Read on Twitter
Isaac Newton is said to be one of the smartest people to ever live this planet. But there’s a big difference between being a smart person and a smart investor.
Unfortunately, he learned an investing lesson the hard way. Here’s a very small story. A thread:-
Unfortunately, he learned an investing lesson the hard way. Here’s a very small story. A thread:-
Back in the spring of 1719, Sir Isaac Newton owned shares in the South Sea Company, the hottest stock in England. Sensing that the market condition was becoming bad, Newton sold his South Sea Shares, with a profit of 100% worth GBP 7000 at that time to re-enter at lower price.
However, just months later, instead of going down, the market went up with full enthusiasm.
With the FOMO (fear of missing out profits) he entered the market again at much higher price and lost GBP 20,000 (more than $5 million today).
With the FOMO (fear of missing out profits) he entered the market again at much higher price and lost GBP 20,000 (more than $5 million today).
To this, he said: ‘I can calculate the movement of stars, but not the madness of men.” For the rest of his life, he forbade anyone to speak the words “South Sea” in his presence.
Newton wasn’t a dumb person; he is said to be a genius. He invented calculus and laws of motions. But he didn’t control his emotion and took decisions instinctively.
This is why the father of value investor Ben Graham says:-
“For Indeed, the investor’s chief problem, and even his worst enemy is likely to be himself.”
“For Indeed, the investor’s chief problem, and even his worst enemy is likely to be himself.”
My 2 cents:-
The biggest issue in selling off the stock to again get back (buy at lower price) is this:-
Even if you are right the first time, to get back in, you need to be right TWICE.
1st, to sell it at exact high price, then 2nd to buy it at low price.
The biggest issue in selling off the stock to again get back (buy at lower price) is this:-
Even if you are right the first time, to get back in, you need to be right TWICE.
1st, to sell it at exact high price, then 2nd to buy it at low price.
And while we think the stock graph to be a simple straight line either going up/down,
there are too many false upsides during a fall or false downsides during a rise.
This fools you into complacency (“I have seen these temporary upsides before. It will fall again. I will wait”)
there are too many false upsides during a fall or false downsides during a rise.
This fools you into complacency (“I have seen these temporary upsides before. It will fall again. I will wait”)
But when the actual recovery happens, you think it’s yet another false upside & by the time you realize this one is the real one,
it is usually too late and you might end up buying the same stock at higher price than you sold.
Lesson: Buy and hold as always advised. @dmuthuk
it is usually too late and you might end up buying the same stock at higher price than you sold.
Lesson: Buy and hold as always advised. @dmuthuk
Please retweet to share the awareness & power of long-term buying and holding. The less active we are, less loss and more profit.
@dmuthuk
@FI_InvestIndia
@dmuthuk
@FI_InvestIndia
