Sell off Stock, forget the market?

Discussion in 'Stocks' started by GUG01, Aug 4, 2008.

  1. GUG01

    GUG01

    I'm basically a total newbie when it comes to investment, I figured instead of having my money sitting around collecting dust I'd invest it in more or less safe picks.

    So around 3-4 months ago I bought EWZ and Brk.b, since then I'm down ~12-14% and a little over 4k.

    This isn't a ton of money to me, but still annoying to see these 3-4% drops in a single day.

    Anyways, EWZ tanked another 5% today and I’m a little fed up with all this and really want to just sell off everything and get back into the market when I'm a little more knowledgeable.

    Does anyone think this is sensible, or am I just being a classic moron that buys high then sells low?

    Anyways, thanks for any input
     
  2. Buy first, ask questions later.
     
  3. DUMP DUMP DUMP
     
  4. dsq

    dsq

    brk should do ok and you probably bot it at an already low price?

    bear market now...we're probably half way through it...market may bottom in 6-9 months..
    I guess your mistake was buying in a bear and not waiting for a new uptrend to develop before buying.Essentially you were bottom guessing or trying to catch a falling knife.We all make mistakes.
    Determine a max loss you can handle and bail out if it hits that point.
    you can get back in anytime after that.MArkets are psychological.
    Read some of the old classic books.

    Jesse livermore by edwin lefevre and tech analysis by edwards/mcgee.Find them at your public library or ebay,amazon.


    Like livermore said "speculating is as old as the hills" .......and the way people trade today is the same as it was 100yrs ago as500yrs ago etc...


    btw,your demoralized feeling now is widespread.In fact the market bear sentiment is at unseen levels-over 50%-this is an extremely bullish signal.There should be a big rally once the commodities are finished getting creamed.Remember all that commodity cash will be looking for a new sector to pile into.Back into discounted equities is my guess.
     
  5. With regard to EWZ, keep in mind it's really a commodities play at this point, especially steel and oil, which explains today's large drop. Where it goes from here is anybody's guess.
     
  6. Your mistake was buying without having done thorough research, along with having little understanding of valuation & fundamentals. This makes it impossible to have the conviction and knowledge necessary to hold on through market fluctuations.

    Example: if I understand an industry, and stock valuations, and see that stock X is selling for 50% of its liquidation value, I can buy with conviction, then wait for recovery while I collect dividends. If the stock falls another 50% I'm fine holding on, reinvesting the dividends, and even buying more. If I buy stock Y, which I know nothing about, and it then falls 50%, I will have no idea if it's an even better buy, or going much lower. I will have no idea if it will ever recover. I have nothing to base any analysis or expectations on. The only thing I know for sure is I'm down 50%.

    In the first case I have conviction and knowledge, and so I can make the right decision. In the second case I have no clue and am therefore likely to either get forced out of the position at a huge loss, or hold on and watch it go even lower.

    You've done the classic mistake of buying for what you thought was an investment, only to find out that after price declines, you aren't comfortable investing in the first place.

    The way to know if something is an investment is to ask yourself - if the price fell 50%, how would I react? If the answer is anything other than "buy more", then you are not investing, you are gambling.

    So, IMO you don't have any rationale for your "investments", you didn't do any research or analysis, and so you have no conviction. You're what is known as a "weak long" i.e. someone who will eventually sell out if the price declines far enough. You are in the uncomfortable position of having to either sell at a loss, or hold on and potentially lose even more, because you lack the staying power to hold on for years if necessary, and average down.

    My advice is to cash out your EWZ, read up on investment, then either decide to follow a passive ETF diversified buy & hold strategy, or do proper value investing a la Buffett. BRK you can hold because it is reasonable value and has top management, so it's a classic bear market buy & hold stock. Just make sure if it falls another 25%, you buy more or at least hold on, not sell. If you are going to sell 25% lower, then better to sell now.

    In future, do your research *before* you gamble with your life savings.
     
  7. U need to read this to understand that we may have a long ways to go!

    http://www.hussmanfunds.com/wmc/wmc080805.htm

    The problem is that the big boys believe a global downturn is coming (or already here) and will take the life out of commodities which is the lifeblood we're talking about here...
     
  8. Excellent advice there by Cutten.
     
  9. I would add that commodities (and infrastructure) is still a great long term bet.

    Remember: if you're reading about a sector in the financial press - it's too late. The market has already had a run up and will very likely go down in the short term.

    But, again, if you're looking twenty years down the road, I doubt you'll regret it...
     
  10. Its still a bull in my books.. just go for SDS, QID or DXD :p
     
    #10     Aug 5, 2008