Quite frankly, no one can teach you to avoid these types of mistakes. It has more to do with knowing about your own psychology, gaining experience as an investor and making many mistakes that you are able to learn from. Every person is different and makes poor judgments in different ways.
With that being said, learning from the mistakes and experiences of others does count for at least something.
One example of a “panic sell” situation is that of Carnival Corporation (NYSE: CCL). Carnival is the world’s largest operator of passenger cruise ships with many thousands of vacationers riding on their massive ships every year. But in January of 2012, one of Carnival’s Ships, the Costa Concordia, hit a rock off the coast of Italy and submerged. 32 people died in the crash, massive rescue operations were undertaken, and the event was broadcast all throughout the world.
The crash of the Carnival cruise ship “Costa Concordia”.
Shares of Carnival plunged almost 20% in mere days as investors were spooked by a large amount of negative publicity. However, Carnival not only soon regained their losses, but later that year they traded at more than 30% higher than their previous lows!
What happened? Investors eventually came to their senses and realized that while the negative media attention was unfortunate, people easily forget things that they hear on the news. Carnival’s fundamentals were also still sound. A cruise ship may have sunk, but Carnival operates over one hundred of them. The loss of one was not only fully covered by insurance, but would cause only a small amount of damage even if it were not.
The advice to “Be fearful when others are greedy, and greedy when others are fearful” has truly been proven to be sound many times.
----------To be CONTINUED BY TOMORROW----------
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