The chatters in the market

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Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance. – Warren Buffett, who became a billionaire through stock market investing

 

There was one time a group of business investors who were about to face St. Peter and know whether they’ll go to heaven or not.

One investor got bored and blurted, “A large oil deposit is discovered in hell!” Suddenly, there was a rush going to the south.

When everyone was gone, the guy started walking towards them. St. Peter asked him, “Where are you going?”

He answered, “I’m going as well. There might be some truth to it.”

Opinion doesn’t matter

Fact does matter. A few years back, I used to visit the PSE library, which was then located in Ortigas. I was a newbie that time and I had library-mates (for there were also frequents there).

I sometimes would have a chitchat with them about the market and share what stocks we held. One time I shared mine and told them I have MPI (Metro Pacific Investment) and PNB (Philippine National Bank).

One of the guys told me, “mahina na ngayon si MVP (Manny V. Pangilinan), (MVP is not doing well anymore).”

When I checked my stocks, indeed MPI was not moving. I thought, my library-mate was probably right. I listened to him. I sold my shares. The next thing I know, MPI’s shares began to climb. Urrrgghhh. Talking about listening to others’ opinion.

The same thing also happened to my PNB shares.

My point is, once you’re in the stock market, you will hear a lot of noise. And if you listen to them, you’ll be in trouble financially.

Tsismis (chatter) in the market is so powerful that it can convince you to be excited or fearful which may eventually lead you to buy and sell on a regular basis.

I must admit though that it is probably human instinct to listen to rumours for a quick profit (or avoid immediate losses). Just the thought of quick profit compels investors to try it. Even the analysts and advisers are into it.

Since the PSEi just reached the peak of 8,127.48 points on April 10, many advisers now are happy and urging people to get in so they can ride on this surging stocks. It’s like you’re missing something big if you don’t participate in it.

But here’s the thing: you will pay the price for listening to rumours.

Many have already lost money (instead of pocketing more) simply because they minded rumours than did their assignment. Remember that chatters are distractions. Tips are unfounded.

 

Source: Yahoo images
Source: Yahoo images

 

It’s like gambling

If you put your money in the stock market based on tips and rumours, it’s not anymore investing but gambling.

If you hear lines like “P5 daw ang presyo nyan (it is rumoured that its price is P5),” know that it’s just a chatter. Such claim is most of the time baseless and unsupported by facts.

And the funny thing is, people who usually spread this kind of line are brokers whose objective is to have more commission; or traders who are ready to dump their shares when its price starts to climb.

When you listen and act to these chatters in the market, don’t expect a result that’s different from buying lotto tickets. Your chance will be very slim.

One time, a friend of mine called his broker and the latter gave him a tip about a certain company. He bought its shares, but only to find out later that the tip was untrue. The worse is, my friend told someone to buy also shares of the same stock.

They are not anymore in good terms since then.

Remember what Warren Buffett says about brokers: “[They] don’t get paid to tell you to do nothing; they earn a living by promoting activity.” Be careful then whom you listen to.

So, ignore the noise. If you keep on listening to rumours and tips, it will prompt you to trade more causing you to pay more broker’s commissions and taxes. In the end, you earn less and your broker earns more.

Do your homework. Put your money only in big and profitable businesses which you are familiar with. That way, you’ll experience the abundance that’s behind the gate where St. Peter stands.

 

Disclaimer: Stocks that are mentioned are not recommendations for you to buy or sell them.

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