Three Little Pigs In The Stock Market - Part 3

Three Little Pigs In The Stock Market - Part 2

We often hear this:

"Bull makes money. Bear makes money. Pig got killed!"

The story of  the 4th Little Pig who got killed was not widely told.

Bull is greedy to make money. Bear is greedy to make money. But Pig is even more greedy and always trying harder to make even more money.

Pig doesn't born on its own. Pig is a transformation from a Bull or Bear. When a Bull or a Bear becomes overly greedy and wants to make even more money; it transforms to a Pig when the overly greedy Bull or Bear begins to lose even more money.

Who is the 4th Little Pig?

The Piggy Couple or the Piggy Family

The Couple (Husband and Wife) and The Family (Father, Mother, and Children) all jump into the same investment product or stock because one of them believes he or she is a savvy investor and becomes a babe magnet to other family members.

A Pig is born when they begin to lose money and the whole family begins to suffer and everyone in the family looks at each other and wondering who else in the family is safe.

The Piggy Good Value

The stock price plunges further and dividend yield surges up. It has become even more attractive and the investor keeps averaging down and has little or no concerns of portfolio being over-exposed to this stock. The truth is Bear Market may seldom last very long but for individual stock it can remain low for years or even decades through the next Bull or Bear cycles. Don't ever mistaken the past dividends as how your future passive incomes will be like.

When the stock price plunges even further and now more money is lost and  the Good Value Bull has transformed into a Piggy Good Value. 

Cow becomes Pig

It is great to leverage and make even more money than one using only his or her limited resources.

Why does leverage work? 

At its heart, you are borrowing someone’s assets and reaping the benefits. It’s like borrowing a cow and selling the milk! What a great idea!

Don't worry. I have a great and carefully thought of plan. It will works! Nobody would like to stop and believe that Murphy Law and Black Swan will happen to them. These will happen to others but not me!

It’s great until the cow runs off. Now you’re stuck — you owe a cow and don’t have one to return. The risk of leverage is investing that debt and losing what you borrowed, which can wipe out any profits. This is when a Cow turns into a Pig.

So there is some truth in the common hearing:

"Bull makes money. Bear makes money. Pig got killed!"

So it doesn't matter if you are a bull or a bear but don't ever transform yourself into a Pig!