Private Investor: Don't look back: invest as if it's for the first time

One of the few useful things I took with me from my years studying economics was the insight that "bygones are bygones". You don't, in other words, throw good money after bad, and you take each economic or investment decision purely on its merits, looking to the future, irrespective of good or bad experiences in the past. After all, you can't do anything about them now. Something like that, anyhow.

So, just because I've seen my shares in some company plummet doesn't mean that buying some more now would be a good or bad idea. You just have to look at them as a "first time buyer" and try to forget what occurred in the past.

Actually, I have to admit that most of what I was taught by my gifted economics teachers was of value, although maybe someone can remind me why the rule of 72 works so well (in case you didn't know, this where you divide the magic number 72 by a given interest rate, say eight per cent, to give the number of years it will take for a capital sum growing by such a rate to double. In this case nine years. Try it. Compound interest will never be a problem again).

All of this is a long way to explain why I try to come to Standard Life with fresh eyes. Like most investors, that is, members of the old mutual, we've seen it have its ups and downs. In many ways we ought to be grateful that it's still alive and hasn't gone the way of Equitable Life or various other "zombie" funds littering the British investment scene.

Interestingly, Jeremy Warner, the Business and City Editor of this newspaper, pointed out in these pages a few days ago that the value the market is presently placing on Standard Life is the equivalent of that which they would assign to a closed life fund, such as that of Abbey Life which was recently sold to an outfit named Resolution who specialise in salvaging such financial wrecks.

So, some years after Standard Life missed out on the opportunity to sell into a huge bull run, we members might as well be in a zombie fund, for all the good we are getting from the shares. Yet, as I wrote some weeks ago when the vote on demutualisation was going on, I voted for the flotation, I am going to hold on to my shares and I will be buying some more very shortly. Members have until next Wednesdayto subscribe to more shares at a discount of five per cent. This would be an excellent way to try to get some of our paper losses back.

The shares should be a good bet for the short to medium term. First, there is that substantial undervaluation of the assets of this well known name. Second, there is the prospect of more and more merger and acquisition activity in the life assurance market. Partly this is the normal capitalist process of consolidation and concentration (I learned that bit at university), which has been going on domestically for decades. The other part is the newer phenomenon of massive foreign investment in British companies.

Anyone, like me, who has seen their shares in O2 and BAA, to name but two, fly off into a foreign sunset will know the feeling of loss. Nowadays cross-border financial takeovers are nothing new, the most recent being Banco Santander's acquisition of AbbeyNational, and I'm sure that it's only a matter of time before Standard Life gets an approach from some British or foreign group that can make more of its business.

At the time of writing Standard Life looks OK, but we don't know what the next few days will bring. I usually try to leave things to the last minute when subscribing for extra shares in a company, just in case there's some cataclysm about to befall it.

However, the balance of risk must be that the market has had its little bit of turbulence and has settled down for the time being. So I shall be sending off for more shares in Standard Life. Wish me luck.

s.ogrady@independent.co.uk