Derek Pain: Investing is a marathon, not a quick gallop at the St Leger


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The Independent Online

It seems that one of the City's more ancient sayings could ring true this year. Unless there is a dramatic revival in the next few weeks, those who sold shares in May will have plenty to laugh about.

The first part of the adage "Sell in May and go away; don't come back till St Leger Day" has for once come up trumps. Whether the remainder – the world's oldest classic horse race is held next month – really does represent good advice on the time to buy is, I feel, questionable.

The old City buy-and-sell legend originates, so it is said, in the days when the rich landed gentry dominated the Square Mile. In those far-off times, many who dabbled in the stock market, and the brokers and jobbers who inhabited it, spent the summer months holidaying in the South of France. With trading reduced to a trickle, shares invariably gave ground.

Of course such habits, if they ever existed, have absolutely no connection with this year's unrewarding episode. Hostilities in the Middle East and Ukraine have taken an inevitable toll, with the Russian involvement adding to international tension.

Any suggestion of peace breaking out in any of the countries involved – but particularly Ukraine – could transform stock market sentiment and, just perhaps, shares could recover much of the ground lost.

But there are other bearish influences. Some knowledgeable people have suggested there is even a good chance that the world's stock markets could suffer another crash – not dissimilar to the one from which many countries are still recovering. And there appears to be a growing band of fund managers and analysts who are taking the view that shares are, anyway, still far too expensive given today's volatile and uncertain climate.

Adding to the uncertainty is the deluge of company profit warnings that I referred to a few weeks ago. They must be hindering prices. So must talk of higher interest rates.

Just to add to the intrigue, there is even a feeling in some quarters that the summertime blues are a necessary blemish offering the stock market a well-deserved breather.

In May the benchmark FTSE 100 share index was at just below 6,900 points, in sight of its all-time peak. It has since collapsed to a four- month low. Other stock markets in developed countries have also felt the pinch.

I don't think the weight of selling has been particularly heavy. It is a case of gradual disenchantment as this hot summer has progressed.

My suggestion to long-term investors is to follow the advice of a former chairman of the Stock Exchange.

Back in the 1960s, when the stock market was suffering one of the many bouts of depression that have emerged over the years, Lord Ritchie said "small investors should put their heads down and let the wind blow over them". With share prices much lower in those days, his comment has stood the test of time. I believe us little 'uns should take a more relaxed attitude to investing than, say, professional players who dive in and out of shares, enriching City traders and maybe, just maybe, themselves.

The no pain, no gain portfolio is a longer-term investor. The cash for the takeover of constituent Brightside, an insurance group, has arrived and I am seeking recruits. I also intend, as I have threatened for some months, to sell at least one of my underperforming constituents to allow for the new boys.

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