In the midst of bull market with occasional corrections/ drawdowns, we see many memes for high flying stocks or cryptocurrencies that poke fun at how people are not excited about a certain security at low price, but everyone gets excited AFTER the security makes a big leg up.
We also see memes that poke fun about how investors say that they are waiting for pull-back to jump in, do not actually jump in when the stock corrects.
This is all captured in the saying “nothing moves sentiment like price”
I am not sure who said it, but it really speaks to the herd mentality that is common in investing.
In my view, that sentence is so important to keep in mind in both bull and bear markets.
We see so many cases when stocks move, everyone comes out with a reason why the stock price declined – many of which have been with the equity story for a long time before the move – it is mostly after-the-fact interpretation. This is almost useless because as we know in biotech, post-hoc analysis does not really mean anything.
Investing is more about psychology than analysis because even if your analysis is solid, psychology will prevent you from capitalizing on your research.
I fight this everyday and I resist urge to move out of a position in the midst of drawdown unless there is new datapoint that is thesis-change.
Obviously I would double-check my thesis because I COULD ALWAYS BE WRONG.
“Nothing moves sentiment like price” – herd will move left and right, but make sure you keep your sentiment AND thesis intact when you invest your precious, hard-earned capital.
Happy Investing!
*not investment advice
