events have been seen as a challenge. Indeed, members have raised their Pounds 15-a-month contributions to Pounds 20.

Kevin Goodwin, an economics teacher, says: "We've made tremendous losses. If things don't improve it will be a frugal Christmas. Some of our members are vegetarian, which is fortunate because we can't possibly afford a turkey.

"Our annual meeting was like a funeral wake. We looked at the balance sheet and declared the meeting closed. But we're not panicking; we might even grow bullish. Now's the time, when prices are low, to expand the portfolio."

Sixth-formers at Sunderland High, an independent day school, run an equities fund. They have weathered the storm - so far. Investors - teachers and relatives - who buy unit trusts from the school's "Fiderium Trust", managed by pupils, are still making money.

Peter Hogan, the school's deputy head and economics teacher, says pupils have been cautious and spread their risks, going mainly for blue-chip companies. "They haven't made the startling growth we saw at our AGM back in April, when units were up to Pounds 36 from Pounds 25 on the previous year. For a time they saw some losses. It has made them realise that buying shares is about medium to long-term investment."

Some of the investment was kept back in cash, and pupils see that now - while prices are low - is a good time to buy. Mr Hogan says: "Before, pupils came to believe all you needed to make money was to have money. It only takes the markets to nosedive to teach them that there are risks. It hasn't put them off investing in the stock market, but it has made their line of enquiry more rigorous."

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