Happy New Year to everybody! Stock market Double has got me really juiced about the year to come. We started chronicling my attempt to double $10k in the market in less than one year on December 12, 2011. So far the account is up 17%, not bad right?
This endeavor started me thinking of the risk/reward factor when it comes to investing. Risk creates anxiety and fear, both of these emotions effect investors' decision making. I myself, love that this is true. Other people's fears is what creates opportunity to profit. A classic example of this would the BP Oil Spill. That occurrence has served as a model for my investing. BP stock got hammered and cut in half in the beginning of 2010. It went from over to 54 to less than 27 in a few months. Everyday there was doomsday report from the media. The stock then proceeded to go from 27 to over 40 in a month. Now that is a great risk/reward opportunity. Meaning, the risk was that yes, if you got in at 27, maybe it could have gone down even further but quite frankly, so what? BP is a behemoth that like any other oil company deals with oil spills all of the time. For sure they are structured to expect this kind of setback but investors didn't really see it that way and sold it down to half its value.
Point being, be happy that Wall Street has become an act now think later kind of community because this creates opportunity. When the dust settles and they start thinking again, the stock is going to rise and rise very fast. Take advantage of these opportunitiies.