Have you been investing? You might find some of the statements below shockingly relevant, and hopefully helpful in navigating the rough seas of the stock market.
(1) People who lose money often buy high, sell low
It is common sense to “buy low, sell high”. Yet, in reality, this is what happens instead.
I never tire of saying that once your colleague, your neighbour, your driver talks about a certain stock, it is often too late to buy in already. This is how people buy stock at a high price, thinking that it is to go higher still. How do you know it’s already too high? Look at the PE Ratio (price to earnings) , and see if it is too far above 25.
And then once the stock suddenly drops 10%, you feel the rush to sell….at a loss. In other words, herd mentality is hurting your money.
(2) Steady hands bring in the profit
During the covid years, the stock market plunged quite badly. Meta (Facebook) dipped below $200. People with steady hands held on to it, and even bought more. Today it hovers above $550. People sold Palantir (PLTR) when it dipped to $9 from $13. Today it is above $95.
If you are not steady, you buy and sell stocks on every change in the wind direction. Sometimes, a downwards trend is only temporarily, a splash against the hull. Steady hands means holding on despite the big and small tides for the big payoff in time to come.
(3) It helps to have a basic understanding of arithmetic
This might sound contrary to the point above, but you should learn to let go of your persistent losers.
Arithmetic dictates that once a stock has fallen 90%, it must rise 900% to go back to its original price!
For example, if you bought Ubisoft (UBI) at 100 EUR on 27 July 2018, you will never recover. Today’s price is about 9 EUR.
Besides the arithmetic, study the company and analyse whether it will stay relevant and important in the near future. Of course, cash flow and the other financial stats are also crucial.
(4) Most of us small guys lose money
“Retail investors”, as we have been called, tend to lose money on the market. We are just too busy with our jobs and lives to really study the ins and outs of the stock market. If you haven’t been winning, it might be time to get a professional to handle your investment money. They live and breathe these stuffs. Get only the serious guys.
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