The pain of losing money - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

The pain of losing money

Dec 11, 2008

Over the past one year, we have witnessed stock prices fall like a pack of cards. Investors everywhere have deeply felt the euphoria of seeing the value of their stock portfolios swell to very pleasing numbers just around a year back. But what they have also felt, perhaps much more deeply, is seeing those numbers shrink faster than they could have ever imagined. The scars of that experience are going to be a big influencing factor on most investors' decision making for some time to come. Amongst many others, two things make investors' current attitude towards stocks very evident. Volumes have almost completely dried up on the stock exchanges, and IPOs are being treated like dirt. As they say, the pain of losing money is twice as much as the pleasure of making it.

But the crux of this article is just how much an experience of the past can influence decision making in the present. How much of that influence leads to wiser decision making is something that often goes unanalysed. At the valuations that many good companies are being given currently, investors are surely projecting out into the future what they have seen in the recent past. Warren Buffett likes to describe this by calling it investors' unshakable habit: looking into the rear-view mirror instead of through the windshield. What we observe looking backward, and what we are observing currently is making us very discouraged about the future. But the fact of the matter is that our excessive fixation on the past and the present is hindering the clarity with which we project the future. It is making sure that a certain amount of bias creeps into our vision of the future.

When times are good for long and many have made easy money, that's the bias that rules our projection of the future. And the same goes for now, when we have seen some very frightening events in the recent past. Investors are seeing the future as full of black clouds and impending thunder storms. Investors are projecting the credit crisis to continue. They are also projecting scarcity of capital and declining corporate profits to continue.

The fact that the current problem doesn't seem to be going away anytime soon makes today's situation even more frightening than the dot-com crash. The current problem is not of a single sector, it is of the entire economy - global and local. The current problem is a creation of years of monetary and financial mismanagement. And it will take some while for the issues to be resolved.

There simply seems to be no end in sight and no safe place to hide. And that is exactly why we believe that you should be buying stocks.

We are not sure which way the markets will move in the short run. In fact, given that the issues will still take time to resolve, do not be surprised if stocks continue to slide from their current levels. However, we believe that shares of companies with solid businesses and visionary managements at helm have been punished as bad as shares of companies with doubtful credentials. The former bunch is trading at discounted prices because of the Mr. Market's pessimistic mood.

As such, if you decide to buy these quality stocks today, we believe you will be more than pleased in a few years.

Equitymaster requests your view! Post a comment on "The pain of losing money". Click here!


More Views on News

The Top 6 Artificial Intelligence Plays in India (Views On News)

Dec 6, 2021

Investors looking to tap into AI theme need to keep an eye on tech firm leveraging the power of AI are making things possible.

6 Penny Stocks that Rallied 1,000%+ in One Year (Views On News)

Dec 6, 2021

These penny stocks shed their penny status by surging 1,000% or more in the last one year.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

How to Prepare for a Stockmarket Pandemic in 2022 podcast (Views On News)

Dec 6, 2021

The transition from a small correction to a market crash to a bear market may be without any warning.

SEBI Issues Operating Norms For Silver ETFs. Here is All You Should Know (Outside View)

Dec 6, 2021

SEBI has issued operating norms for Silver ETFs to ensure uniformity of the schemes.

More Views on News

Most Popular

The Demonetisation Debacle

Here are some insights on how the entire demonetisation drive unfolded...or should we say failed...

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Dec 6, 2021 (Close)