The dangers of going against the herd

Well I have to hold my hands up here and admit that my BP investment has not gone to plan. Going against the herd can often be very risky but also lucrative over the long term. BP is now down 36% from its peak just before this oil crisis.




However I still believe that this investment can come good. I have therefore averaged down on BP again at £4.20. I would have rather waited for the March 09 bear market low of £4 or even £3.68 which was the Lehman Oct 08 low. If we get towards £3.68, I will have to consider one more entry, as I believe by this point, bidders will be circling BP. There are already rumours Shell and Exxon will be tempted to swallow BP.

This has now become quite a big bet that BP can still turn the situation around, cap the leak and continue to pay its high level of dividends, despite the huge costs of the cleanup.

But the key rule as ever is not to risk too much on one investment. Good performers such as AstraZeneca, Severn Trent and United Utilities, are offsetting the current weakness of BP in my Portfolio.

But just remember this; the key to making money in stocks is not to get scared out of them. Many people have sold out of the stock market through fear, just at the time when it’s better to be adding good quality shares to your portfolio. I can guarantee that if this market starts to recover again, all the analysts will come out saying buy shares, after they have gone up 10%!