Now I am eating a humble pie while writing this useful lesson for all investors. As much as I hate to expose my own mistake, I consider this lesson is very useful and essential to all investors.
Jaks share price has been falling from Rm 1.84 in February to close at 50 sen yesterday, a drop of 68% in 8 months, as you can see the chart below.
You can see the above chart that Genting has dropped from Rm 5.10 to close at Rm 2.86 yesterday, a drop of 48% in the last few weeks. Genting has been dropping faster comparatively. In both cases, all the shareholders are badly wounded.
Yesterday the total volume changed hands for Jaks was nearly 130 million shares and I sold about 20 million shares. Besides my selling, there must be a lot of people also selling.
Who would sell so many shares at this unrealistic price?
Fortunately, I have been selling at higher prices for quite some time to meet my margin call. I must admit my mistake in buying too much Jaks using margin loan.
There must be a lot of shareholders of Jaks are being forced to sell to meet margin calls. The more they sell the more the price would drop. Forced selling is a vicious cycle.
You can use margin loan to buy more shares. You will make a lot more profit when the share price is going up. But you will lose more money when the price is dropping. Margin loan is double edge sword. It cut both sides.
Most investors cannot control their emotion. They are egoistic and greedy. When their shareholdings are going up, they would not sell and like to boast to all their friends that that are so clever to have bought them at much lower prices. The biggest problem that most shareholders have is greed and refuse to sell early to take profit. Profit seems like a dirty word. While the price is going higher, they continue to boast.
Genting has dropped from Rm 5.10 to close at Rm 2.86 yesterday, a drop of 48% in about 1 month. Genting has been dropping faster comparatively. In both cases, all the shareholders are badly wounded.
Yesterday the total volume for Jaks shares changed hands was nearly 130 million shares and I sold about 20 million shares. Besides my selling, there must be a lot of people also selling. Who would sell at this unrealistic price?
Lessons
1 Develop the ability to control your emotion.
2 Do not borrow too much to buy shares.
3 Eat a humble pie to cut loss. Many investors cannot would sell to cut loss.
4 When the price start to drop, you must also start to sell.
5 Life is full of challenges, but don’t give up because life is also full of solutions.