We all go, or have gone to the theatres to watch our favourite movies on many an occasion. The long wait in even longer queues for our tickets at the ticket counter or booking them online, and the excitement of buying popcorn, snacks and cold drinks at the refreshment stalls is something that I’m sure all of us look back on fondly. Then, once the doors to the screening room open, there is the mad rush of excited people pushing and grappling with one another, overcome by the sheer impatience of finding and settling into their seats before the action begins.
Once the movies begin though, they do sometimes fail to live up to expectations for a variety of reasons, ranging from things like the movie being a bit of a drag because the pace is too slow, an undercooked plot, sub par acting, to things like the movie being a bit too tragic and having to watch the good guys suffer for the best part of the film. When this happens, people sometimes tend to leave the theatre early because they haven’t enjoyed the film, happy that they have saved themselves from having to watch the rest of it. But just take a second to think about it logically.
When you leave the theatre early because you haven’t enjoyed the film, is the person at the ticket counter, or the website on which you booked your ticket going to say, “Oh I’m so sorry, you didn’t enjoy the film. Here’s a refund of your ticket cost.”? Absolutely not. And what if the movie actually got better as it went on after you left had a happy ending? Neither did you get your money’s worth on your ticket, nor were you able to experience the closing thrill of the happy ending. Overall its a lose-lose situation for you, rather than a win-win situation, as you had thought it to be.
Things work exactly the same way in the stock markets. When we buy our stocks and enter the theatre that is the stock market, we go in with all the enthusiasm that we will hold on to our stocks for years on end and compound our money. But things change drastically once the stock market movie begins. Let me first warn you about the perils of watching the stock market movie. The stock market movie is as good as anything out there when it comes to playing around with your emotions. It can throw up scenes of extreme joy one minute and a scene from a bona fide horror movie the next. This takes investors’ emotions on a roller coaster ride and many investors find themselves incapable of putting up with it. The most horrific scenes are usually thrown at investors when the quarterly results of their companies are released. A couple of bad quarters for a company and its stock takes a sharp and sometimes long nosedive, thereby almost always forcing investors out of their positions with losses. And just like the person at the ticket counter in the theatre, the stock markets are never going to be benevolent enough to refund your losses.
That’s the dark side dealt with, time to look at the bright side. The bright side of watching the stock market movie is the fact that the longer you watch it for, the better it gets, and most importantly, the stock market movie always has a happy ending. Of course, there will be a few horror scenes along the way, but in the end, it will all be worthwhile. As long as the fundamentals of your company are in place, remember that a great company going through a few bad quarters is not a bad company. Also remember that until you choose to book out your losses, the stock market can cause your money no harm. Most importantly, remember never to leave the theatre too early, because there is sometimes darkness before there is light, and the darkness of the horror scenes in the stock market movie is what makes us fully appreciate the light of the happy ending at the end of the stock market movie. Here’s hoping that you find the story of the stock market movie more than useful in your quest to achieve the best possible investment returns.