FOOL'S EYE VIEW
Leading the Blind

By Alan Oscroft (oscroft)
January 16, 2002

Liverpool -- Few things in life are certain, especially when it comes to money. Where will your favourite shares go tomorrow? Next week? Next month? Next year, even? We can never know. Over longer periods, like 5 years and more, there's a pretty good chance that shares will do well, and the longer the period, the greater the chance of success. So much so that if you're stashing money away for decades, you'd most likely be mad to put it anywhere other than in shares. But we can never be certain.

Still, there are two things we can be certain of. The blind will always be with us. And the blind will always be there to lead them.

Enter the Newsletter

What am I talking about? I'm a computer programmer (or "IT professional" as the more pretentious amongst us like to be known). Last week I received an e-mail newsletter aimed at such folk. It was full of recruitment stuff, as you might expect, but one piece caught my eye. It was about investing money. IT professionals are supposed to have such a big pile they have trouble peering over it, you see. I don't have any trouble myself. I guess I must be unusually tall.

I can't remember the title. "Invest in Property, not Shares" or some such. Groan. Impending "Gawd, wasn't that the worst investing advice I ever took" exclamations the length and breadth of the country. Why do I so dislike the idea of investing in property? I don't, actually. I've even done it myself with reasonable success. Let me give you some idea of what it is I don't like.

Back to the Future

Remember that stock market bubble back in the distant days of not-so-long-ago? The one led by Internet and telecommunications shares? What was everyone talking about then? Buying Internet shares, of course. "Buy Internet shares," a taxi driver might have told you, "I had that Martha Lane Fox in the back of my cab the other day". "I've just sold my prize-winning whippets and put all my money into MangyMongrel.com" said many a bloke in many a pub.

And what happened? We all know what happened. When everyone you know is telling you that something is a sure-fire winner, it'll most likely be a loser. When the last mug has thrown his last penny on the bandwagon, there'll be no greater mug to come along and keep it rolling, so it will stop and start to roll backwards.

Bubble mentality, blindly following the crowds, investing using emotion rather than logic and buying things we don't understand; those are the kinds of thing I don't like.

Of course, we learned our lessons and won't do it again, right?

The Move to Property

Since the stock market started to falter, more and more people have been having a go at becoming property barons. Over the last year or so, places where investors gather (like the Fool's boards) have seen growing interest in exchanging pounds for bricks. Investment publications have done their bit too, and have written a good few upbeat words about property investing, just as they sang the praises of technology shares a couple of years ago. (Writing about things that are popular sells, see. No rocket science there).

Movement of money away from shares and into property has helped to lower share prices and raise house prices. House prices are now at an all-time high, and the stock market has fallen to its lowest levels in recent years.

And now we're starting to see newsletters aimed at high-earning professions telling us that property is a better investment than shares. Does anything sound familiar? I haven't heard a taxi driver giving me property investment tips yet, but it can't be far away.

Burnt Again?

Still, after buying shares at the height of the bubble, none of us would be daft enough to sell them now at such a low point, and put what money's left into the latest craze without really understanding it, would we? Nah!

Anyway, I'm thirsty. I'm off to the pub. I expect the barman will know of a lovely little flat that's just perfect for renting out. Cheers.