One day a fellow man decides to invest his money in a stock market in an anticipation to make a good bucks within a couple of days.
He made a profit , but not a good profit.
The gentleman purchased a stock for Rs.100 each. The markets ,economy and global business were good.
Suddenly a Panic & Fear erupted like the volcano about Demonetization announced in the country. Analysts started to brag about economic crack down, economic slowdown ,a few of them talked about recessions.What the analysts did not talk about was that effects will be short and it is an positive step towards white collar economy.
The Stock suddenly fell from Rs.100 to Rs.80 in 2 trading days.
Getting in fear he did not have conviction to buy further at a huge discount. It is said that “Discounts are friends of Purchasers” ,but due to fear he did not purchase or choose to average his price at lower cost.He felt that he has lost 20% of the investment and never had conviction to buy on dips.After a few days markets were up and trading normal stock prices shot up to Rs.110
Stock again corrects to Rs.105 and in fear he sells all the stock at 5 % profit. Now all the weak hands are out of the stock and only strong hands are left with their holdings in the stock.Now since there is less selling pressure from weaker hands stock moves above Rs.150-160 .
Profits can be exponential in stock markets but one needs to pick up right stocks with right set of fundamentals , right conviction and then hold them with patience with price target in mind.
Warren Buffet the worlds second richest person rightly said the following quote :
“No matter how great the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.”