This Time Its Different
They have been called the four most dangerous words in investing. Beware whenever you see the words “its going to be different this time” used to justify why it is worthwhile to join in the latest investment mania. The mania will probably last longer than you think it will but it always ends in the same way – by not being different this time.
Professional traders who are very disciplined and accustomed to using stop-losses are the ones who truly profit from speculative bubbles & manias because they are the ones who hang onto their winnings and do not end up by giving all their winnings back again cometh the downturn. The true professionals follow the trend up, get out & then switch to the bear tack and profit on the way back down too.
From a practical investing standpoint and no matter how compelling the argument du jour used to justify why it is going to be different this time, just don’t fall for it. The market may sustain the latest investment mania for longer than speculators betting against it can stay solvent but, rest assured, it won’t be different this time. As an investor you don’t have to bet against the mania, you can simply choose to protect your capital by not participating in it.
Tags: dangerous words, manias, professional traders, speculative bubbles, stop loss, this time its different
May 8th, 2009 at 11:35 am
Hi Antonne,
How true! And what you say is not only true of the investment world; the same can be said of the internet marketing world, where a more common maxim is “Don’t buy if you think it’s THE answer”. It won’t be.
And there is also a VERY good reason why they say, “History repeats itself”. What happened last time will happen again in the same circumstances.
In a high pressure world where impulse often overtakes common sense, it’s good to get a reality check! Thanks!
Susan