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•Five Greatest Ways of Winning in the Stock Market 43

directors buy shares in their own company then you buy, and if three or more direc-
tors sell shares in your portfolio then you should sell.

It has worked in the past and it will almost certainly work in the future. The
only problem you are left with is knowing when.

Idea 28 – Backing last year’s losers

With all their faults, unit trusts are a very popular way of private investors getting
into the stock market. So here is a possible strategy to pick the right unit trust by
studying the form. This probably presupposes your agreement with my thinking
that choosing unit trusts is something of a lottery.

The main boast of any unit trust provider is that with the skills and knowledge
of their management teams they will tend to outperform their sector, index or bench-
mark. As we have already seen they will then advertise those funds that do actually
achieve this result. The ones that have done really badly get no publicity and no
advertising budget. But look at the thing from the provider’s perspective and an
interesting possibility presents itself.

Because marketers need to attract new money, performance has become more
and more important. This means that successful fund managers have become su-
perstars on huge salary and bonus packages. They are also very mobile. According
to the publication Successful Personal Investing, the average time an individual fund
manager has responsibility for a fund is 2.5 years. So, impressed by the performance
of one trust and determined to invest in that management team, investors, unless
they are careful, could be buying the expertise of a team new to the fund, with a
poorer track record.

This means that if you want to follow a manager you may have to switch funds
or even provider. This is often expensive with the payment of initial charges. But
there may be a way of turning this to the investor’s advantage.