Posted by stockraider > 2016-12-19 00:03 | Report Abuse
For the majority of transactions, losses occur when the stock is bought at too high a price. This may occur for many reasons. Yes, you might have too rosy assumptions on the stock in your computation of its intrinsic value, that is, you made a mistake as discussed above. Maybe you were too impatient. The business fundamentals remain good and as you have projected. Due to impatience and various influences, you bought at that price, which subsequently proved to be too high or overprice. The company was good but the investment failed because the price paid was too high.
Market value fluctuations of your portfolio are to be expected. Losses are realised in the 3 situations elucidated above; all preventable and within your control. At least the risks of downside or loss can be controlled.
Avoid making mistake by improving your investment education and skill. Always be conservative in your projections of the company's prospects.
Selecting the highest quality companies, especially those with economic moats that are durable, you can hope to be with the company for the long term. Certain businesses and certain sectors enjoy durable competitive advantage.
For the majority, losses occur because they pay too high a price to own the stock. Discipline in buying bargains is important. "Buy your stocks like when you are buying your groceries and not your perfume or LV bags!" Stay away from the momentum herds. Be fearful when others are greedy and be greedy when others are fearful. Be aggressive when the market is down and fear prevails. Be wary when the market is up and everyone is in good spirit boasting their gains. Be worried when youngsters or newbies are making 100% gains in the market, because as surely as the sun will rise and set, these are times when you should be most fearful.
Investing is most sensible and rewarding, when it is businesslike. You are not buying a stock, but a portion of a business. After careful study and a lot of homework, you look for safety of your capital first. Then only do you look at the returns that can potentially be hope for. The market has been returning averagely about 10 to 11% yearly over the long term. If you aim for average of 15% per year consistently over many years, you would have done very well indeed. You will be on the path to riches you can enjoy for a lifetime.
Alas, for those who aim for much higher returns of 100% per year or even higher, hoping to be a millionaire in a very short few years, be warned - they are speculating. Given the vagaries of the market, they can expect a return commensurate to that of a speculator. Over the long run, they will enjoy a speculative return at best. I have yet to know of anyone who trades short term who made all their wealth in the stock market. Neither have I met or know of anyone who made all their wealth going to Genting Highlands. For short term speculators over the long run and the gamblers in Genting Highland over the long run, their fate probably share a common path.
