Or If You Prefer A More Accurate Title:
?The Simulated Loss Of My Money In The Stock Market?
I?ve just invested in the stock market. That?s something I would normally not do for two reasons. One is that I don?t have the funds for it, and the other is that if I did have some extra cash lying around, I?d rather stuff it under the mattress than lose the bulk of it.
There are many theories and investment strategies. One is my own strategy which I?ll call the ?Over my dead body? strategy. That?s right; someone would have to get past me and my arsenal to get my money. E-hem. If I had any?I mean weapons or money. But since all of this is based on theoretical considerations, let?s say for the sake of argument that I have a 357 Magnum and a shotgun, and that I would be willing to use the shotgun, depending on whether or not I?m in the mood to scrape someone?s theoretical blood and brains off my ceiling and walls.
Another, less messy approach is to place the money in stocks and oversee the investment myself. Pfft. Like I?m going to hand over my life?s savings (if I had any) to some character I know little about?except that he probably hasn?t served any time, YET. Anyway the cornerstone of the invest it yourself theory is the Greater Fool Theory, which Investopedia?the place that gave me the imaginary money?describes thusly: ?
?One of the assumptions of the discounted cash flow theory is that people are rational, that nobody would buy a business for more than its future discounted cash flows. Since a stock represents ownership in a company, this assumption applies to the stock market. But why, then, do stocks exhibit such volatile movements? It doesn?t make sense for a stock?s price to fluctuate so much when the intrinsic value isn?t changing by the minute.
?The fact is that many people do not view stocks as a representation of discounted cash flows, but as trading vehicles. Who cares what the cash flows are if you can sell the stock to somebody else for more than what you paid for it? Cynics of this approach have labeled it the greater fool theory, since the profit on a trade is not determined by a company?s value, but about speculating whether you can sell to some other investor (the fool). On the other hand, a trader would say that investors relying solely on fundamentals are leaving themselves at the mercy of the market instead of observing its trends and tendencies.?
So, there you have it. The cornerstone, but not the sole approach either. I rather like the idea of placing my new found loot into a company that has reasonably solid fundamentals and rely on someone overreacting to market trends. They say greed and fear are the two driving forces. I can believe that. Thus if one avoids greed and fear one is likely to lose less money than the other damn fool who has placed his mullah in the market, rather than under his mattress. (If you?re like me many people will have told you about losing half their money. Not something that any sane person would do, and yet it?s done?All. The. Time.
Well, not by me! ?Cause, cough, cough. I don?t have the money to lose. :(
Oh, well. I do now!!! $100,000 worth! Muahahahaha
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