Thursday, January 08, 2009

The disenfranchised shareowner?

A startling picture of how share ownership has shrunk - pretty steadily, despite the Conservatives' pledge in the 1980s to widen it. Though I can't tell from this to what extent it's down to individuals' purchase of unit trusts, investment trusts and collective pension funds.

htp: Patrick Vessey

P.S. I Like the flowers. Man.


Anonymous said...

The reason why this has happened was made clear to me by a share-dealer I once knew.

He said that ordinary people tend to get in the share market when a fuss is being made in the press. This tends to happen when the big money has already been made - i.e. when the market has already risen markedly and is near a top. Often the fuss is being made because the market-makers are looking to find new people to prop up the market!

Soe first, ordinary people tend to buy in near the top of the market.

The market then continues to rise for a bit, which encourages the ordinary person to stay in the market, as his original (but wrong) assumptions about the market have been realised.

The market now tops, but the ordinary person stays in. He knows markets can go down as well as up, so he sticks with it.

The market now falls so much that the ordinary shareholder is actually losing money. The brokers tell hims to buy shares because the market is low. But the ordinary shareholder cannot buy shares. He needs that money. He was playing the markets with money he could afford to lose BEFORE the market fell, but now he needs that money. Why does he need the money now? Because the situation that caused the market to fall is also the very situation that is putting his job at risk!

So ordinary people tend to enter the market too high and sell too low. They get their fingers burnt and never come back.

Oh, and Maggie didn't really believe in wider share ownership. She believed in finding willing buyers for government owned businesses to offload them from the state, keep Labours' hands off them and pay down government debt. For that she needed a liquid share market.

Sackerson said...

Thanks Anon, enlightening. Yes, the ordinary person buys and sells at the wrong time - and many advisers find it easy/convenient to sell him investments during the boom.