13From Zurich to disaster
Gains and losses
Many people buy shares for capital gains
‘Because the price of shares is volatile, you need to be able to
calculate your return in per cent. Look, here’s a share I bought
which had a fantastic year and I made a big capital gain.’
On 1 January 2011 I bought a share for £10
And on 31 December it’s worth £16
My capital gain for the year is £6
In percentage terms I made 60%
(which is the gain of £6 divided by the original value of £10)
But every rose has its thorn
Conrad snatched the paper from me. ‘But, my friend, you haven’t
mentioned just how easily your share could have plummeted in
value.’ Conrad had the gift of making the word ‘friend’ sound
like a threat. ‘Here’s my calculation of what could have happened
if the share fell in price and you made a capital loss.’
On 1 January 2011 you bought a share for £10
But on 31 December it’s worth £6
Your capital loss for the year is 2£4
In percentage terms you’ve lost 240%
(which is the loss of £4 divided by the original value of £10)
‘You are one of nature’s pessimists, Mr Conrad.’
‘Pah!’ Conrad spat out. ‘Long-term investments wouldn’t work
for me. I can’t wait around for the promise of future returns. In
twenty years’ time I won’t be here.’
The train screeched to a halt. We still hadn’t made it as far as Basel.
One-way ticket14
What sort of person prefers steady income to capital
gain?
They are probably old . . . and they’ll be reliant on their savings.
They probably haven’t got a job, so they need income from their
investments.
. . . and are not able to take many risks. You’ve got to be more of
a risk-taker to buy shares for capital gain. If you’re after the upside,
you’ve got to be able to cope with the downside.
They rely on the investment for income . . . This may be their only
source of current income. No one likes to lose money, but for some
people it could be fatal.
. . . and their cultural background is one which values stability.
You may have been brought up by entrepreneurs who spent their
leisure time gambling at casinos or at the race track. Or you may
be the child of civil servants who worked in the same office for
forty years. Upbringing has a huge impact on every choice we
make.
They may be investing for the benefit of others. There’s a huge
difference between trying to make a quick buck to pay for a
flashier car, or investing for your grandchildren’s education.
fast facts
We didn’t move for twenty minutes. Delays on the Swiss railway
system are extremely rare and I couldn’t see why we were stalled.
I was beginning to get irritated when I felt a tap on my shoulder.
It was the man from the queue.
‘Hello. You may not remember me . . .’
I said: ‘To be honest, I recognise you but sorry, I can’t place you.’
‘Don’t worry.’ Abercrombie’s smile was disarming. ‘You must
get this all the time. Ten years ago you taught me when I was
‘Don’t be too sure about that,’ I said.
15From Zurich to disaster
a graduate at Goodman Rozel.’ The conductor announced our
departure in German, French, Italian and English. ‘My name
is Guy Abercrombie. You told me everything I needed to make
money.’
I laughed. ‘So the course was successful?’
‘Yes. Very, very successful.’
I said, ‘How successful?’
‘Millions and millions of pounds successful.’
‘I reckon you owe me lunch.’
Day 1, 1.30pm – The dining carriage of the Zurich to
Paris train
We sat in the pristine dining carriage. My salmon terrine hadn’t
even arrived when Abercrombie leant forward. ‘Shall I tell you
how I did it?’
‘Go on.’
The immaculately-suited waiters served our starters. Guy began
to tell me what he was doing at work and I was gobsmacked.
Absolutely astounded.
‘Is this all true?’ I asked him.
‘Every word.’ Abercrombie’s phone vibrated and he snatched it
up from the table. He listened intently and whispered two words.
‘Buy oil.’ He turned back to me. ‘I have to go back to my carriage
to make some calls. I’ll come down and nd you as soon as I can.
And then I’ll tell you exactly what I’ve got planned.’
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