What if it’s not working? That is the first question to ask you before investing a penny out of a GIC. Unfortunately, losing money does happen when you get in the ring and try to beat the market.
Many people would think that you would not panic in front of a market crash. I was part them until that day. On that day, I stopped breathing for a couple of seconds and then I started gasping like a dog for the next hour. If you never that this feeling, here’s my story.
It happened last year. I was making good money on the stock market. I was up 71% in September. Everything I touched back then was turning into gold! I thought I was smart, but I was just lucky. Since I was on a strike, I decided to put 10K in a very promising mining company. The stock was going up and news was good.
I had many opportunities to sell and make a good profit (over 50%) but I decided to wait until the final analysis comes up. With good results, the stock could have exploded by 200% on the same day. I was totally excited by this picture. I was already thinking about my new bright red BMW…
The final results finally came up. They were definitely not digging at the right place as they didn’t find any minerals. That stock lost around 60% of its value in a single afternoon. It was a total disaster for my portfolio and for my BMW dream!
In the end, I lost 4K out of 10K in that transaction. It was almost all the profit I made so far during that year. When such things happen, there is a lot of “what if” or “I should have done this or that” that go into your mind. It was not a good day and it was not easy to tell my wife that I lost so much in one single day. I may not reproduce our discussion on that night… it was quite ugly 😉 However, you can learn from such situation.
I learned that I should never put a big chunk of my portfolio into one opportunity, even if it’s a slam dunk (yearh, right!). There is no slam dunk in the stock market. I also learned that when you are making good profit on a highly volatile stock, you sell. Cash the money and run!
I suggest you think about this piece of life and think about how you would react if you loose more than your monthly pay check in one day. What would you do? Would you still sleep well at night? Would start trading the next day?
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