It has been confirmed to me on an almost daily basis that investors are far more comfortable buying a stock that has fallen 10-20%, rather than one making new...

Nicholas Forsyth

Market Matters

It has been confirmed to me on an almost daily basis that investors are far more comfortable buying a stock that has fallen 10-20%, rather than one making new all-time highs. Unfortunately, human psychology is often an enemy for investors who struggle at rule 1 of investing/trading: •Run your profits and cut your losses. Consider the below analysis of stocks in the US S&P500 over the last 100 years: -After the stock market hits a 52-week high, the compound annual gain over the next year is 9.6%. That is an impressive outperformance over the long-term simply holding return, which yields 5.6% a year. -Buying when stocks are within 6% of their 52-week lows leads to compound annual gain of 0%! The above history illustrates perfectly that investors are far better buying new highs than new lows. You might want to catch a falling knife and buy when stocks are at new lows, but if you do acknowledge, the stock selection must on average be far better than buying stocks that are rising. See full report including BEN,BPT,FMG,Iron Ore,SKI. (VIEW LINK)


2 topics

Nicholas Forsyth
Nicholas Forsyth
Director
Market Matters

Market Matters is an online investment and share trading advisory service designed for those that want to take their wealth further. We specialise in advice for active share market investors, including those new to the markets or those with a Self...

Expertise

No areas of expertise

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.