My adventure with "Mattone Arancio"

A few weeks ago I promised I’d have told you my experience with Mattone Arancio, since it may give you a few tips on what you should do (and what should not do) in investing your money.

Mattone Arancio is an investment fund from ING Direct, targeted to consumers and small investor, accessible for the owners of Conto Arancio saving account. Mattone Arancio invests in shares of companies that operate in the real estate related business. Real estate is a business sector that has seen an impressive growth in the last few years, but can have some potential, mostly if you think of collateral services: in my opinion, in fact, the most interesting part of the real estate sector isn’t the housing part (since house price have reached prices that objectively are really high), but the business part (stores, offices). This is because in this last case there is the opportunity not only for selling “the walls”, but also to sell further services that may allow interesting re. Think for example at malls, where the owners prepare a fully inclusive service package.

Before getting into my story, one last note: some people seem to have misunderstood what Mattone Arancio is, apparently thinking that the fund buys shares of buildings and houses. In fact, Mattone Arancio invests in shares of companies on the stock market, thus being exposed to all stock market risks.

But let’s see my adventure with Mattone Arancio. Here we go.

September 2006

Last summer I had a few money in “Dividendo Arancio” (another one of ING Direct’s consumer investment funds). In september Mattone Arancio was launched [share price 50,00]: it looked quite interesting (in the first month it earned 8%!). I waited before buying some share, since it wasn’t yet announcet what was the benchmark (that could substitute historical data, unavailable since the fund was only just created).

November 2006

At the end of November 2006 I switched some money from Dividendo Arancio to Mattone Arancio, luckily hit a relative minimum (I bought at 56.46, while the previous and the next days the average price was above 57). It was just luck, yet I was a little tempted to think that it was my skill.

December 2006

Mattone Arancio continued on its trend, and made two more purchases of shares [price, respectively, 59.82 and 61.77]

February 2007

This is where, looking back, I did wrong. But maybe it’s more correct to say that I bet and lost. Price was over 65 (it reached a maximum of 67.15, +34.3% from September!), and I had earned nearly 15% in just two months. It was clear that there would have been a correction, a drop in prices, but it was not easy to tell when. I tried to make a prediction, and I decided that the correction would have been between April and May (triggered by dividends), and until then I expected it would have followed the previous trend, that would have meant a possible 10% increase, and I doubled at one my shares. Unfortunately, I was wrong, and after less than a week stock markets dropped, triggered by the Chinese stock market correction. Mattone Arancio lost 4,22% in just one day. Since I expected the drop in prices to continue, I switched nearly everything on Euro Arancio, the ING Direct’s bond investment fund, selling at 62.53.

What I did wrong is to buy so many shares at once: doubling the number of shares also doubled my losses. It was like if, instead of a 4.81% drop, it had been a 9.62% one. And I wasted nearly all earning I had until then.

March-April 2007

Getting fond of a fund may be dangerous, and even be too much dubious can be. You may discover yourself buyng at the first positive sign, and to sell at the first negative one. And that’s exactly what I did, with a collection of awakward attempts to buy and sell, that I should have avoided with a less emotive behaviour.

May 2007

In the end I realized that if you’re so uncertain of what you’re doing with your money, you’d better do nothing, and so I sold all the shares I had of Mattone Arancio.

I think that from this experience we can draw some teaching.

  • It may be better to split buying in smaller parts (most of all when there are no fees for buying or selling)
  • You should diversify your investments (in the end, Mattone Arancio had a excessive weight in my portfolio)
  • You shouldn’t forget alternatives, if your investment stop to be favourable, you may revise your choices, without fossilize.

Italian translation of this post: Le mie avventure con Mattone Arancio

Banche e Risparmio []