Swimming Naked = Using Margin to Buy/Sell Stocks
The recent news has been filled with topics of investors getting burnt by the falling markets.
I will like to think that these people who are getting burnt are primarily those who are buying on margin and using leverage to maximise their positions.
While the market is doing well, things are fine and dandy and they make enough to actually be able to make a living out of it.
However, as one of the Buffett quotes is good to describe this scenario when the market sinks.
"You only find out who is swimming naked when the tide goes out."
Thus, these investors have been caught with their pants down when the market sinks.
The best way to invest is with your own money so that your holding period is longer and you are able to ride out the bear period as the bull will always appear next. When it next appears is the million dollar question and answer.
Sources:
1. Burnt by the Markets.
2. Singaporeans feeling blue over the stock market turmoil.
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