Hi
This video is about a stock market case study when Sir Isaac newton lost money in South Sea bubble .
What happened to Sir Isaac Newton in 1720 might have a lesson for tip-hungry Robinhood traders in India and elsewhere, who sometimes try to judge a stock based on its name, or shun an IPO because of bad publicity.
Newton was one of the early investors in South Sea Company, which was founded in 1711 to trade with Spanish America. In 1720, the company bagged a deal to manage British government debt. As soon as the news spread, the price of the South Sea stock started soaring.
Newton, who was then the warden of the Royal Mint in London, wisely chose to book profits in April and pocketed a handsome gain of about £20,000, a princely sum in those years.
As the euphoria around the stock kept on inching higher with every passing day, Newton could not resist the temptation of buying the hottest stock in town once again.
The man, who developed the calculus and formulated the laws of motion, ended up buying the stock almost at the peak of the bubble. The stock underwent a precipitous collapse in September, most likely because investors began to realize their profit expectations were unrealistic. By October, the stock was worth less than a quarter of its peak price. It fall back near to same price again where it has started the price advance.
Crowd psychology or herd behavior, which dominated the stock market 300 years ago, is at play even today as tips on Twitter, Telegram and WhatsApp groups drive thousands of new retail traders and investors, who are in a hurry to make a quick buck.
Recently, an NBFC stock (Bombay Oxygen Investments) skyrocketed over 250 per cent in a month just because it has the word ‘oxygen’ in its name. Stocks of oxygen-producing companies are on a high on Dalal Street over the past week amid the medical oxygen crisis to deal with the new wave of Covid infections.
The learnings from this incident and investor behavior are :
1. Don't buy a stock just because its in news and everybody else is buying it
2. Always buy stock because of some reason and logic which can be fundamental analysis , technical analysis or candlestick charts .
I hope you will like the video
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