The Gamestop saga had all the drama needed for a Hollywood movie.
And I must admit that there was a tiny part of me that wanted to participate in the action. But these days I know better than to follow the crowd when it comes to investing. Ultimately, I decided to avoid the GME trading because it was not in wheel house.
There are so many lessons that I took away from Gamestop that I will break down here:
- When stock news breaks it is often too late to get in on the wave. If you really want to capitalize on a stock you need to invested in it before big news breaks.
- You need liquidity. Part of the reason that Wall Street is able to do things that main street is not is because a hedge fund has a lot of cash on the side lines that they can deploy at a moments notice. If you are an individual investor it is important to set aside a certain amount of cash for a rainy day and an investment you want to take advantage of.
- Never have all your eggs in one brokerage basket. Robinhood shut down trading of GME on its platform, but if you have different brokerage accounts you could keep trading on those.
- Do not sacrifice long term gains for short term gains. The stock market is a long game. Unless it is your day job to trade, then stick to your long term plan.
- Wall street has tools that the average investor does not have access to.
- A determined group can have power.
- Do your research before you purchase a stock.
- In the short term the stock market is a voting machine, in the long term it is a weighing machine. – Warren Buffett
- What is your strategy? Day trading or long term investing?
- Cheap stocks can be volatile.
- Even in a bull market there are some stocks that are undervalued relative their intrinsic value.
- Just avoid “shorting” a stock.
- If you are lucky enough to take advantage of some short term gains, take some or all of your winnings off the table and be happy.
- FOMO is real and you need to avoid it.
- It has never been easier to invest in the market. Be careful.
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