Thursday, February 1, 2024

“What’s Happening?”

Whenever the price of a share goes down, the most common question asked around would be “what’s happening to this stock?”. I got asked this many times before, and most of the time, I do not know the answer. On occasions, I would be criticized for not knowing, with comments like “you are a shareholder, how would you not know?”, etc. I admit I do not monitor the market 24/7, and I am not on anyone’s alert list, so that’s that.

Curiosity is a human trait, and naturally we will want to know the answers if something happens. The main problem is, however, at that point of time, not many people know what is really going on. To find the answer, we would have to look for it (via Google or word-of-mouth), but this gets tricky when the happening is constantly evolving with old and new (and sometimes wrong) news coming in.


In the realm of investing, when the share price falls, there is something going on with the company concerned. Is it that the company missed its expected earnings? A major tenant not paying their rent? A product recall? When these questions are popping in one’s head, note that the price had already fallen.


While it is good to know what is going on for later analysis, there are probably many people who knew of the news faster than you had exited their positions, thus leaving you in what is called a bagholder situation. By then even if you knew the answer, what are you going to do about it?


This is a reason why I seldom show concern whenever a share of mine had its price dropped, because these can be avoidable if the right company is selected in the first place. If the company is fundamentally sound, such drops would likely be less catastrophic than those weaker ones. In fact, this may present a buying opportunity for averaging down. 


It is always good to take a step back and see what is going on by reading the reason(s) for the dip, conduct a quick fundamental analysis regarding its present and potential future, before making a sounder decision.

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