"I personally dont make mistakes when I go in large" (Shrewd Crude)
Quote:
Originally Posted by
Shrewd Crude
When an investor buys a stock based on fundamentals, they buy because they see value, future value...When the stock prices falls, that value increases...so the more it falls, the greater the attractiveness of the stock...
Right! - so the more they buy!!! Here is a salutory example of just such an approach. Read all these comments carefully - there is a lot to be learnt a lot from a chart such as this. Observe the pernicious practice of "averaging down" in action!
Regardless of what Shrewdy claims, the fact is that everybody makes mistakes. The important thing is what you do after that. To my mind, it is crucial to recognise any mistake early and to do all you can to limit the damage. The posters here were so sure that they had assessed the fundamentals of this stock accurately that they were unwilling, indeed unable to accept that they had got it wrong. Some even bragged that they never used stop-losses! Month after month, their optimistic prognostications were crushed as the inexorable downtrend continued. They were in a hole but did they stop digging? No, they dug deeper, buying more and more, averaging down as the shareprice progressively collapsed. Throwing good money after bad. See how these posters influenced each other with their comments - threads like this become support groups for those that have all made the same mistake. The effects of "group think" are all too evident as they lead each other down the garden path.
http://h1.ripway.com/78963/PEM2008.gif
This stock is now at less than 40 cents. I haven't named it in an attempt to protect the identities of the poor misguided sods that wittingly or unwittingly contributed their comments to this chart.