Page 373 - How to Make Money in Stocks Trilogy

248 BE SMART FROM THE START

Everyone loves to buy stocks; no one loves to sell them. As long as you
hold a stock, you can still hope it might come back up enough to at least get
you out even. Once you sell, you abandon all hope and accept the cold real-
ity of temporary defeat. Investors are always hoping rather than being real-
istic. Knowing and acting is better than hoping or guessing. The fact that
you want a stock to go up so you can at least get out even has nothing to do
with the action and brutal reality of the market. The market obeys only the
law of supply and demand.
A great trader once noted there are only two emotions in the market:
hope and fear. “The only problem,” he added, “is we hope when we should
fear, and we fear when we should hope.” This is just as true in 2009 as it was
in 1909.

The Turkey Story
Many years ago, I heard a story by Fred C. Kelly, the author of Why You
Win or Lose, that illustrates perfectly how the conventional investor thinks
when the time comes to make a selling decision:
A little boy was walking down the road when he came upon an old man
trying to catch wild turkeys. The man had a turkey trap, a crude device con-
sisting of a big box with the door hinged at the top. This door was kept open
by a prop, to which was tied a piece of twine leading back a hundred feet or
more to the operator. A thin trail of corn scattered along a path lured turkeys
to the box.
Once they were inside, the turkeys found an even more plentiful supply
of corn. When enough turkeys had wandered into the box, the old man
would jerk away the prop and let the door fall shut. Having once shut the
door, he couldn’t open it again without going up to the box, and this would
scare away any turkeys that were lurking outside. The time to pull away the
prop was when as many turkeys as one could reasonably expect were inside.
One day he had a dozen turkeys in his box. Then one sauntered out, leav-
ing 11. “Gosh, I wish I had pulled the string when all 12 were there,” said the
old man. “I’ll wait a minute and maybe the other one will go back.” While he
waited for the twelfth turkey to return, two more walked out on him. “I
should have been satisfied with 11,” the trapper said. “Just as soon as I get
one more back, I’ll pull the string.” Three more walked out, and still the man
waited. Having once had 12 turkeys, he disliked going home with less than 8.
He couldn’t give up the idea that some of the original turkeys would
return. When finally there was only one turkey left in the trap, he said, “I’ll
wait until he walks out or another goes in, and then I’ll quit.” The solitary
turkey went to join the others, and the man returned empty-handed.