JAMES BARTHOLOMEW DIARY OF A PRIVATE INVESTOR

This has been a testing time. I have lost a bucketful of money and so far I have got things badly wrong. At the beginning of the coronavirus crisis I did not take it seriously enough and stayed fully invested. But as shares fell and then fell again, I reluctantly began to sell. Shares continued falling and, as they did, I continued selling.

The early sales I made – before about March 12 – still look as if they were worth doing. But I went on selling. When shares rallied, some investment adages came into my mind, such as “don’t be tempted into the market by a dead cat bounce”. Another one was “don’t try to catch a falling dagger”. So I kept selling.

I became so alarmed that I felt I must realise enough cash to see me through whatever happened. I got to the point where I was more than half in cash. For a moment I felt OK about this but then the rally continued.

At this point, I had a choice. Should I stick with my decision or

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telegraph.co.uk/ investornewsletter swallow my pride and change course again? I was guided by something my mother used to say: “Don’t live by your mistakes.” In other words, don’t stubbornly stick by previous decisions if they are wrong. Highly embarrassed, I changed course and started to buy back at a higher level.

I did not buy the same shares I had sold, though. With a little more time at my disposal, I did the homework I used to do more often in the past. I looked at companies’ accounts and their recent statements. I sought out those with low borrowings or net cash. They have a better chance of seeing out recessions and returning to something like their former health.

The biggest recoveries will be (and already have been) in the companies worst affected. But I am not brave enough to go for cruise companies or airlines, which might go bust. So at a lower level of risk, I have bought into housebuilders and property firms.

Their statements regarding the disease contain many claims that their priority has been the safety of their staff and their tenants or customers. That’s fine but, as an investor, I prefer companies that also give shareholders’ interests at least a mention and that are trying to keep the business ticking over.

It is remarkable, though, how many companies have made no statement at all about how they have been affected and what they are doing about it.

I have also bought into some less risky companies, including a utility group that, presumably, will continue to be able to sell electricity and make an income. I am back to 66pc invested as I write.

It is extremely difficult to decide how much to commit to shares overall. To take any kind of view one is obliged to become an amateur epidemiologist and guess how the disease is going to progress. Then one has to suppose what the Government will do. Thirdly, one has to imagine how the stock market will react. It is piling a supposition on top of a guess resting on an amateur hypothesis.

Here is my current way of looking at it. I suppose that the reported deaths are the result of infections caught on average 16 days ago. I assume a certain rate of fatalities among those infected to hazard a guess of the number infected back then. Next, I assume that the total infected has doubled every four days since. This back-of-the-envelope maths gives a total figure of several million people infected earlier this week – more by the time of publication.

If infections double more slowly now, say three times by the end of this month, then tens of millions will have been infected by May. Not long afterwards, a majority of the population will have been infected.

What will the politicians do? Well, if we finally manage to get a test to see who has had it, we might hope for certificates that prove this and then those people would be able to go back to work. If that were to happen, surely shares would rally strongly. Please note the enormous size of that “if ”.

After some big losses, I’ve had to swallow my pride and change course – but where things will go from here is anyone’s guess

‘ Highly embarrassed’, James began to buy again