Consequence of chasing stock prices: The live example

When stock prices move people become impatient both on upside as well as  downside. After 16th may people went crazy and bought whatever they can feeling they should not get left out. The consistent rising prices created perfect trap which sucked in most people. Today some of those junk names are down 50 - 60% from their June 2014 high.

In a post titled "Stocks to avoid under BJP govt." two stocks were specifically highlighted in bold that must have been avoided. But euphoria was so high that those stocks went up significantly over next 1 month. People were excited and still bought those stocks at higher levels without understanding the consequences. Today one of that stock is down 35% from it's level on 16th may and 50% from it's June 2014 high, while the other stocks is flat since 16th may but down 40% from June high.

You can check that post here

Moral: Never chase a running or falling stock price. List 5 solid reasons why you are buying or selling a particular stock. By this practice alone you will be ahead of many stock market pundits on street and achieve superior results. It must be remembered that succeeding in investing or trading doesen't require MBA degree in  finance. People with reasonable knowledge but with very high self discipline and control over emotions are likely to achieve much better result than people with MBA & Phds with fickle psychology and emotions. 


Sandeep BS said...

Amit whats the future of DLF shares and shareholders now? Will they have to wait for 6 years to recover their money?

Amit Agarwal said...

Real Estate per se is not a very great business model as far investing in their stocks are concerned. It has all the inherent qualities of a bad investment like high gestation period, black money management, very large ticket products and low ROE, ROC. DLF was bad at 1000, it's was still ridiculous at even 200 and it's not even a buy at 100 bucks. It could be a punting stock but definitely not an investment stocks. Minority shareholders should invest only in companies with high management integrity otherwise losing money is a given.

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