Lessons from the stock market (day 305): there are no mistakes in life, only lessons.

i took a beating at the stock market last week.

and over the weekend, i tried to make some sense on what happened (hindsight is always a 20-20 vision, as someone famously quoted).  and over the weekend, i found out it was a good thing that it did.

it was a good thing not because i could buy the same stocks at a lower price this time but because i realized certain attitude (or lack thereof) i had, if not corrected, would cost me a lot of money in the future.

i breached my maximum percentage for playing with speculative stocks. i set a limit equal to 10% of my entire stock market investment for play, deciding earlier that any profit i get from this will be re-allocated to my investment portfolio. i had been lucky so far (there really was no other adjective to describe my earning profit out of playing speculative stocks) but luck has always been so random and i got hit this time around. not only did i have 14% of my stock market investment are into speculative stocks now but unlike its predecessors, i am not earning money on these now and are close to eating any previous gains i have got in the past. lesson learned: respect the criteria you set for yourself.  most often than not, you set them there for a good cause.

i though i was ready to play the “hyped-up” game. i yielded to the temptation of earning money betting on the possibility that someone out there will bite the hype and buy the stock at a price higher than i bought it. the accountant in me shudders at this thought. the good Samaritan in me is uncomfortable on the fact of making money over someone else’s expense (strangely enough, these revelations are shocking to me as it is probably to you. i do not see myself as a truly good person but the extent of how i actually care about humanity as a whole is quite surprising at times). i tried it once and i failed. though i was quite pissed at myself then, i am quite relieved now.  that is one road taken once and never again. lesson learned: the market will play with your greed and it will always win in the end.

i got a little bit cocky to think i can get away not doing my research.  in the course of getting myself familiar with how the stock market works, i found a lot of people that are really good with technical charting and fundamental analysis.  and no shortage of people freely giving unsolicited advices (both good and bad) and hypes (mostly bad). i noticed that even the really good chartists over and under estimate the market and make wrong personal moves with their portfolio.  this has somehow gave me a silly idea that knowing how to draw and properly read a technical chart and how to deduce the fundamentals may not be as helpful as understanding the psychology of the traders and investors that drives the stock prices down or up.  the accountant in me vomits at this thought. and i bet that if my banker hears this now, he would hit my head with a stick. driven by the excitement of trading, i have almost lost sight of why i was doing the stock market in the first place.  there has to be valid reasons to buy a certain stock and i need to have a sound knowledge of its fundamentals.  knowing a little bit of technical would help me find a good entry point to further lower my average cost.  not having good foundation of both may expose me to picking a stock that defies the qualifications for a reliable source for capital growth. it would also push me into basing a lot of my decisions on what other people recommends regardless of whether or not i understand them. lesson learned: to understand something, one must continuously learn about it.

i took a beating at the stock market last week. i believe now that it had to happen. as someone once famously quote, there are no mistakes in life- only lessons. a lesson is repeated until it is learned. if you don’t learn the easy lessons, they get harder. you know you have learned it when your action change.

there will be other lessons in the future, i am sure. but i am mostly certain i have learned this one lesson well.


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