The Art of the Exit: Knowing When to Take Profits in a Microcap Runner
In penny stock investing, finding a “ten-bagger” is only half the battle. The true test of an investor is the ability to exit that position with capital intact. Most retail investors suffer from “round-tripping”—the painful experience of watching a stock soar, only to hold it through the inevitable collapse. Learning the art of the exit […]
The Sunk Cost Fallacy: Why Microcap Investors Cling to Failing Stories
In microcap investing, the hardest decision isn’t when to buy—it’s when to admit you were wrong and sell. While institutional investors are trained to treat every dollar as if it were newly invested, retail microcap investors often fall prey to the Sunk Cost Fallacy: the tendency to stick with a losing position simply because of […]
The Canary in the Coal Mine: Why Microcap Weakness Often Precedes a Stockmarket Pullback
In the mining era, canaries were used to detect invisible, odorless gases before they became fatal to the workers. In the modern stock market, the microcap and smallcap sectors often serve the same purpose. While the “Generals” (mega-cap tech stocks) keep the indices looking healthy, a quiet retreat by the “Soldiers” (microcaps) can be the […]
Memecoin Casinos & Microcap Mania: Why the Cycle of Speculation is a Dangerous Gamble
Introduction From the dizzying heights of Bitcoin to the absurdity of memecoins spawned from internet jokes, the cryptocurrency market often feels like a wild frontier. Simultaneously, certain corners of the micro-cap stock world can exhibit similar frenetic energy, with stocks soaring based on narratives and hope. This isn’t new. History is littered with speculative bubbles, […]
QNC vs CRON – The Dangers of Herd Mentality and Irrational Exuberance in Microcap Investing
It is not uncommon for microcap investors to chase momentum and “stories” that latch on to a popular trend or topic. Over the years I have seen this with commodity rallies in gold or oil, world-class discoveries of other metals and minerals, legalization of Cannabis in Canada (and the two years leading up to it), […]
The Elusive Nature of Bubbles: Insight and Ten Books on the Subject
In 2024, crypto is creating bubbles in the microcap space while NASDAQ is being fueled by big tech. Predicting market bubbles is notoriously difficult. The line between a justified bull market and an unsustainable bubble can be blurry. Even the smartest investors can make mistakes either predicting a bubble that doesn’t materialize or missing one […]
Playing with Profits: How the House Money Effect Can Derail Your Micro-Cap Strategy
Micro-cap investing offers the allure of explosive growth and landing a multi-bagger can feel incredible, validating your research and risk-taking. But beware: those very profits, if not managed psychologically, can become the seeds of future losses through a common cognitive bias known as the House Money Effect. Understanding and combating this effect is crucial for […]
Understanding the Psychology Behind Short-Term Investing and the Gamification of the Stock Market
The investment landscape has undergone a significant transformation in recent years, moving beyond the traditional image of patient, long-term wealth building. Today, a growing segment of investors is drawn to the fast-paced worlds of short-term trading, cryptocurrency, and other asset classes that offer the potential for rapid gains. This shift is fueled in part by […]
Peter Bernstein on Being Wrong & Benjamin Graham on Managing Risk
“After 28 years at this post, and 22 years before this in money management, I can sum up whatever wisdom I have accumulated this way: The future is not ours to know. But it helps to know that being wrong is inevitable and normal, not some terrible tragedy, not some awful failing in reasoning, not […]
The Greater Fool Theory and How it Applies to Penny Stock Investors
The Greater Fool Theory is a dangerous concept that lurks in the shadows of every speculative market, and it finds particularly fertile ground in the world of penny stocks. It suggests that you can make money by buying overvalued assets – even fundamentally worthless ones – as long as there’s someone else (a “greater fool”) […]