The current financial earthquake in the world cannot be measured on the Ritcher scale. The only scale to measure it would be the ‘Richer’ scale which is showing every investor poorer than he or she was a few weeks back.
The reason for this is not hard to find. Investors may call themselves short term or long term investors but in the ultimate analysis over 95% of them are just wrong term investors. Being successful in the stock markets is as easy or difficult as going to the gym to lose weight. We all know that it is easier to lose weight than maintain it. Similarly it is much easier to make money than to hold on to it. It is incredible how the question the ‘aam’ investor always asks (irrespective of a bull or a bear market) is - ‘what to buy’? Nobody ever asks ‘What to sell’?
Short term investors become long term investors when the markets go up. They cannot control their greed for making more until the market collapses and once it crashes below their cost they hold on in the hope that they will make up the losses in future! Long term investors invariably end up selling too soon for fear of price crashing. However, when they see the prices continuing to rise after they have sold they cannot resist getting in again to make a quick buck knowing well that the party has to end sooner or later. The party invariably ends sooner than they think it will.
Investors may all have the knowledge, the skills and the brains to make money in the markets but sadly only a minuscule have the discipline to withdraw at the right time. Be it life in general or the bedroom in particular the inability to withdraw at the right time is what leads to maximum pain!
The stock market like the underworld is easy to enter and almost impossible to totally get out of. The best thing to do is to learn discipline more than learning to read Balance Sheets. Discipline in the market for most part consists of having the patience to sit on cash and more importantly the wisdom to cut your losses rather than wait in the hope that someday you might get lucky!
The reason for this is not hard to find. Investors may call themselves short term or long term investors but in the ultimate analysis over 95% of them are just wrong term investors. Being successful in the stock markets is as easy or difficult as going to the gym to lose weight. We all know that it is easier to lose weight than maintain it. Similarly it is much easier to make money than to hold on to it. It is incredible how the question the ‘aam’ investor always asks (irrespective of a bull or a bear market) is - ‘what to buy’? Nobody ever asks ‘What to sell’?
Short term investors become long term investors when the markets go up. They cannot control their greed for making more until the market collapses and once it crashes below their cost they hold on in the hope that they will make up the losses in future! Long term investors invariably end up selling too soon for fear of price crashing. However, when they see the prices continuing to rise after they have sold they cannot resist getting in again to make a quick buck knowing well that the party has to end sooner or later. The party invariably ends sooner than they think it will.
Investors may all have the knowledge, the skills and the brains to make money in the markets but sadly only a minuscule have the discipline to withdraw at the right time. Be it life in general or the bedroom in particular the inability to withdraw at the right time is what leads to maximum pain!
The stock market like the underworld is easy to enter and almost impossible to totally get out of. The best thing to do is to learn discipline more than learning to read Balance Sheets. Discipline in the market for most part consists of having the patience to sit on cash and more importantly the wisdom to cut your losses rather than wait in the hope that someday you might get lucky!
1 comment:
Very True indeed! Even the biggest of financial institutions (Lehman, Merill, Bear Stern) did not have the discipline to hold back and we all know what happenned to them
Post a Comment