A stock starts falling the day you buy it. Ever happened to you? Let’s understand why? 😫😫
Consider a stock X with
- Very strong fundamentals
- Correct valuation
- Small cap
- Relatively unknown to retail investors
All these factors make this a high growth potential stock and hence big investors(FII, DII, Mutual Funds) have this stock on their radar. 😎
Now this entire process happens in two phases,
Phase 1 — Accumulation ✅
- Big Investors start accumulating this stock part by part
- The stock price increases gradually without even getting noticed
- After a significant growth, even if some investors notice it, they won’t dare to take it because it has already increased a lot
Phase 2 — Distribution ✅
- When big investors plan to exit from this stock, they need someone to offload these shares
- They start spreading good news about this stock. A kind of euphoria is created. Every news channel and people around you start talking about it
- This time, you are made to believe that this stock is wonderful and will keep on increasing forever
- You finally make an investment at a much higher price and it starts falling from there.
A very recent example of this is the Indian Crypto market. In the past 2 years, crypto like Shiba Inu increased million folds but no one ever talked about it. 😒
But by the time it was about to get dumped, everyone started talking about it. 😓😓
- Crypto was the front page headlines in the newspaper.
- Everyone was opening an account to buy Shiba Inu
- Everyone was made to believe that it’s price will keep going up and up forever
And today, many investors are in huge losses in the crypto market. 😭😭
What could be done?
- If you notice a huge euphoria for a particular stock, stay away from it ✅
- Invest only if the stock is fundamentally strong and trading at proper valuations ✅
#StockMarket #euphoria #StockMarketEducation #StockMarketPsychology #StayAwayFromStockEuphoria #cryptocurrency