Reporting from New York — Investors are supposed to buy low and sell high, but the psychology of markets often leads them to do the exact opposite, buying just as a stock reaches its peak and selling when it bottoms out.
This is not true for just naive retail investors, as hedge fund magnate John Paulson proved in his latest regulatory filings.
At the beginning of last year, Paulson, who became wildly rich with a bet against the subprime housing market in 2008, was expecting Bank of America stock to hit $30 by the end of 2011. Instead the stock dropped over the course of the year to around $5. Paulson's big stake in the bank was one of many bad stock picks that helped lead one of his most high-profile funds to a 52.5% plunge last year, DealBook reported.
The regulatory filings Paulson submitted Tuesday show that the pain finally became too much, leading Paulson to bail out of his Bank of America position in the fourth quarter of last year, selling his $400-million stake in the company.