[Summary]
The Tulip Bubble is a historical bubble in which exuberance drove up asset prices.
What is more likely to fail during the Tulip Bubble is not the lack of knowledge itself, but the fact that one hastily made a decision and then justifies it afterwards.
In actual investment, the starting point is to check the distance between price and real value. However, you need to be careful that if you dismiss it as an old story, you will miss the modern craze.
In this article, we will organize the tulip bubble not as "knowledge" but as a step to check before buying or selling. Don't rush to conclusions, read according to your financial amount and time horizon.
First thing to separate with tulip bubble
When looking at Tulip Bubble, first determine what you want to judge. The information you need will change depending on whether you want to know the meaning, confirm before buying or selling, or review your current holdings.
Especially for beginners in investing, the easier the words are, the more they tend to take them as a conclusion. The tulip bubble is not the only factor in making a decision. If you want to check it, it is more realistic to look at it in conjunction with fund management, holding period, and opposing materials.
Scenes where tulip bubbles are likely to fail
If we look at the tulip bubble as a failure pattern, we must first make narrow assumptions. It is important not to mix up whether you are talking about the market as a whole, individual stocks, NISA or long-term funds.
If you check the following points, things will be much more organized.
| Axis to check | Things to see at Tulip Bubble |
|---|---|
| purpose | What do you use to judge? |
| Time axis | Which is closer to short-term trading, long-term holding, or NISA? |
| basis | Which one is more important: price, business performance, interest rates, exchange rates, or psychology? |
| risk | When things go the other way, where should you look again? |
| action | Will it lead to buying, selling, or doing nothing? |
Points that can easily cause trouble in making decisions
Tulip bubbles don't only cause you to stumble due to a lack of knowledge. In fact, there are situations where we interpret something conveniently because we know a little bit about it.
- Don't decide to buy or sell the moment you see the tulip bubble
- Do not mix the time frame that fits the tulip bubble with your own holding period
- Don't increase your position to recoup your losses
- Don't make a decision just based on SNS or rankings.
The important thing here is not to decide on just one correct answer based on the tulip bubble. In investment, the meaning of the same material changes depending on the market, holding period, and amount of funds. When in doubt, prioritize confirmation over conclusion.
Checklist before buying and selling
Please check these 5 things at least before using Tulip Bubble as a basis for your actual judgment.
- Can you explain in one sentence the purpose of looking at the tulip bubble?
- Have you confirmed one or more countermeasures or failure conditions?
- Are you investing your living funds or money that will be used soon?
- Have you decided in advance the criteria for cutting losses, taking profits, and continuing to hold stocks?
- Are you making judgments based only on social media or short headlines?
Checklists are simple, but they prevent you from adding reasons after making a decision. The purpose of checking the tulip bubble is not to act faster, but to reduce unnecessary errors in judgment.
Summary
The tulip bubble is a material for organizing investment decisions. Even if you read it as a failure pattern, treating it as a standalone buy/sell signal will lead to poor judgment.
The points to keep in mind are as follows.
- Decide first the purpose of viewing the tulip bubble
- Do not mix time axis and amount of funds
- Check not only good materials but also negative materials
- When using NISA and long-term funds, consider how to handle losses
- When in doubt, reduce your position or postpone it.
The more knowledge you have, the safer it seems, but in the market it can become dangerous if you use it incorrectly. It is realistic to treat the tulip bubble as a tool to pause before buying or selling, rather than as a word to rush into judgment.