Whilst I was at university I had a mobile phone contract with Orange. For those that don’t know, Orange have in my opinion, the best mobile phone adverts ever (there are no phones in them). In addition, I was also extremely happy with Orange as a mobile phone provider. When the opportunity arose for me to invest in Orange I took it up and bought ï¿½250 of shares. I was reasonably sure that I they would remain a successful phone provider and that if I was happy to be a customer so would other people. On this basis, I figured that I would make money in the long run.
After a few years, my shares were compulsorily repurchased and after fees and transactions costs I was left with about ï¿½250. Although not anything even remotely resembling a financial disaster, this was hardly the success that I was looking for. What did I do wrong?
I bought because I was given the opportunity to do so, not because I determined I needed an investment and looked for a suitable one. Salespeople are good at their job when they get you to purchase things that you didn’t know you had a need for, and that is what happened in this case. Later on, when I left university and was looking for a long term investment, I did some research and decided that an inexpensive index fund (rather than shares in individual companies) would be most suitable for my needs and budget. I’m much happier with this investment because I know that, even if it doesn’t make any money, I did the best I could.
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