Business & Investment

The average investor loses a shirt

Speculative: This word is often used to describe the crypto market.Still, after what happened Gamestop (NYSE: GME) At the rally, it’s no exaggeration to say that speculation can be as powerful as moving stock prices up and down, especially if you gain traction in social networking circles and build legitimate “hype”. There is none. Cryptographic price.

Whether you attended a rally, made a profit, or lost a lot of money, there are some lessons to be learned from the rally and the dangers of riding a dangerous and short-lived tide.

Disadvantages of following hype

Easy to see Gamestop hype As a kind of justice, individual investors are servicing institutional investors who have shorted Gamestop for quite some time by creating short squeeze games. The rally started with the Reddit group and was caught in a storm on social media, and now even mainstream media. I can understand why.

From the beginning of the year to its recent peak on January 27, Gamestop’s inventory has increased by more than 1,900%. This is beyond how Bitcoin has grown from its post-crash lows in 2017 to its peak in 2020.

And while it was a glory for those who bought and sold at the right time, it caused many average investors to lose their shirts on this bet. According to analysts, that usually happens when short squeeze reaches its inevitable end. For the average investor, betting on the machine (more precisely, betting “late” on the machine and not withdrawing on time) did not work very well.

Even if the minority won the short squeeze and was a different minority than the elite, the situation was only worse for the average investor.

Good old long-term holding

For the average investor, playing “trader” once in a while is not a good omen.It is safer to stick to a good long-term holding strategy (even if it is Not so explosive).One affordable stock you might think of, especially for an appetizing yield of 8% Timber Creek Financial (TSX: TF).. The payout ratio is somewhat volatile at 119%, but it is sustainable for now. And given the history of payout ratios, the company has the potential to succeed without reducing dividends.

The company saw a slight increase in revenue in the previous quarter, but looking back, it has been increasing revenue every year since 2012. The company is financing the commercial real estate business. Most of the loans are short-term, so companies don’t have to wait long to make a profit. Companies like Timber Creek are filling the gap left by traditional lenders, banks, and real estate companies are asking them to fund many of their projects.

Stupid takeaway

One of the key points from the Gamestop Rally is if you want to play a trader, or if you want to capture the benefits of the hype that is being built, try it with the money you risk losing. So if you win, you win big. However, losing does not seriously hurt your overall financial position.

The average investor loses a shirt The average investor loses a shirt

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