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Is it a good idea to buy bank shares?

Someone I work with says that he is currently using all the money he can lay his hands on to buy banking shares. Share prices are down a lot and his view is that their balance sheet positions are still strong. Is he making an astute investment decision or a foolish one?

Wolfboy Fri 10/10/08 05:45

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WoWo
Fri 10/10/08
12:06

Tell him to speak to the people who did the same thing with Northern Rock shares about a year ago.

To be fair I have had similar thoughts, however for me I think the risks far out weigh the gains.

WoWo
Fri 10/10/08
12:08

Hadn't see it before I posted, but see dancecaller's post directly below.

joggerjayne
Fri 10/10/08
12:14

I'd be cautious too. But ...

On that Thursday a few weeks ago, when Barclays shares tumbled, I almost bought £50,000 of Barclays stock, on the basis that they would recover sooner or later.

I didn't because ...

1. The old adage says don't be left holding a position on a Thursday night, or there will be a blood bath on Friday morning.

2. I was a fraidy cat.

However, if I had bought them, I could have dumped them on Friday lunchtime, and been £14,000 better off.

Fortune favours the brave!

terambulan
Fri 10/10/08
12:18

Lifes a gamble JJ. £50k to spend; whip off to Ukraine or Eastern bloc and buy a property/castle/winery etc. Quick and invite me over for the tip?

joggerjayne
Fri 10/10/08
12:22

That sounds like a decent plan, terambulan. x

joggerjayne
Fri 10/10/08
12:23

Hang on terambulan. I know what you're after ...

... you just want the duty frees !!

=0)

terambulan
Fri 10/10/08
12:24

he he ;)

WoWo
Fri 10/10/08
12:40

"However, if I had bought them, I could have dumped them on Friday lunchtime, and been £14,000 better off. "

But if you had decided to hold on to them for a few days to maximise your profits you would have lost almost half of it.

Hindsight is a wonderful thing. Not a criticism just saying it's a risky business.

Not sure how you would be buying them but I know lots of people who can't access their on line share trading accounts today. What would you have done had that happened last Friday lunch time?

I have little doubt that most of the banks will recover, to a share price much larger than they were at the high, but it's possibly not going to happen for sometime yet and just as much risk they could plunge much further in the short term. Can you afford to tie up capital for a very long period if necessary.

eastern
Mon 13/10/08
20:48

As with all things to do with shares, only buy them if you can afford to loose the money! Banks have just been virtually nationalised so it is a very dodgy area, I bought RBS last week at a £1 and look at them now! Im just praying they come back soon. The other old adage is that If it looks too good then it probably is! I always tell my friends whatever I buy you sell and whatever I sell you buy! I havnt been lucky so tread very carefully.

joggerjayne
Mon 13/10/08
20:50

But, for about £20,000, you can probably own your own bank ... like Barclays.

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