In 2020 as the stock markets crashed during the pandemic. The leading market specialists emphasized that they would return with a bang, which led novice investors like me to jump in the unknown waters.
I am considered prudent and I believe in having full expertise before trying anything new. I studied numerous market analysts and tried to make sense of this game. I became familiar with general market terms to essentially understand the analysts.
I took my time to become familiar with terms like
Finally, after spending several days understanding and analysing different stock terms and trends I thought I was ready for it.
Apparently, the market is not as simple as this I have learnt many lessons amid my stock investing journey and I would love to share them.
Stocks can fall after the good news
After gaining my basic knowledge in stocks it was time to look for the best stocks for investment. By the looks of it, it sounded simple I was searching for a stock that would rise immediately after pandemic crises. My first thought went to the vaccine stocks and I started studying them. The news of vaccine approvals was just around the corner and these stocks were surely predicted to rise after the vaccine approval.
On December 18, 2020, the FDA authorized the emergency use of the Moderna COVID-19 Vaccine in individuals 18 years of age or older
I bought Moderna on 16th December 2020 foreseeing a huge rise after the approval but that didn’t happen, the stock kept reversing and till the end of December Moderna stocks fell by roughly 25 per cent.
I suffered a loss but gained some new insights essential to the stock market
It is not uncommon for stocks to fall after good news because huge investors who are holding stocks sell them off, resulting in immediate fall in the stock prices.
Long term investing is the key, and one shouldn’t worry about stock fluctuations as long as you have invested in a reasonably stable stock as you can see in the screenshot if I had waited long enough the stocks would have returned.
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” ~Warren Buffett
Investing in stocks can be fun
Investing in stocks is not simple it requires a lot of study and analysis but can also be good fun if you have done your homework and you have some money to spare.
The thrill and excitement involved kept me alive during my lockdown days.
An important lesson I have learnt is that one should only invest the amount of money he is willing to lose and to always remember the rule of thumb to buy the best stock at the least price but it requires a lot of observing and waiting and only striking at the right time.
“The secret to investing is to figure out the value of something — and then pay a lot less.”~ Joel Greenblatt
It is not for the faint-hearted
When it comes to mental tension stocks lead all games for example in gambling you win or you lose, it is a one-off thing but in stocks you see your socks dropping for days and you might get hopeful in between with a slight rise and it can start falling again and it is like slow killing certainly not suitable for the weak.
A research by Harvard University even shows an increase in heart attacks linked with crashing stock markets.
“No one can tell you when these will happen. The light can at any time go from green to red without pausing at yellow.” ~ Warren Buffett (in a letter to Berkshire Hathaway’s shareholders in 2017)
In the start, you think you can simply get out of the stock when it starts falling but when the stocks crash they do it in the blink of an eye and by the time you come out, most of it is lost if not all.
Market predictions can change
“If stock market experts were so expert, they would be buying stock, not selling advice.”~Norman Augustine
The most important lesson I have learnt while investing in stocks is that market predictions vary depending on who is foreseeing what and why. In this era of vast networking people say things for their own motives and not everyone can be believed. There is so much information out there but it is your obligation to assess the credibility and to own your risks.
We’ve long felt that the only value of stock forecasters is to make fortune-tellers look good. Even now, Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.~Warren Buffett
Some stocks defy all market rules
Some stocks simply don’t follow any market rules and GameStop is one of them like last April its stocks were being sold for almost $3 each and just yesterday they reached over $300 this unrealistic growth is apparently a result of the tussle between millions of small investors gathered on social media platform Reddit and Wall Street professionals, for now, it is proving all financial experts wrong.
About 71.66m GameStop shares are currently shorted. Shortening means investing with borrowed money and selling it at a high price to buy back at a lower price at times a lot of money is made this way but if the price doesn’t fall the losses are devastating. This is what is happening the price is simply not dropping. Today's pre-market view also shows a huge gain.
Till now, this is continuing but once the fog settles many things will become clear until then social media is full of students gaining enough money to return their loans and general public making huge amounts hanging on to the skyrocketing rides.
While the market as a whole is on the decline a number of other stocks are following Gamestop trends i.e AMC: the movie theatre chain, Blackberry, Express, Nokia, Palantir all these stocks are increasing without much logic and reason.
This is exactly the type of day trading which forces all trading advertisements to state “do it at your own risk”.They can either make you or break you because when the stocks decline it happens in a flash and everything is lost.
Now everyone is watching GameStop very closely even the White House.
The White House and Treasury Department are monitoring the situation involving GameStop and other companies that have seen sharp gains on the stock market, White House Press Secretary Jen Psaki said on Wednesday. ~WASHINGTON (Reuters)
The last word
2020 has made us all vulnerable undergoing uncertain circumstances and some quick recovery options seem extremely attractive. When a newcomer enters this market world he is stunned by the number of possibilities unaware of the amount of risk.
It seems simple but believe me, all logic and reasoning comes to an end, what counts is how you control your urge to join the crowd. So, the last word is not from me but from the most amazing American investor and business tycoon Warren Buffett
“The most important quality for an investor is temperament, not intellect.”~Warren Buffett