Ever heard a story about a town sheriff caught a driver for speeding? The driver argued that most of the cars passing that main road were speeding as well, but they were not caught anyhow. The sheriff replied: “have you ever went for fishing in the nearby lake, and caught all the fish there?”
Similar to the stock (share) market; it is impossible for an Investor to capture all the maximum possible gains.
An Investor can either have a mindset of ‘Optimizing’ or ‘Maximizing’ that drives his / her behaviour in the stock market.
| Optimizing Behaviour | Maximizing Behaviour |
| Meticulous research of a company before investing in its shares | Technical Analysis (TA) of the historical chart, e.g. candlestick, resistance level etc |
| Long term investment | Short term investment |
| Average annual gain (loss) can be as high (low) as +- 20% | Average annual gain (loss) can be as high (low) as +- 100% |
| Have confidence in the company it invest in | Company performance is not as important as what the market is doing to its shares (being bought up / sold down) |
| Buy the shares when it is deemed to be undervalued | Buy shares based on TA |
| Sell the shares when it is deemed to have reached beyond fair value; or when the company starts underperforming | Sell the shares when share price has reached the peak; or share price is trending down (sometimes keep the shares regardless, hoping for a U or V curve) |
| Risk is moderate | Risk is high |
Whichever behaviour an Investor adopts, he / she should be aware of the risks and be prepared for the loss to be incurred in rainy days.