Fire, Fire! ๐ฅ
Red hot fire with stocks in the red seems to be the prevailing fashion these days and obviously 3 prevailing points of view have come to light. See which one applies to you.
Fire in another house ๐ ๐ฅ
This is the situation where you see a massive sell down leading to stock price crashes in an industry or asset that you have no investing in.You can say, "it's other people's house so I'll just stay out, eat my chips and watch the show." For example, the massive sell down in $Tesla Motors(TSLA)$has no impact on me whatsoever. EV is still an industry that I am honestly figuring out and choose to learn from the side lines.
Fire in my house! ๐ฅ๐ฉ๐ฅ
In this situation, your stocks, assets or positions got red. Consistently red. You might be wondering "WTH or WTF am I doing?!". Or you might be proudly or quietly confident that "Things will turn out right. I am in an unsinkable ship." For example, there was an investment I made that sank 5%, then 10%, then 20%, then 50% and then 90% from its peak. Am I still vested? Fortunately or unfortunately yes. You get the idea.
Fire sale!!! ๐ฅ๐ฅณ๐ฅ
Yes, this the situation like 11.11 or the Great XXX Sale! All the companies, assets or instruments that you have been looking at suddenly gave a massive discount. Prices can drop from 10%, to 20% to 30% and in extreme cases to even 50% or more. You will be thinking "This is such a fantastic opportunity with a huge discount and there's no way I'll let this go by without investing in it." For example, I had this stock that went on a massive sale in 2008 and I didn't invest because of a lack of funds. Kicked myself when it subsequently soared. In 2020, when the great sale presented itself again, I fired in and am now sitting comfortably with it paying me regularly in dividends and with a huge appreciation in share price. Huge enough for me that is. (Almost a 1 bagger, ie 100% growth). Of course I have to humbly state it is nowhere near the multibaggers that the gurus hold and I am looking forward to head there.
Key point: Are you looking at Fire in another house, Fire in the house, or a Fire sale?
So what can we do about it?
Firstly if you cannot differentiate between the 3 situations, congratulations, you are likely a newbie. Or a confused person investing but notan investor. Please take time to read up, attend courses (after fact checking), get mentors and invest in yourself. Trust me, the time and money will be more well spent vs loss of a ton of money, time and sleepless nights.
If you are looking at fire in another house, youcan consider the following questions. What can I learn from here? Is this a possible Fire sale? What are the risks involved? Can I invest in another industry or instrument instead that can have a better risk:benefit ratio? Is it within my circle of competency?
If it's fire in the house, ask yourself these questions. Why did I invest in the first place? If you cannot remember why you are speculating. Simple as that. Get out as soon as possible. Ismy investment thesis still valid? Is this an opportunity or a value trap? Should I reduce risk by selling out some (Think Munger when selling1/2 of $Alibaba(BABA)$), or should I average down and buy some more?
If it's Fire sale, check yourself with these questions. How certain I am if it is a sale? Is my original investment thesis right? Is this a temporary correction or a permenant change in fundamentals? Fallen angel or dying company? Is it a cyclical? Average down in time (eg buy every month) or average down in position (Buy at 10% 30% 50% drop)?
Bottom line: know your situation andthen cross check your assumptions. Then take massive action.
Ultimately, when fire ๐ฅ hits, you have to thinkcool and move fast. Make sure you are affected by greed or fear and take action fast. The window of opportunity has a fixed time gap.
What are your thoughts?
Have you been hit by fire? ๐ฅ
What situation was it?
What did you learn from it?
Love to hear from you and learn from you too!
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