Opportunities and Pitfalls in a Bull Market: A Guide to Investment
By Wang Yandan, Journalist at Everynews
In just 25 trading days from September 24 to November 4, many stocks on the Shanghai market have more than doubled in value, giving rise to a few "monster" stocks. These stocks' repeated fluctuations have greatly boosted market sentiment, but also spawned huge risks. On November 1, the exchange emphasized that it will maintain a strict monitoring attitude towards trading behaviors such as stock manipulation, concept chasing, and blind reorganization. On November 4, many high-flying stocks fell to their daily lows, with investors who chased them losing heavily.
Under the backdrop of a bull market, the overall atmosphere tends to be more optimistic, and investor sentiment is more easily ignited. However, as Warren Buffett's teacher, Graham, said, "The main reason ordinary investors lose money in a bull market." Blindly participating in high-flying stocks or repeatedly buying and selling at the peak is an investment taboo that many investors may fall into again and again.
From a psychological perspective, it's because investors tend to get caught up in an emotional state when they see some stocks performing exceptionally well. They might think that if they don't invest now, they'll miss out on the opportunity. However, investors must clearly see that some extreme fluctuations are not based on fundamental values and may be orchestrated by institutional investors or major shareholders. Ordinary investors often lack comprehensive information and are easily swayed by market sentiment. Once the market wind direction changes, stock prices will face enormous pressure for adjustment, which could lead to frequent "one-digit" falls, making it difficult for ordinary investors to sell and causing unpredictable losses.
In a bull market, opportunities and pitfalls coexist. When faced with the temptation of stocks skyrocketing or plummeting, I advise that investors should remember that steady progress is key to achieving their goals. In specific operations, it's essential to pay attention to the following four points:
Firstly, delve deep into a company's fundamental values and industry position before making an investment decision. Only by truly understanding a company's value can you remain calm in market fluctuations.
Secondly, monitor closely any information that may impact a company's stock price movements. Changes in lock-up shares, major shareholders' stakes, or other key factors often signal potential risks for investors.
Thirdly, pay attention to market sentiment and trading volume changes. In recent days, some stocks have seen single-day turnover rates exceeding 30% or even 50%, which indicates a massive disconnect or risk in the market. A company's stock price may surge after a period of consolidation, but it could also plummet sharply. At this point, investors should be cautious and consider reducing their positions rather than chasing every last cent.
Fourthly, maintain patience. Investment is not gambling, but a long-term strategy based on fundamental values. Don't abandon your investment principles due to short-term market excitement. Wait for the best entry point and be prepared for a more stable return.