The purchase and sale of securities should be passionless. Emotion distorts
one's perception of reality.
The reality though is easily measured: is the price of a stock below your
purchase price? When considering an investment be aware that you can
be wrong.
As with all decisions in life, there exists the chance that your choice of
action is wrong. I believe capital preservation must be the primary
objective of all investors: cut your losses. If a stock drops 50% below
your purchase price, it has to increase 100% for you to break even.
How often does one find an investment that doubles?
As a stock drops below your purchase price, the chances
increase that your purchase decision was wrong. I am not advocating
"sell" as soon as that stock drops 1/8. I am advocating instead that
an investor determine in advance at what price they will admit error,
and that they in turn act without emotion in acting upon that admission.
That decision could be based on an 8% drop, or a 10% drop; I don't know
how much of a loss the average SI investor can endure. But from reading this thread,
and others here on SI, I do know what an ever-increasing loss can do to an investor.
It paralyzes them. They cannot act to cut their loss. They go into denial.
They insist the market is wrong as their losses increase. Their arguments
are tainted with emotion. They are quick to blame anything or anyone other
than themselves. Everyone makes mistakes. I certainly do; there is no
shame in admitting a mistake, and I won't let a small mistake turn
into financial disaster.
Another poster here refers to me as a bear. I do not *want* to be bearish.
But that is irrelevant. What I want and what others want doesn't matter.
What does matter is your profit and loss statement.
"Want" doesn't change the direction of a stock's movement.
The market doesn't care what one thinks.
I do want to be dispassionate in analysis of market action.
I'd rather have the averages ascend to new highs. I am not short any
stocks. It really doesn't matter if I am a bear, I can't move the
markets. What matters is the answer to the question: is the market
action bearish?
It does seem to me that if the Nasdaq composite loses 5.35%
as it did Friday, or loses 12% for the week ending Friday (as it did),
or is off nearly 40% from its March highs (as it is), and is off about
25% for the year ... that to me is bearish.
Maybe this is the bottom. I can't call the bottom. No one can. But I'd
rather step back and let the market decide where the bottom is. If
I miss the first 10% of an upside move, so be it. The Nasdaq trend has been
down; no one can reasonably deny that. At some point in the future
the markets will rally furiously. When that happens is anyone's guess.
For weeks I have been reading (on SI) about all of these so-called "bargains" in
the stock market. With that logic, these "bargains" have become even better
"bargains" as they slide lower.
I dont agree. I can't look at them as "bargains"; I view them as stocks that
have gone down, and could go down more.
I'm an optimist about life and the future, but I'm pessimistic about
tech stocks. I know I won't feel this way forever, but I share the
current market's view of tech stocks. |
