15 May 2012

Human Weakness in Stock Market Investment: The grass is always greener on the other side

The grass is always greener on the other side - this idea is as normal as any natural law or phenomena in this word. For example, most of us always admire other people around us, don't us? When we have motorcycles, we admire those have cars; when we have cars, we admire those have helicopters; when we have helicopters, most likely, we will, once again, admire those have private aeroplanes. However, what we will see sometimes is, those have private aeroplanes do enjoy driving motorcycles, isn't it? However, what I am going to tell you is that there is never wrong or right in this world, but suitable or not. 

In stock market investment, we can assume there are two group of people - the sellers who hold shares; and the buyers who hold cash.

Most of the potential sellers admire people who have cash in bank. As a result, they have more tendency to find reasons to "exchange" their shares to cash. Potential buyers, on the other hand, admire people who have share in hand which will potentially help them earn money in terms of capital gain and dividend. Again, they will also find sufficient reasons to convince their self to buy shares with their money. In fact, this is the most normal phenomena in stock market investment, until extreme phenomena occurs, which destroy the balance of the stock market investment.

The grass is no longer greener on the other side.

Yes, when grass is no longer greener on the other side, people tend to either hold cash or hold share, only. As a result, the market price of shares will be extremely under-valued or over-valued. In order to outperform in this extreme circumstance, Warren Buffett's famous quotate - 'Be Fearful When Others Are Greedy and Greedy When Others Are Fearful' will almost always be a good indicator for investors.

Most of the time, investment can be as easily as
1. Doing sufficient homework,
2. Wait for attractive price (undervalued),
3. Buy with discount,
4. Hold and enjoy dividend/bonus in the some time,
5. Sell high when it is over-valued.

But most people still cannot believe it. Maybe, most of people do enjoy creating or finding "secret weapons" to beat the market. The grass is always greener on the other side, maybe. Nothing is wrong or right, as long as it does not harm other people.

That's all for today. More fascinating articles and sharing will be updated from time to time in Xaivier Blog. So, you are welcome to subscribe our feed, look at our sitemap or simply visit our Homepage.

Written by: Xaivier Chia



justin bartholomew said...

Thanks to share that information with us, its amazing for business.Nice post

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