This article will talk about the practical things you can apply to real life. I will probably write one more specific to investing later on.
If it feels too good, it probably is
Over the past year, so many crazy bull runs and “bubbles” occurred. The latest one was the meme stocks saga with $GME and co. (My detailed opinion about the controversy below) However, that’s not all.
Remember the crazy electric vehicle hype? A company (Nikola) with no working vehicle and 0 sales could have such high stock price valuations. I think Nikola will probably be studied in business courses in the future as one of the many frauds, such as Enron and Theranos.
What about the frenzy about SPACs and IPOs? Some of these companies are trading purely at speculative levels for they are still relatively new and are making use of public markets for funding.
And also the cryptocurrency boom. I think I will give credit to Bitcoin, because I believe it is legitimate and the one I studied the most about. However, some alt coins are seemingly purely pump and dump schemes. What is up with everything going up just because of a tweet from Elon Musk? It’s definitely amusing, but not sustainable for long-term profits.
All this has happened and they are definitely not the only ones that occurred. Of course, not all of them have shown to be “bubbles” yet, but I am very sceptical of them. It feels too good to me. And it probably is.
You can tell yourself that you will be rational, until you can’t
Before actually putting money into the market, I always tell myself that I can be rational. But when my money is on the line, I realise it is really difficult. This probably explains why short-term market fluctuations are a norm.
You can be the most stoic and rational person in the world. But beware, come up with a plan before you put your money into the market for you might just make the most emotional and irrational decision of your life as time passes.
Just like everything in life, it is unpredictable. However, do your best to make a plan and stick to it. Make a watchlist. Have a few solid stocks that you are eyeing. Study them properly. Once the market dips, grab the opportunity.
Adopt a growth mindset
Just keep learning. Learn and read. Don’t stop. Keep growing.
Investing is like an art. I don’t think anyone is perfect and no one probably can be perfect. However, you can keep getting better. It’s like cutting someone’s hair. If you keep practicing how to cut hair and you keep cutting the hair of one particular client, you will keep getting better at giving the client a better haircut.
Never stop growing. Read widely. Read everything. I used to hate reading. But I think that was a result of school and forcing literature upon us. Ever since graduating, I love reading.
My brief thoughts on Gamestop:
I think the redditors on WSB were definitely smart, especially the ones who caught on at the start. Catching a short squeeze like that is once in a lifetime experience, like the 2008 “mother of all squeezes”.
They were the one who started the trend. Then it became trending on social media. When something blows up on social media, I treat it with a lot of scepticism. All the memes and emojis began popping up.
The media starting painting a picture of David vs. Goliath. Then, the retail traders became successful. We managed to conquer Melvin Capital! But wait, I felt like it was not real. I have always learnt that institutional investors still have the most power in public markets. Upon more research and with the onset of limited buying from brokerages, I realised the “smart money” was greatly pumping into this movement led by Reddit.
We won, but they also won. Well, it looks like it was not so great after all. As of 8 Feb, the stock has gone back down, albeit still at fundamentally ridiculous levels. We have learnt that hedge funds always win and brokers will side with the smart money. But what can we do? Stick to the traditional, boring approach of investing in good solid companies and make returns I guess.