Pigs get fed, hogs get slaughtered

What investor doesn't dream of strong profits? However, getting too greedy often leads to tricky situations. The stock market adage "Pigs get fed, hogs get slaughtered" is a warning against precisely that. Those who are satisfied with a nice profit are often more successful than those who suddenly want to shift into a higher gear to achieve even more. And more.

In layman's terms

Pigs are calm, get their food when they need it and grow steadily. Hogs go out and take risks because they are impulsive and greedy. And as a result, hogs risk being slaughtered.

In stock market terms, this means that those who see their profits grow steadily and cash in at the right time are successful. Those who get too greedy, tend to take sharp turns and keep wanting more and more without calculating the risks are bound to suffer a (severe) blow.

Who said it first?

The exact origin of this statement is not quite clear, but it has been a popular adage on Wall Street for decades. Former hedge fund manager Jim Cramer, for example, regularly uses "Bulls make money, bears make money, and pigs get slaughtered" as a warning to overconfident investors.

Is that really how the stock markets operate?

Absolutely, precisely because it is human nature to suddenly start to doubt your strategy. You start investing according to a great plan, but suddenly things start going really well. Instead of opting for a slow and steady approach, you decide to invest a lot more. If you don't, you fear you will miss out on a lot of potential profits. Until the share price suddenly takes a dive and leaves you with heavy losses.

Wirecard's hard fall

Payment processor Wirecard grew and became a rising star in the German tech universe. It joined the DAX index in 2018. Loads of investors were eager to jump on the promising Wirecard bandwagon. Despite rumours of serious accounting irregularities, many were blinded by the rising momentum. Those who took their profit when the share was at its peak (around 190 euros in September 2018) were laughing. But those who ignored the signs and kept hoping for even more were left holding the baby. The share price went into free fall and the company went bankrupt in June 2020.

Is it worth a try?

Are you going to play it safe or go on a stock market adventure? Are you drawing a clear line in the sand or do you want to rely on your gut feeling in your investments? What side of this stock market advice you end up on depends on what type of inner voice you allow to drive you.

Does Nokia still ring a bell?

In the early 2000s, telecommunications manufacturer Nokia was one of the jewels in the crown of European tech. Those who invested in the Finnish company in its early days were rewarded with attractive returns, especially around the turn of the millennium.

When the company seemed to be reaching its peak – around 2007 – many investors seemed to believe that its dominance would last for years to come. Until Apple and its competitors launched their smartphones. Investors who continued to buy Nokia shares at their peak or held on to them too long saw their price plummet. By 2012, Nokia had lost most of its value and had disappeared from many portfolios.

Expert insight: "Don't let yourself be talked into anything when things are going well."

Danny Reweghs is a stock market analyst, Director of Strategy at Trends Beleggen, and (co-)author of the book 'Haal alles uit uw beleggingen' (Get the most out of your investments) and various other publications on this subject. He has been one of the most experienced voices in stock market analysis in Belgium for more than thirty years.

"As a beginner investor, you often start with caution. But as soon as the first profits start rolling in, the urge to invest more as quickly as possible grows. However, shares with a rocketing price can hurt your return the most when things go wrong."

"I made this mistake myself in the late 1980s: the stock market was on the rise, I invested heavily, and then one day the markets fell by 20 to 30%. My profits were gone, and worse still, so were my reserves. Then all you can do is wait it out until the decline is completely over. Nobody wants to experience that."

"Too many investors increase their investments when it's already too late. They buy at the peak and are then punished mercilessly. Those who take a calm and structured approach are almost always better off in the long run. So be satisfied with gradual gains and stay in control of your portfolio."

"Don't let yourself be rushed into anything when things are going well or based on online success stories. Instead, write down for yourself why you are buying a share and after a while check whether your gut feeling is still right. Making a loss? Simply admit it and sell. At the end of the day, your accumulated return will always be the average of all your efforts."

Swiss investor powerhouse Nestlé

Swiss food giant Nestlé is a classic example of a share that has proven its value in the long term. Those who invested in Nestlé in the early 1990s and left their shares untouched have seen the share price rise almost continuously. Despite some interim stock market corrections, the share remained a stable choice in many long-term portfolios. Investors who stuck with this growth story have now built up a solid return. Admittedly without any spectacular leaps, but with a robust return over the years.

What should you bear in mind as an investor if you're just starting out?

If you don't want to get caught up with the hogs, it is important to ensure you control the investment process as much as possible. Here are a few useful tips to help you maintain an overview:

• Set a floor price for yourself in advance, a point at which you will sell without hesitation.
• Don't be swayed by the hype of the moment and even less by the opinions of those around you.
• Spread your sales: you don't have to sell everything at once.
• Explore automatic selling mechanisms such as stop-loss orders.
• Check your portfolio regularly (but not too often) and adjust where necessary.

From stock market wisdom to life wisdom

"Pigs get fed, hogs get slaughtered" is a plea for being reasonable, for making sensible decisions and for abandoning blind decisions. Those who learn to be satisfied when the time is right, often reap the best rewards. This is by no means an easy exercise, especially as a novice investor, but it is one that may bring you the most satisfaction in the long run.