Alberto Costa warns against FOMO during the 2021 GameStop surge, when the stock rocketed from under $20 to over $480. He argues the wild swings reflect speculation, not real business improvement, and urges disciplined trading and risk management instead of chasing quick gains.
January 30, 2021
As low as $4
Values cited include $1213 and "more than $480"; also a jump from "less than $20" to "more than $480".
Fear of missing out. We talked about that in the past and I think this is a very good opportunity to remind yourself what it is and why it is very dangerous. You may have heard the recent increasing price of GameStop. You can see here the share price on the screen. It was trading at around 10:20. If we go back you will see it was as low as $4 and then it went up to 1213 and then boom. Look at here, it's like more than $480. Can you imagine from less than $20 to more than 480. That's crazy. That's something that maybe you have seen only in bitcoins, behaviors like that. And GameStop is not going up because it's doing particularly well. Business side. It's just a speculation. Now what is interesting is that many people are now experiencing what I call fear of missing out. Actually, it's not my definition, but I made it very clear in the past that this is very dangerous. Why? Because fear of missing out is pushing people to buy something that they should not buy. Exactly. Because they feel that they are missing a great opportunity to make money. But because of this fear of missing out combined with the greed, they are overlooking the danger of entering a position now that the price is so high. Of course high can be higher, but the more parabolic behavior you observe, the more likely the price will crash because eventually will. So for those of you who are thinking that I will be sharing something about the reason why the price is going up so much, if it's good to buy, if we should wait, I will tell them. I'm not going to answer to that. Because if you are asking yourself these questions, you're missing the point. That's exactly the difference between gambling and trading or investing with a specific plan, specific risk management, and even more important, a very, very clear mindset. Because I know it's very easy to know that you have your plan, your trading rules and everything is there. And then when you see something like that, the reaction will be, okay, you know what? I don't care about all these. I just want to buy to make some easy and quick money. So when something is easy and quick, usually it's not going to end well. And you see here already after the big jump in price, there was a huge drop and then it went up again. The point here is, are you really looking for opportunities, if you want to call them opportunities, like this one where you may be lucky, and I want to stress this word, lucky, to make some easy money. Considering, of course, that there is also a huge risk if you enter now to lose everything. Or would you rather choose an approach that is maybe not so exciting, but will guarantee you something more stable, with returns that are more realistic and even more important, more consistent? Because things like that, they don't happen all the time. I don't remember who said that. I read in a book. I think it was a trader. And he says something that I think is a very, very good summary for commenting, something like that. And the sentence was something like, if you are trading or investing and you want excitement, just take your money and go to Las Vegas. So again, this is my comment. Do you want to get some excitement with GameStop? Your choice. Eventually the money is yours. The choice is also yours. See you next time.
