A Omani investor follows share values at the stock exchange in the Omani capital Muscat on Oct 9 2008.
A Omani investor follows share values at the stock exchange in the Omani capital Muscat on Oct 9 2008.

An idiot's guide to playing the stock market



If you have lost money on stocks in the past few weeks, perhaps you should turn away now. At the end of last month, as the sky was falling in on markets across the globe, I butted into an office debate about the apocalyptic nature of events with an observation that, I see now, must have been as annoying as it was ill-informed. "Surely any idiot with money can play the stock market? How hard can it be?"

Stung by the response, I set out to prove my point. After all, when it came to matters financial, I was that idiot - and I would find exactly how hard it could be. An attempt to persuade any of my close friends to front me US$100,000 (Dh367,350) to invest in the interests of investigative journalism fell flat. Undeterred, I found the website umoo.com, and signed up for a seven-day virtual-trading contest that would test my mettle in a head-to-head trade-off with several other pretend players on the most volatile of markets - the New York Stock Exchange.

My natural inclination was to cash my imaginary chips and buy a virtual yacht. Instead, I set about selecting my stocks. To keep things simple, I decided to place $20,000 each into five companies, sit back and let market forces do the work. The competition was to run for a week. I had read all about playing the long game and, once I'd jumped in, planned to stick by my choices. Actually, that's not true. I was going to trade every day, but quite frankly I forgot. Plus I mislaid the password. To be honest, I had forgotten about the whole thing by day two and it was only when someone asked me how my stocks were doing on the penultimate day of the competition that I thought to look.

I realised, picking the right stocks was the key. I tried some research, but this was Sept 30 and most of the advice I found was of the "head for the hills" variety. This was, after all, a day when the graphic on the front page of The Wall Street Journal, headlined "Stocks in a spin", showed the Dow plunging earthward. This is how my thinking went - and Warren, George, you might want to pay attention to this. Where do Wall Street types eat when times get tough? McDonald's, right? And when times get really, really tough? At soup kitchens, of course. Easy. Place $20,000 each into McDonald's and Campbell's Soup.

Having exhausted my supply of homespun financial "wisdom", the next moves were trickier. Walmart, home of all things cheap, seemed like a good bet and without a shred of research, in I plunged. Two more to go. I was getting bored now. I was also sitting in front of an Apple laptop, so that was obviously a sign - always good to have at least one "gut" purchase. And then I took another look at the financial pages. "Citi, US Rescue Wachovia," read the Journal. "Latest shotgun deal creates nation's third-largest bank."

I recalled one of my perpetually impoverished mother's favourite sayings - "The banks never lose" - and, despite the evidence to the contrary, felt it would be churlish to ignore her words, so in I went. Imagine my surprise when I checked a week later. Not only had I not lost money, but I had actually made a 4.13 per cent profit - $4,129.11 - and was ranked second in a field of 41. Admittedly, three of my choices had tanked: Walmart down 7.85 per cent, McDonald's 10.15 per cent and Apple 20.39 per cent. But guess what? Campbell's Soup, up 0.34 per cent in a week, had made me $67.34 - and good old Wachovia had bounced back 58.18 per cent, to the tune of $11,631.36. And it was all mine. Virtually at least.

So, how hard can it be? Listen to your mother. And read the financial pages. jgornall@thenational.ae

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

SQUADS

India
Virat Kohli (captain), Rohit Sharma (vice-captain), Shikhar Dhawan, Ajinkya Rahane, Manish Pandey, Kedar Jadhav, Dinesh Karthik, Mahendra Singh Dhoni (wicketkeeper), Hardik Pandya, Axar Patel, Kuldeep Yadav, Yuzvendra Chahal, Jasprit Bumrah, Bhuvneshwar Kumar, Shardul Thakur

New Zealand
Kane Williamson (captain), Martin Guptill, Colin Munro, Ross Taylor, Tom Latham (wicketkeeper), Henry Nicholls, Ish Sodhi, George Worker, Glenn Phillips, Matt Henry, Colin de Grandhomme, Mitchell Santner, Tim Southee, Adam Milne, Trent Boult

Dubai Bling season three

Cast: Loujain Adada, Zeina Khoury, Farhana Bodi, Ebraheem Al Samadi, Mona Kattan, and couples Safa & Fahad Siddiqui and DJ Bliss & Danya Mohammed 

Rating: 1/5

Emergency

Director: Kangana Ranaut

Stars: Kangana Ranaut, Anupam Kher, Shreyas Talpade, Milind Soman, Mahima Chaudhry 

Rating: 2/5