Did you know that it is possible to marry stock or any other assets?
A good example of this Ron BaronOne of the most popular investors He is a leading investor in Tesla. Baron invested $400 million in Tesla in 2014. At Tesla’s peak, Baron’s investment in Tesla was over $5 billion. He rarely sells the stock and often buys it on dips.
It is also maybe To marry stock as a day trader. This is your place The habit of trading one currency pair or a stock over time. You may have made a lot of money trading the asset and decided to stick with it.
In this article, we’ll look at why you should never marry a stock or other asset.
Married to stock meaning
The idea of marrying stocks is a relatively simple one. It indicates where You become addicted to one stock or any other stock.
In most cases, people marry stocks because of their strong historical performance. For example, in the case of Ron Barron, he was about to marry Tesla because of its strong historical performance.
Another good example An investor married to a shareholder He is Warren Buffett, who has been married to Coca-Cola for decades. He initially bought Coca-Cola in the 1980s and holds it to this day. During this time, he generated significant returns as Coca-Cola’s market capitalization rose to over $260 billion.
Related “ Powerful lessons to learn from Warren Buffett
Some of the dealers are also married to some of the stocks. We’ve seen Many day traders who only trade one stock or group who are they. While this strategy can work well over time, the truth is that it sees itself missing out on more market opportunities especially when trading conditions change.
Why marry stocks?
A common question is why should a trader or investor marry stocks. There are several reasons why this might happen.
They think it is undervalued
First, investors often marry stocks because They think it is undervalued. Investors who do this believe that the broader market undervalues the company. As a result, they believe the stock will continue to perform well over time as the true value is reflected in the market.
Warren Buffett has always invested in Coca-Cola because he believes investors undervalue the company.
Related “ Steps to search for, analyze and trade undervalued stocks
They believe in its opportunity
The second reason why investors marry stocks is just that They think it has a strong chance in the financial market.
A good example of this is Ron Barron, who believes the company has an excellent chance of success in the future.
He expects it to be the dominant player in the electric vehicle industry even as competition rises from the likes of BMW and Nio.
historical performance
The other reason to marry stocks is due to its historical performance. This is where you get a lot of success over time with your stock investment and decide to hold it for the long haul.
For example, if a stock has made you a lot of money historically, you might be afraid to let it go.
Why you shouldn’t be married to stocks
There are many reasons why you should not be married to stocks. Let’s break down some of the top reasons why you should never do this.
You can miss the alternatives
First, you don’t have to be married to the stock because you are It can make you miss out on alternatives. For example, if you only focus on an EV company like Tesla, you can miss out on the opportunity to invest in other equally good companies in the industry.
As a day trader, if you focus on one stock, you can miss out on opportunities, especially when the stock you’re married to is in a narrow range. So, Expanding your scope can help You become a much better trader.
Related “ FOMO in trading
Wrong entry points
Sometimes, when you’re married to a stock, that probably is You will have the wrong entry points. In this case, you will often buy a stock even when it is not performing well.
Also, you can buy it from above even when it is overpriced or overbought. We’ve seen many popular investors buy assets that are clearly overvalued.
Related “ Best entry and exit indicators
overexposure
Meanwhile, the marriage of stocks It could lead to overexposure, which is often a bad thing. For example, we have seen many popular traders who tend their portfolios to certain industries simply because they adore certain stocks.
For example, Bill Ackman’s portfolio consists of Chipotle Mexican Grill (CMG). While the stock has performed well over time, so does the risk A major problem can lead to significant performance impairment. For most investors, it is highly recommended to have a well-balanced portfolio.
biased decisions
The other risk of marrying stocks is that She often makes biased decisions. For example, sometimes, for investors who believe in the future of electric vehicles, it is often impossible to convince them not to buy electric vehicle companies.
How to overcome the marriage of stocks
There are several strategies that will help you avoid stock marriages. some of them:
- Have a clear trading strategy You must have a good broad based trading strategy. You should take more time to get a good trading plan.
- use your Trading Journal – A good trading journal can help you become a good trader by listing the key decisions you make.
- Uses Risk management strategies – You should always have the best risk management strategies in the market. This includes having a balanced portfolio and stop-loss for all of your trades.
- Identify the main driving factors – The next thing to ensure is to focus on the most prominent market drivers and identify key opportunities.
summary
In this article, we have looked at the main concept known as equity marriage. We have also explained why you should always avoid getting too addicted to one stock, currency or commodity.
Useful external sources
- What stock have you been holding for the long haul? Was it worth catching? – Quora