• How to Win in a Volatile Stock Market

• by Alexander Davidson

Reviews

• How to Win in a Volatile Stock Market is a comprehensive guide to various methods of investment, from shares to property, and what to look out for in each area. We are shown tried and tested strategies for selecting and buying shares and other kinds of assets, usually at rock-bottom prices, while paying as little commission as possible. Each rule, already used by and making money for City professionals, is set out simply and clearly, and, as the author has first-hand experience of City share dealing, it certainly would seem wise to listen to what he has to say. What he does outline in this book is all very useful and sensible, and he claims that following his investment strategy can help you select the best investments, interpret market trends and financial news, balance your portfolio effectively, and get to the bottom of company accounts. Davidson calls this strategy the Bargain Hunter’s Investment FlexiSystem and, despite the somewhat unusual name, it certainly can be tailored to each individual, picking out the elements which are particularly relevant to each investor’s goals and reasons for investing. Each chapter is clearly set out, covering different aspects of each topic, with the key points summarised at the end. Topics vary from ‘How to invest like a City insider’ and ‘Profit from the Internet revolution’ to ‘Give the taxman a run for his money’, and deal with all aspects of investment. In the first chapters Davidson suggests the importance of ignoring the information provided by highly paid analysts and instead concentrate on being your own analyst, and find for yourself the companies which are trading below their true value. Choosing a broker is one of the major factors in investing, and Davidson goes into detail about the qualifications to look for in a broker, especially if choosing one with an advisory capacity. He also reinforces the idea that different investors will have different priorities when it comes to chossing a broker: some may only want an exection only broker, while others will need more advice. For both options, Davidson explains the pros, the cons, and what else to look out for. The key to the Bargain Hunter’s Investment FlexiSystem, or making investment work in a volatile market, is buying stocks in defensive sectors at the right price, according to Davidson, and using his simple principles in order to identify them. He suggests that the aftermath of the disastrous events of 9/11 gave rise to some potentially significant investment opportunities. After a major market correction is usually a good opportunity to invest as share prices plummet; however, we are only encouraged to buy the stocks that have declined due to sentiment, and not fundamentals. Davidson sets out the seven steps in the ‘master plan’, which draw on principles passed down through the investment world, such as buying after a market correction, select 10 highest yielders and then whittle them down to draw out any of the more dubious looking ones, and then set a stop loss of 20% below the mid-price of the shares’ value when you first bought them. He also advises what to do when at the height of a bull market, and what to do with the money you have not invested. Warnings against being duped by cowboy brokers are also present here; Davidson shows us the ways in which share sharks operate and where they operate now. He also explains what to look out for when buying US shares, showing the difference between Pink Sheets and the OTC Bulletin Board, and the controlled NASDAQ stocks, where all companies involved are fully reporting to authorities. This is followed up with explorations of online investing, the world of technical analysis and the minefield of personal finance. Davidson sees the claims of technical analysis as ‘far-reaching’. While acknowledging the skill involved in such methods, he believes technical analysis only works as a self-fulfilling prophecy when it does work at all. He doesn’t completely dismiss the technique, and spends some time on the mainstream and fringe theories. It is clear, however, that he favours other methods. Tax efficient investing and property investment are also covered, as is the importance of complaining in the right way if you are dissatisfied with a service you receive. This book as a whole covers a lot of ground, though obviously not in as much depth as the more experienced investor might like, but it is a good foundation for those with less experience to build upon; it gives context to many aspects of investing and points the reader in the direction of further reading material, keeping them on the course of successful investing.
  Pa Watkins