THE TWELVE MOST DANGEROUS THINGS PEOPLE SAY ABOUT STOCK PRICES

 



1.                        IF IT’S GONE DOWN THIS MUCH ALREADY, IT CAN’T GO MUCH LOWER.

It’s gone down this much already, it can’t go much lower, and probably also threw in good companies always come back, you have to be patient in the stock market, and there is no sense getting scared out of a good thing.

 

2.                        YOU CAN ALWAYS TELL WHEN A STOCK’S HIT BOTTOM

Bottom fishing is a popular investor pastime, but it’s usually the fisherman who gets hooked. Trying to catch the bottom on a falling stock is like trying to catch a falling knife. It’s normally a good idea to wait until the knife hits the ground and sticks, then vibrates for a while and settle down before you try to grab it. Grabbing a rapidly stock results in painful surprise, because inevitably you grab it in the wrong place.

 

3.                        IF IT’S GONE THIS HIGH ALREADY, HOW CAN IT POSSIBLY GO HIGHER?

The point is, there is no arbitrary limit to how high a stock price can go, and if the story is still good, the earning continues to improve, and the fundamental haven’t changed, “can’t go much higher” is a terrible reason to snub a stock. Shame on all those experts who advise clients to sell automatically after they double their money. You will never get a ten bagger doing that.

 

 

4.                        IT’S ONLY $3 A SHARE, WHAT CAN I LOSE?

The point is that a lousy cheap stock is just as risky as a lousy expensive stock if it goes down. If you’d invested $1000 in a $43 stock or $3 stock and each fell to zero, you’d have lost exactly the same amount. No matter where you buy in, the ultimate downside of picking the wrong stock is always the identical 100 percent.

 

5.                        EVENTUALLY THEY ALWAYS COME BACK

I could give a much longer list of smaller and lesser known public companies whose blip has disappeared from the Quotron’s forever.

Health Maintenance Organizations, floppy disks, double knits, digital watches, and mobile home stocks haven’t come back so far.

 

6.                        IT’S ALWAYS DARKEST BEFORE THE DAWN

There is a very human tendency to believe that things that have gotten a little bad can’t get any worse.

Sometimes it’s always darkest before the dawn, but then again, other times it’s always darkest before pitch black.

 

7.                        WHEN IT REBOUNDS TO $10, I’LL SELL

Whenever I’m tempted to fall for this one, I remind myself that unless I’m confident enough in the company to buy more shares, I ought to be selling immediately.

 

8.                        WHAT ME WORRY? CONSERVATIVE STOCKS DOESN’T FLUCTUATE MUCH

 

Investors who didn’t catch on to this new situation right away must have suffered terrible financial and psychological punishment.

Companies are dynamic, and prospect change. They simply aren’t a stock you can own that you can afford to ignore.

 

9.                        IT’S TAKING TOO LONG FOR ANYTHING TO EVER HAPPEN

It takes remarkable patience to hold on to a stock in a company that excite you, but which everybody else seems to ignore. You begin to think everybody else is right and you are wrong. But where the fundamentals are promising, patience is often rewarded.

 

10.                LOOK AT ALL THE MONEY I’VE LOST: I DIDN’T BUY IT!

The worst part about this kind of thinking is that it leads people t try to play catch up by  buying stocks they shouldn’t buy, if only to protect themselves from losing more than they have already “lost.” This usually results in real losses.

 

11.                I MISSSED THAT ONE, I’LL CATCH THE NEXT ONE

The trouble is the next one rarely works, as we have already shown. If you missed Toy “R” Us, a great company that continued to go up, and then bought Greenman Brothers, a mediocre company that went down, and then you have compounded your error. Actually you’ve taken a mistake that cost you nothing and turned it into a mistake that cost you plenty.

 

12.                THE STOCK’S GONE UP, SO I MUST BE RIGHT, OR THE STOCK’S GONE DOWN SO  I MUST BE WRONG

They convince themselves that higher price proves that the investment is worthwhile, and they hold until the lower price convinces then the investment is not good.

So when people say, “Look, in two month it’s up 20 percent, so I really picked a winner,” or “Terrible, in two month it’s down 20 percent, so really picked a loser,” they are confusing prices with prospects. Unless they are short term trader who are looking for 20 percent gains, the short term fanfare means absolutely nothing.

 

 

 

 

Next blog is coming soon.

Thank you again for your Patience.

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Congratulation you take one more step towards your financial freedom.

This summary from Book-“ONE UP ON WALL STREET”

 

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