Can you really make money in the stock market?
Typically when the Philippine Stock Exchange index (PSEi) surges, stock picks of virtually everyone — from self-proclaimed gurus on Facebook or Twitter to friends and family members who, just a few years back had no idea what a stock is — appear to be spot-on and profitable all the time.
In reality, however, the euphoric bullish state of the stock market simply deludes some investors into believing that they are genius experts making infallible guesses all the time. Indeed, during periods of hype and boom, it’s easy to make money.
Everyone’s a genius?
If you bought any of the darling stocks during bullish periods, expect to be laughing your way to the bank in just a few weeks’ time.With almost all stock prices rising, who’d lose money in that setting? Even an unknown company with no confirmed profitable operations would usually yield outrageous stock returns.
That’s because “everyone’s a genius during a bullish market”, as the old adage goes. The optimism and euphoria further drives up prices, with more newbie investors being enticed to invest in stocks with the promise of “easy money”.
The cycle simply continues, but be warned: making money consistently (i.e., every day, every week, every month) is not sustainable.
The “new normal”
In fact, a 1-2% daily loss seems to be the “new normal” recently. This could translate to mounting losses for an investor day after day.
Fact: in the beginning of 2018, the PSEi peaked at 9,000 points but months later, the index slumped and settled at just above 7,000 points. That’s a 2,000-point drop equivalent to losses of around 20%!
This means your investment of P100,000 during the peak period of the PSEi would just be worth P80,000. Ouch!
Delusion of intelligence
So is stock investing a losing proposition all the time? Not really.
It is lucrative and profitable — but only for those who truly understand how stock markets really work. Here at PinoyMoneyTalk, we try to contribute to investor education by posting informative articles in an attempt to diffuse the delusion of intelligence that usually permeates during bullish periods.
Here are some of our popular posts that you can read and re-read in order to bring sense back into the chaotic but exciting world of stock market investing.
Summary: In this article, we encourage all investors to assess and craft their investment objective first. Having an investment objective ultimately determines one’s investment actions. Once this is done, the investment objectives can be matched with available investment options. For all you know, you shouldn’t be investing in stocks in the first place, given a different investment objective.
Summary: Need some inspirational quotes while managing your stock market losses? Here are 10 sensible quotes from popular and successful investors to help you rethink about your investment philosophy.
Summary: In this article, we highlight that humans are investors who sometimes make irrational decisions when they follow their emotions. Know how to succeed in the stock market by understanding the typical cycle of emotions in stock investing.
Does this make us experts in this field? Not at all. Does that mean you should trust everything we say? Definitely not.
What we’re just trying to emphasize is that true financial success lies in a person’s ability to make informed and intelligent investment decisions. The winners are those who study and learn; those who consider a variety of perspectives but, in the end, take control of their own actions.
It is our simple goal here in PinoyMoneyTalk to join you in your quest for financial freedom by giving you what we believe are useful information to help you emerge as a stock market winner.