The cost of not knowing

Remember me saying how much I liked banks as investments?

Well let's see how three of my bank holdings have done in the last six months:

Pretty isn't it?

Bank shares are being punished because the market just does not know how much they have been affected by the sub-prime mortgage mess. It is hard not to think the worst when the American banks have reported such horrific write downs.

The last reporting season for British banks was in early August and that was for the first half of the year, before the credit crunch reached its climax. The next round of trading updates starts in late November so all us bank investors have had to go on for the last three months is detailed reports of the demise of Northern Rock, shocking results from American investment banks and downgrades of UK banks by the brokers. No wonder the share prices are suffering.

It is pretty frustrating watching a big holding get hammered knowing that it is probably at a great entry price now but it would be irresponsible of you to add more. All you can do is grit your teeth and ride it out.

Solace can be found in the Vodafone chart for the last two years:

In mid 2006 the market was concerned about slowing organic growth and some possible extra tax charges from the government and the shares were punished all the way down to 110p. Just over a year later the share price is over 180p - a nice return for those lucky enough to buy at the bottom.

I am confident that in a year's time the current prices of bank shares will look like bargains. Despite what I said earlier I am still accumulating a few Barclays shares every month so I will enjoy getting some bargains and wait for the storm to subside.