Thursday, March 1, 2012

What Have I Learned in Seven Months?

Yesterday, I sold one of my most sluggish stocks few minutes before the market closes. Then I opened my Twitter account and was greeted with this quote:
Don't settle for less, just because you're too impatient to wait for the best!                                                                                                            
What an opening salvo?! Bull's Eye! Now, I can only hope that it will not soar high tomorrow (I mean at least not too soon). It happened to me before. I sold some stocks in negative so I can catch those in sale with much better fundamental or at least the ones in upward price movement. The next day, BOOM! The market price skyrocketed and I lamented. Blame my short thread of patience.

Last week, I accompanied a friend to the seminar I mentioned in my previous post. Same speaker. Same speech. Different effect. The seminar was actually sweeter the second time around. Why? (1) My industry vocabulary has improved and; (2) now I know what he meant by this: “At some point you will lose money. If you can’t accept this, stock market is not for you.”

No investor in his right mind will rejoice if he loses money either in the stock market or even literally but behind this heartbreaking fact are valuable lessons. In my seven months of investing, I have learned that losing money has two different meaning: (1) You lose money when you sell your stocks at the current market price lower than your average market price. As a result it decreases your actual balance as well as your purchasing power; and (2) You lose money in paper once the current market price of your stocks becomes lower than your average market price. This is a common phenomenon. Price will move up in time (unfortunately no one knows exactly when). Here, no transaction is executed.

In my case, my most recent transaction falls under the first definition. Since there were no signs of progress in weeks (as far as the chart is concerned), I took a difficult decision. Instead of waiting for the boost, I thought of looking for other companies that are technically performing better. And hope that this risk will bear better fruits in shorter period. For investors/traders with limited resources like me this is one risky strategy that at one point you might just have to consider than lose money in paper for uncertain time.
Flashback. In my first month, I was able to savor the feeling of earning money (in paper) without a sweat. Ecstasy. And then August came, my portfolio suddenly turned bloody red. I experienced definition no. 2: losing money in paper. Just when I thought I was about to make a breakthrough, the stock market got terribly affected by the European economic crisis. And I tell you, losing money in paper is no joke. It’s tragic. Scary.
Today, I’m gradually learning from research and actual experience (mistakes included). Looking back, the effects of the European economic crisis in the Philippine Stock Market were actually not as bad as I thought. The wiser and more experienced investors probably consider it as a blessing more than a tragedy. For the well-offs, Christmas sale started in August. In January, when the market started to bounce back, I bet many rejoiced. Indeed, patience is a virtue. And that’s one thing that I have not learned by heart in seven months. But I really wish I will...SOON.

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