Tuesday, October 22, 2013

Burnt by high-flyers

For those who have been reading and why I have been so hesitant on investing in Tesla, it is because I have been burnt in the past by high flyers such as Jet Blue, Taser, etc.

High flyers are basically due a bubble that has occurred. A stock market bubble is a type of economic bubble taking place in stock markets when market participants drive stock prices above their value in relation to some system of stock valuation. Behavioral finance theory attributes stock market bubbles to cognitive biases that lead to group think and herd behavior. Bubbles occur not only in real-world markets, with their inherent uncertainty and noise, but also in highly predictable experimental markets.

Like I mentioned yesterday, any type of bad news that comes, the stock drops a lot. There are investors who do this for a living and will beat you to the punch in terms of executing sell orders to lock in their profits. Although the upside is high, the downside is very high as well. In my opinion, it's not a safe investment for conservative investors by any means.

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