On Fear and Greed

Target price. Stop-loss. Sell down. Flushing. Pump and dump.

Familiar with any of these terms?

Warren Buffett's famous lesson on fear and greed was "Be fearful when others are greedy, and be greedy when others are fearful." It makes sense, if you think about it. Thing is, when you're in the moment, and either emotion hits you like a tidal wave, it can be hard to stick to your guns. You, in a panic, call your broker and tell him to get rid of all your shares, in the hope that you won't be the last dunce clutching on to a broken dream. On the flip side, you enthusiastically take on leverage (another term for debt) and pour all that money into a particular counter, confident you've caught the damn gravy train.

These are true stories - I've seen both happen, and the temptation to do both has struck me plenty of times. Honestly speaking, I've given in sometimes, to my later regret, although to my great relief, I've never lost borrowed money in my investments.

Warren Buffett himself admitted that following his own advice was easier said than done.

In some cases, you might have people trying to spread fear, in the hopes of driving a stock's price down. In others, you see people doing so much advertising for a stock that they should get paid an advertising fee - this is done in the hopes of attracting more demand, and the potential increase in stock price that follows. 

I sometimes get angry texts from my friends:

"...shortists are trying to spread fear again, did you see that post in XYZ forum?"
"...trying to lure people in to buy at such a high price..."
"...if it were true, the company would've already announced it, right?"
"...after price started dropping, these people suddenly kept quiet..."

Shortists, contra players, retailers - we all have our own agendas and our own targets. #donthatetheplayer #hatethegame

What I could advise is to set limits for yourself - manage your risk and your expectations. Set a target price for a stock, and set stop-loss limits for yourself and stick to them if you don't trust yourself to keep rational thought. Do your research before you buy into anything, so you won't get too shaken up by rumours about negative news, positive news, and whatnot. Keep up with official news on the companies you invest in, either from their official sites or from the papers. 

Just wanted to pen this stuff down.

Thanks for reading. Until next time.


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