After few years of stock market investment, I have experienced a constantly failure if I applied one of these BAD habits when I made a decision. This post summarises these 7 habits that cost me make bad decision previously.
Habit 1: Predicting future trend
Look, volume comes, more buyers than sellers: it is a good entry point.
Insight: Volumes can be manipulated, so the number of buyers and sellers. Three of them actually have no point for a long term investors.
Habit 2: Follow majority people action
Hey, my best friends all buy the shares of this company. We should follow their footprint. Together, we are no alone.
Insight: We need to consider the price of purchasing as well. Even a good company with intrinsic value of RM2.00. Only people who buy lower than this value will ultimately earn money. For who buy it with RM5.00... I have no comment to them.
Habit 3: Simply believe mathematics
Mathematics is a science that concerns about logic. For example, one plus one always equals two. But in stock market, there are too many uncertainty and factors. There is no correct answer for the question of "one plus one" because the conditions are different, from time to time.
Habit 4: Hyper-active
People who re-act every single news (or rumours) may sometimes earn some money from stock market in a very short period of time. But based on my experience, people are always over re-act with a tiny news. And the worst case is we cheap sell our good company. So, for long term, we can simply ignore these small fluctuation.
Habit 5: Want to sell at the highest price
Nobody knows who is the last person who willingly to pay the highest price of a particular stock. So, it is too normal to sell it under the highest price. But as long as we sold them in over-valued price with an undervalued buying price, the profit is already very attractive.
Habit 6: Want to buy at the lowest price
Wait and wait and wait. What is the lowest price of a company? Again, nobody knows. The temporary price is determined by thousand and million of participates. I personally do not interested and no able to know what these thousand and million minds in each second. Because it will change tremendously within few seconds.
Habit 7: Simply make decision based on the price
Look, the market price of this company falls from RM4.00 to lower than RM1.00. It is a good chance to have some bargain with potential profit of more than 100%! IF and ONLY IF, it REBOUND back.
(Example of making decision based on price. I personally never own the shares of the above company)
This is my very first draft of the Seven Habits of Highly Unsuccessful Investors in Stock Market in this moment. I think I will revise them in the future. 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 for latest sharing.
Written by: Xaivier Chia
(P/S: The above sharing is solely based on personal insight. Please do not take it seriously. However, your valuable feedback are very welcome.)