The below article was first published on my website www.sharechap.com
When I was at school, a shop opened in our town going by the name Sport and Ski. Within a matter of weeks, the windows of the shop were filled with signs proclaiming that "Everything Must Go!" Imagining this to be a short lived opportunity to buy cheap trainers, we went in to see what bargains were on offer. Whilst history does not record what we bought, Sport & Ski thereafter refused to close down whilst constantly proclaiming the retail equivalent of the End is Nigh. After a while, the place became a running joke between us. It was still trading in all its neon sale sign "about to shut down" glory some years later when we all left school and went off to University.
Sport and Ski came back to mind as we were all together again back in our home town. We were intrigued as to whether over a quarter of a century later it was still there. It was not. It had finally shut its doors.
The art of retail is to maximise your profit from your period of trading. That might mean making big profit on a few items, upselling from a less profitable item to a more profitable one or maximising turnover so your slim profits from lots of items aggregate. Sport & Ski used similar tactics to a number of retailers today. Lure people in in hope of a bargain and sell them something they really want at a greater level of profit. Repeat. It clearly worked as they managed to trade for a lot longer than we ever expected them to.
When it comes to investing in shares, it is really important to start with a plan. That plan might be described in different ways, but at its essence it should be the same. You need to maximise your profit from your investment. Otherwise it's a very expensive hobby.
How you execute your plan might differ however. You might take a riskier approach in the hope of making a lot of profit very quickly. In doing that however you run the risk of all your capital dwindling fast. Few sensible investors go this way. The best ones seem to have the gift of growing their capital over the years and harnessing the wonderful power of compounding. Thousands…
