IF you want to understand how the stock market works, think back to the good old days when we travelled by airplane.
Before you fly, you have to do your homework. A long time ago—when fares were regulated—you had to decide which departure and arrival schedule was most convenient. Then you chose whether to pay for a big seat, champagne, and filet mignon or a small seat, coffee, and burger steak. Homework done; flight booked.
Now it’s considering how far in advance do you need to book to get the biggest discount, how much your baggage is going to cost, and if you want to pay extra to get the seat location you desire. You schedule your flight—and often your vacation— based on the airfare.
Also, back then it was a safe blue-chip stock, or a stock which price went nowhere but paid a higher cash dividend, or a “double your money or lose it all” issue. Now it is “potential back-door listing,” “ten-times oversubscribed IPO,” or “The oligarch family would NEVER let the price fall on their flagship company.” And of course, “Who’s the jockey? That’s what I want to know. ”
Travelers on commercial airlines are like stock market investors. Both want to be the first onboard and both want to be the first to get out. A little secret: When I was flying sometimes as much as one international flight every two or three days, I cheated by using a cane when I came to the boarding area. I was able to both get on and off before the others. Don’t hate me. I couldn’t pretend to be pregnant.
There are advantages to being on the plane first and being on the stock before anyone else. However, with both planes and stocks, it is getting to the destination that counts. Actually, last on the flight means you do not have to fight with all the other passengers for the overhead luggage compartment. The flight attendant will always find room someplace for your luggage. Just make sure it is securely locked.
Likewise, it is better to be buying in on the stock after there is a confirmed uptrend. You may miss the higher initial jump. But your goal is to take the long trip and not the short one.
Approximately 30 percent of the global population has at least some fear of flying. That is probably a lot less than “fear of the stock market.” But we all know that flying is safer than travelling by automobile. Putting your money in a bank is “safer” than the stock market. But you cannot go to Thailand to see the elephants by car. You cannot even beat inflation with the best bank deposit. Reward means taking risks.
The reality is that unless you fly on a Boeing 737 MAX or fly on Pakistan International Airlines or SCAT Airlines out of Kazakhstan, there should not be any problem. Likewise, those that recently bought Abra Mining and previously invested in Calata expected super high returns and therefore should have understood that the risks would be higher.
But unlike on the airplane, the stock market does provide a parachute. It is called the “Sell Button.”
Plane crashes are rare. But if you are concerned, know that the large majority does not cause fatalities. You can go so far as to check which particular seats on the plane are the “safest.” By the way, do not sit in the cockpit. That is the most dangerous seat on the plane.
You can fly safely and gain the rewards. You can invest in the stock market and gain profits. Just learn how to do both.
E-mail me at [email protected] Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis provided by AAA Southeast Equities Inc.