As I am not a psychologist, unless I use an example for illustration, I am not able to explain to you all these psychological problems. Let us look at Eversendai:
The chart shows that Eversendai share price has been going up from 50 sen on 28 Feb 2017 when the company announced its losses in 2016, to close at Rm 1.37 on the last trading day.
Many investors sold at 50 sen because they were afraid that it could drop lower. There must also be some investors with good business sense dare to buy. As the share price keep going up, there must be a lot of sellers and buyers on every trading day. The sellers do not think the price will continue to go higher but the buyers think that it will go higher.
As any share price cannot continue to go up or down continuously for whatever reason without a break as shown on the chart. It is called correction. Many people sold during correction. What happen if the share price continues to go up again because the company reported increased profit? Many people who sold would not buy it back at a price higher than the price they sold because of shame. Only really super investors can overcome this psychological problem of shame.
Now it has gone up to close at Rm 1.37. Do you dare to buy it at Rm 1.37 or higher? That is the question.
Our brain has 3 basic functions such as auto, emotional and logical thinking. Auto function controls the breathing, blood circulation and reflex action. Emotional function controls your emotion such as fear, greed or ego. Logical thinking is the ability to analyse any problem and make a sensible decision.
My remisier Ricky Kon of TA Securities Ipoh and Allan Yeoh of Kenanga Ipoh can confirm that I have been buying Eversendai from 50 sen to Rm 1.37. You can see from the company announcements that I have been buying on almost every trading day.
My reasons for buying are:
About 3 months ago, I gave a talk under the title “How to overcome contractors’ difficulties?’ at the Master Builders Association Malaysia (MBAM) Building in Kuala Lumpur. MBAM members are most of the contractors who have been building all the properties in every town and city. The entrance fee for each attendee was Rm 300. The total collection was Rm 34,000 and I donated Rm 100,000 to start a scholarship fund.
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