Don't Fall in Love with You're Stocks(Collect a Free EBOOK - seewebsite)
It appears that I have a dislike for admitting that I could everget it wrong and this explains why I sometimes can't take aloss. On the other side of the equation: if I was wrong and XYZwas not going to make me a fortune - then what could I do?
Okay I spotted one of my stocks in the "Shares" magazine - Iconfess! I was just reading about all the up-and-coming starsand there was this little snippet asking a question like: "Couldthis be a new Microsoft?". Now they may not have said thatexactly, but it was enough to make me think XYZ was a good newsstory as its price will testify - at the time(in the 70's ). Imean it was there - it had to have some merit!
It was a miner and had a technology company in its portfolio anda percentage of another tech company and was doing very littlein the resources area because there was more hype in tech sharesat the time. It was a time when many miners were turning intotech companies. Can you visualize the miners making their way tothe goldfields?
Well I was right into that - so I bought heaps and the crazypart was that I was not going to sell something that had such agreat future. Nearly $60 000 went into this company and I'vestill got it. Not because I am still in love, but because it'snearly worthless. It will be a reminder to me never to do thatagain!
How much is this RULE really worth to me? That's simple -without counting any other stock in my tech-wrecked portfolio,this RULE is worth $59 494.45 saved.
If I just add one more, an online retailer, which cost me $69928.20, my total saving would be $129 422.65. So if someone hadgiven me the above rule to live by, I could have sold out earlyand kept most of $129 000.
The unloved by the market, which included many of my startupshave plummeted since the tech boom - some went up like shootingstarts, only to be blasted to pieces and fall back to Earth. Youwon't get directors coming out to say that the market has put anoutrageous price on this company or that one, and that really,there is no substance to back up the price. However someone willnotice that the king is really naked and when they do there isno mercy from the crowd.
I have heard say, "The market is always right", and maybe it'snot a bad one to remember. Those that didn't participate in thetech boom will have lost considerable money and those that fellin love with the naked royalty will have lost their shirts.
Does it hurt? You bet it does! It hurts every day, but it willget better one day - I hope! It was a great experience, eventhough it was a painful one. Now it is you, the reader, whostands to benefit from my mistakes; which increases the value ofsuch insights and will make this book probably the mosttreasured book about the market's affect on individuals'psychology and an awesome reminder of the pitfalls ofsharemarket speculation.
Do I think that I'm the worst case? NO WAY!! You only have tolook back in time to see what companies, underwriters andwell-established financial houses paid for software companiesand internet security companies - even our beloved Telstra(usingthe taxpayer's wealth) suffered its billion dollar nightmares,not to mention News Corp's businesses going bust. The biggerthey are the harder they have fallen: Enron, Vivendi, Worldcomand others handing over billions as if there was no tomorrow.Well now the penny has well and truly dropped as these hugegorillas fight for their survival under a pile of debt andscandal. Nope...I'm in good company. The scandals and fallssince June 2002 have certainly been enough to scare me. We livein hope that we don't end up with a depression and that thelosses of up to $US8 trillion at the time of writing, arefinally stemmed without bringing the whole financial system toits knees.
How many lucky devils bought News Corp at $26 and how many havewatched the decent to $8.46? Losing $12 billion in one year onlymakes people want to own it, pushing the price from below $9.50back up to above $10.50.
The market lurches from drunken stupor to bottomless pit ofdespair - it's easy to get it wrong on any day!
In sharemarket trading you live and die by your trading plan -so experiment by all means but at some stage you will needtrading rules to live by. The market can leave you behind. Ithas a way of changing faster than you can. It does its time as abull and then becomes a bear and in the same breath will do anabout face and scream to a high, leaving your position in thered, when everything you know tells you that the market for thatstock should not behave that way. You keep screaming ...BUT IT'SA LOSER!!!!!! Stock punters just ignore you, pushing the dog ofa stock higher, after losses counted in billions of Australiandollars and a weaker quarterly profit. Who really cares? Emotioncarries the market higher until once again the profit takerscome in and sell the highs.
If you have enjoyed this discussion...there's more....and thecontent is not specific to any one country. You can apply theseideas.
Please visit: http://www.tutorhelp.com.au/sharemarket.html
Get interactive with our Ezine "Request":10simplerules@tutorhelp.com.au
Happy Investing, Joseph Sgro The Author
About the author:Joseph Sgro was born in Western Australia with a hunger tobecome a millionaire(a Wild Colonial Boy at heart).
Classroom teacher with 15 years and sharemarket tradingexperience of 16 years culminated in a portfolio of over $700000 and a serious turn for the worst in March 2000.
This turn of fortune gave rise to much analysis and a desire tolearn what went wrong.
