Last Updated on October 4, 2006 by stlplace
I started this “stock lesson” series because I want to write down some of the mistakes I made on the stock market in the past few years. I hope I can avoid making the same mistakes in the future; I also hope others can learn from my mistakes.
OK, back to the subject. I have talked about enough about “Grass is not always green on the other side”, find your own rythm (stocks and trade pattern), the investment goal and plan, all these good stuffs. Now comes the practical question: when to buy? when to sell?
This seems like an easy question. I think we all want to buy low and sell high, so that we can make money. But how do we know whether a stock will go down or up when we buy it? Remember our good friend Warren Buffett once said “buy when others are scared; sell when others are greedy”. Fair enough. But there are some caveats on this one. I have done this: in Spring 2004 I bought some Nokia (NOK) stocks at $17.xx when it released earning below expectation. And I bought more at $14.xx a week later when it said it would miss the next quarter earning estimates too. The main reason is Nokia is a bit slow releasing those Flip phones which are more popular in the US market. They lost market share to competititors. So here is the mini lesson one: don’t try to catch a falling knife. When the earning is bad, and everyone is selling, why would I fight against the market? So what was my results? The stock went down as low as $11 before it recovered to $17 in one year. By that time I already lost patience and sold it at a loss.