Love is an integral part of our life and we should love and pamper our wife, husband, girlfriend, boyfriend, parents, children, siblings, and friends….etc. But we must always remember NEVER to fall in love with stocks! Just because you are working in a specific company or have made money from a particular stock before does not mean that you should buy and hold on to the stock blindly. Buying and selling decisions in the stock market need to be made with logic and reason, not with emotion.

Let’s take a look at Cosco Corp below, which used to be a hot potato in the Singapore stock market. Note that the phrase ‘used to’ signifies that its glorious days are already history.

The Ship That Sank Along With Their Money

Cosco is a famous shipping company in Singapore, and its stock has enjoyed spectacular ratings from several analysts and broking houses. Cosco’s share price has been climbing up since its IPO days and whoever bought it during its early days would surely have loved Cosco like crazy! However when its earnings started to decline during the 2007 financial crisis, a lot of people did not pay attention to how overpriced the stock really was.

The shareholders of Cosco were probably thinking “Come on, the price has fallen this much already, how much lower can it go?” Even when the stock dropped to S$6 from a high of S$8.20, they continued to reassure themselves that “good companies will always rebound” and “you just have to be patient in the stock market”.

Come On, It Can’t Go Any Lower.. Can It?

Sad to say, thousands of shareholders who believed in the “it can’t go much lower” theory was proven to be wrong over and over again each time the share price breaks a new low in front of their eyes. Some loyally held on and some even bought more shares on its way down, they totally regretted that decision when Cosco plunged more than 90% from its high of S$8.20 to as low as S$0.605!

The Other GLorious Stock That Gave Them Hope

I recall another famous stock that was on everybody’s lips during the time it was flying high – Creative Technology, a pipping hot stock that used to be loved by a lot of retail investors and big institutions, a name that all Singaporeans are so proud of.

Creative made its name from its famous Sound Blaster sound cards and was listed in NASDAQ. Its CEO Mr Sim Wong Hoo was even named the Businessman of the Year twice. Everything looked rosy with these great fundamentals and the share price rallied to a historical high of S$69.50 in Year 2000. Whoever bought Creative in the 1990’s would have seen their profits went up several folds and imagined themselves laughing all the way to the bank. However, little did they know that it was too early to call for a celebration as a disaster was quietly in brewing.

The Sad History That Never Fails To Repeat Itself

All eyeballs were on Creative when its price broke one new high after another, share-holders rubbed their
hands in greed praying that the stock will continue to shoot through its roof, more and more people were drawn into the chasing game after witnessing their peers’ glorious profits, nobody wanted to miss out on this “sure-win stock”, “gold mine stock” or whatever funny name they gave it.

But most of them have no idea what will be the highest price! In other words they did not know when they should sell the stock, and simply held onto it blindly. In the end, they saw Creative dropped all the way back to around S$2 near the end of 2008.

At the point of time I’m writing this article, Creative has very slowly climb back to around $6 since then, but I can tell you that it will take years before it will regain its historical high… if it ever does… Just like their Cosco friends, tons of shareholders out there would have thrown in more money into Creative thinking that this lucky stock will shine again someday and they will be able to recoup all their losses and even make more money from it.

Can you see that the group of people who stubbornly held on to Cosco and Creative have unknowingly allowed themselves to become what I call “Involuntary Long Term Investors”? More than often, they are just wasting long period of time waiting while missing out lots of opportunity costs because their attention and money are locked in Creative such that they turned a blind eye towards other stocks which could have actually made them more money.

Throughout my 10 years of trading experience in the stock market, I have seen the same old story happening to so called fundamentally good stocks like Informatics, Osim, Raffles Education…etc. And yet, many people are still caught up in the stocks’ former glory and failed to realize that their prices may never regain their all-time high within the next decade or even longer.

This is my sincere advice to all – please STOP FALLING IN LOVE with your stock. Eternal love in the stock market will only hurt your bank account, so when it is time to cut loss and part with a stock, do it promptly without any emotion.

Devote your affection to the loved ones around you and your returns will be greater than monetary rewards. Remember, fickleness should only be practiced in the stock market but not in real life, else you may end up like Tiger Woods!