Taking a Dive

Hi there! Trust all of you to be well.

I'm not really in top shape. I took a series of lessons from Mr Market and the tuition fee he charged were really exhorbitant. Nevertheless, he made sure that I took note of the essence of his teaching.

Luckily, that was about 3 weeks ago.

Even if you were not interested in Financial News, you would have taken notice of the recent fall on our local STI. A drop of over 6% in the index within 2 days is no laughing matter. An individual stock can easily go down more than 3 times that percentage, no matter how good it was.

I am really glad that Mr Market pushed me out of the game earlier this month. I tried to purchase some stocks which I believed would continue rising. However, I did it without taking into account the general market sentiments. Naturally, when it started behaving abnormally (read: drop), I was worried.

But being greedy and optimistic (like all humans are), I decided to hold on to it. It was only when my "cut loss level" was reached that I acted. By then, I was too late for some of my holdings and had lost a bit more than planned.

On hindsight, I can only thank myself for having the discipline to cut loss when I was required to. However, I believe I could have managed the situation better. I was getting hopeful - A sign that I was denying what was happening.

So lesson learnt: If a stock doesn't behave the way you expect it to, run first, think later. No matter how marvellous the stock is, it is a lousy one if it drops below your cut loss level.