Greed and fear rule the markets
“Markets are driven by greed and fear,” financial commentators often tell us; what this basically means is that fear prevents investors from buying when the stock price has reached a low point while greed prevents an investor from selling when the stock price is high.
The recent activity with the game company GameStop is a perfect example of how greed is going to take over many investors. Few will sell for fear of missing out on the continued rise in the stock and end up losing a large chunk of their earnings + their initial investment when the company’s stock price tracks its course, which it will. without a doubt.
This is a case of investors using their common sense. It is generally young people who are attracted to this type of cattle; I think probably because older investors have been there and done and have taken a more conservative approach.
Fear also prevents many investors from buying a stock when its price has bottomed out, so a savvy investor can take advantage of these fears by buying stocks that have fallen in price. It is good for investors to check the newspaper stock market chart and the statistic to note is the high and low price of the year. This will give you an idea of the stock situation.
If you invest through an online sharing platform that lets you put money into the markets, you can say buy shares of the same company every two weeks. That way, when the stock price is going down, you have at least bought stocks at the lower price.
But there are just a few stocks this rule may not apply to.
Games company GameStop has been in the news a lot lately (January 2021) due to the rise in the share price and with so many investors jumping on the bandwagon, its share price has been falling. inflated well above its true value. It’s only a matter of time before its stock price slips, but who knows when. It is likely that many investors will jump ship to accelerate its slide.
Is GameStop therefore a short, medium or long term investment?
In my opinion, this is none of the above; it’s more of a speculative game where you use your discretionary income. If that goes, that’s fine and if the investment turns into a cream, well that was money you could afford to lose anyway.
By discretionary income, this is money you would have spent on alcohol, parties, vacations, the lottery, satellite TV or whatever; if you lose your money, it’s okay.
The media don’t get the full story when they report that someone lost X amount of money in the stock market when a company’s stock price hit an all-time low. An investor may have owned $ 1,000 of shares in an xyz company, but may have paid only $ 100 for them, but it will be reported that $ 1,000 has been lost.
It’s up to investors to do their homework and think and think about what they’re doing, because at the end of the day, it’s your money that you’re playing with.
I cannot stress this enough; do not use the following funds to buy stocks in GameStop.
* Home deposit
* Money saved to buy a car
* Money set aside for your child’s education
* Money set aside for your retirement
* Money set aside for emergencies.
The Games Stop bubble will burst. It has a short lifespan, therefore, only buy stocks of this speculative investment or other similar investments with money you can afford to lose.
After all, you wouldn’t go to Kumara’s races with the house deposit money.