• Thursday, December 07, 2023
businessday logo


Stock investing isn’t a game, no matter how it looks


Buying and selling of stocks looks like a game, but it isn’t because some money is involved. For every one who buys, that means someone sold. Each in the deal is feeling to have struck a good one, but the long term decides who carries the day.

In this game of money therefore, one must understand the trend and play with caution. It is not a band wagon thing, as those who have lost will have their ugly side of the tale.

Year after year, major financial sites like scare readers with advice “sell, sell, sell.” After a while, they go ahead again saying something is going to be good for a quarter …“buy, buy, buy!”

The inference is that anything urging long term ownership of stocks is generally absent and now one wonders why.

Navigating the markets isn’t hard, the longer term the moving average a stock remains above, the stronger the support levels will be.

Frank Robert, a financial analyst recent said: “The problem with the consensus of many in the markets is that they feel the influence or temptation to pile all of their money into whatever stock is performing the best for the day rather than spreading their liquidity to various stocks that have upside potential.”

“I usually like to reference the moral of the story of the tortoise and the hare, slow and steady does win the race. As great as it may seem to be tempted to go all in to a stock that’s performing well, it is better to catch a stock on a pullback if it holds support above shorter term moving averages. It alleviates overall risk while at the same time spreading the likelihood of sustaining collective gains over a long period of time,” he said.

Robert believes that adding positions over time and in turn increasing levels of liquidity and the scope of leverage over a variety of stocks will help to not only increase average daily gains, “but also alleviate anxiety of risk as long as you buy into stocks that have upside potential rather than stocks at a premium just because they are outperforming for the day. That only puts liquidity at a higher risk of losing money and likely one of the reasons people feel the markets are rigged rather than buying on weakness.”

According to Ross Poldark, an investor, “There are two games in town: equities and foreign exchange. The equities game is that as long as the market remains too big to fail, the politicians won’t allow it to. I will only go down if everyone else is in the boat with me.”

“This might as well be headlined – Stop “investing” in the stock market. The analytical elite, who have enough money to buy the best information and flatten any market discrepancies, are the very few who should be in the market. Everyone else is just guessing against a “fair coin” what will happen over ANY given time span. This is especially true of choosing between one company against another. Any advantage has already been priced in,” Poldark stated.

Chuck Jaffe, a senior analyst with MarketWatch said, “Whether you are talking about the Stock Market Game or playing the stock market in real life, there’s a lesson that investors need to keep in mind at times like these: Don’t confuse a bull market with brilliance.”

“Sure, the game teaches folks that they can beat the market. But it is only a few participants — in the game or the real thing — that do. What real life proves is that you are probably better off if you forget about “beating the market” for any long stretch of time, and simply make sure you are participating in it — with a balanced, cautious, diversified approach — for a lifetime,” Jaffe said.