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One Up On Wall Street

The 12 Silliest & Most Dangerous Things People Say About Stock Prices

In this chapter Lynch talks about twelve silliest things that he has heard people say about stock prices and thinks that one should dismiss them from their mind:

 

  • If stock prices have gone down by this much already, it can’t go much lower.
  • One can always tell when a stock’s hit bottom.
  • If a stock has gone high already how can it possibly go higher? Lynch says that this is a terrible reason to snub a stock.
  • There's not much to lose if it is only $3 a share—whether a stock costs $50 a share or $1 a share, if it goes to zero one will still lose everything.
  • Prices always come back eventually, which is also not true because lots of stocks don't come back.
  • There's a tendency to believe that there is always darkness before dawn—which means that if things have gotten a little bad it can't get worse.
  • When a stock rebounds to higher levels – the investor plans to sell— no downtrodden stock ever returns to the level at which you've decided to sell.
  • Why worry? Conservative stocks don’t fluctuate much—there is no stock that one should afford to ignore because companies are dynamic and prospects change over time.
  • It’s taking too long for anything to ever happen—patience is the key to create wealth, so it is important to be patient.
  • Look at all the money I’ve lost: I didn’t buy it! —one doesn't really lose anything by not owning a successful stock irrespective of it being a ten-bagger on Wall Street. Somebody else’s gains cannot be considered as your own personal losses. It is not a productive attitude for investing in the stock market
  • I missed that one, I’ll catch the next one—there is no next Home Depot, no next Amazon, no next Costco. It’s better to buy the original good company at a high price than it is to jump on the similar or next one at a bargain price.
  • The stock’s gone up, so I must be right, or, the stock’s gone down so I must be wrong—don’t confuse prices with prospects unless you are a short-term trader looking for 20-percent gain in the short-term.

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Units 22/24