Swings and Roundabouts
No you're not imaging it - this is one of the longest periods I've gone without more than a few words posted to this here blog. More evidence that blog activity is inversely proportional to actual life activity. I didn't plan it, things have just been going well for me recently. My priorities have shifted and I'm enjoying finding a new equilibrium, shared with someone I care about.
But never fear! The geek within still burns strong. And the geek within has finally managed to take the gloves off, put some real money aside, and dive into the sharemarket. What an enormously energetic introduction to share trading! What follows is my impression of the events of the last few months, from the perspective of a first time trader.
By most accounts, my entry into the sharemarket coincided with a point that will be known as the beginning of the end. Nonetheless, I was confident that despite general market sentiment, I have the patience and critical thinking skills to find the undervalued gems in the rough. After all, even in a falling market individual stocks go up. I've since discovered that a falling market generates investor sentiment that affects all stocks - the occasional gains don't necessarily coincide with good business at all.
Traders continue to rationalise with the typical measures. The fundamental traders point to low P/E ratios, good management teams, cash in hand and product to sell as indications a stock is about to rise. The technical traders claim that the stock price chart shows a clear head and shoulders pattern, or that there are strong signs of support at a particular price and a crossing of the 30 day moving average. Of course, the majority of traders are not exclusively fundamental or technical, nor in fact, are they all on the same page. So while technical Freddy has spotted a broken resistance line and his buy signal is blaring, a million other traders have decided that Mars is too close to Aries and a sell is in order.
That's been the big lesson for me - share prices are not driven by the value of a company, but by the feelings of the buyers and sellers. If investors are gloomy, share prices fall across the board. Fundamental traders throw their hands up and say the market doesn't make sense any more, and the cycle repeats.
While I've seen every stock I've bought immediately go down, and continue a downward trend, my investment is shallow enough to still leave me with wonder and intrigue. Ultimately, my research and careful purchases are still susceptible to the sentiment of the next guy, who just lost $30000 of his retirement portfolio on an unexpected drop. The sharemarket is not a poker machine, driven by chance with a guaranteed long term return less than your invest, but it's still driven by humans and their collective irrationality.
I presently own shares in five companies, and I haven't quite calculated what large percentage of my initial investment I've lost so far. Last Friday was simply spectacular for the size of the losses across the board. My shares dropped about 20% on average, in one day. A kick in the guts for me, but truly shattering for others. But what do you do when prices are unusually low? If you have the cash, you buy! So naturally enough, two days later I had the best run on the sharemarket since I started trading, by a long way. It was enough to prompt this post, and convince me to save the day's results here for posterity.
Of course, the share I planned to next secure a position in (that's trading speak for "buy") isn't shown here, but FMG rose over 50% on this day. Trading, I'm hooked.