STREET DOGS: Stocks and socks
Why don’t we buy stocks the same way that we buy socks?
Adapted from Investment Thoughts: Imagine that the price of the average stock declined 50% in one year. I can think of three ways to describe this: 1. Stocks on sale! 50% off, first come first served! (positive). 2. Average stock prices 50% lower than last year. (neutral). 3. Stock market crashes! Stocks lose half their value! (negative). Which one do you see the most? The last one. Which one most suitably describes the general mood of the investing public? Again, the last one. Now, if we were talking about socks, we’d have: 1. Socks on sale! 50% off, first come first served! 2. Average sock prices 50% lower than last year. 3. Sock market crashes! Socks lose half their value! Which one do you see the most? When it comes to socks, I bet you’ve never even seen the last one. What the heck is the sock market? Maybe you’ve seen the second one if you work in the sock industry. But basically, you would see only the first one. So why is the way most of us buy stocks so different from the wa...
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