The late 2000’s were a rough time. The United States economy was in the biggest decline since the great depression and a young Gabe was testing the waters of investing after a conversation at the gym with a friend. If you’ve read my blog before, you know I’m a huge fan of investing, but that doesn’t mean I didn’t have a ton of horrible rookie mistakes. Let’s look into my worst investing mistakes.
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I am not a financial advisor and do not offer financial advice. This article is for informative purposes only. If you are seeking advice, look for a professional in your area.
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Investing Mistakes 1: Sold Apple at $18.5
(Price is adjusted after stock split). My first investment was Apple. I was so excited because the iPhone had just been released, I didn’t see how I could lose! I placed the trade at around 10 pm (After Hours, The market is closed and your trade doesn’t go in until the next morning). Little did I know that they had just released their quarterly earnings report, and the stock pulled back so my $10,000 investment lost about $300. I left it there for about a week and since things didn’t get better, I sold.
Lesson: The stock market will have its up and downs! If you believe in the company stick with it. The market is meant to fluctuate, don’t let small changes scare you. I did jump back into Apple at around $50 and sold at about $100. Yes, I would have gained another 50% if I would have held it, but I’ve learned not to be greedy. If I have a good enough return, I’ll sell and take my earnings.
Investing Mistakes 2: Hunches
Once my family found out I was investing, there was a slight rise in interest of the investment world. My brother decided it would be a good idea to invest in Concurrent Technologies. Not familiar with it? Neither am I. But it was priced like at $0.60 (again, pre-reverse split) so obviously, it had to go up right? We all ended up putting in a couple of thousands since I didn’t want to be the one to lose out if it went up. Well, we lost about half of the money we invested. We were down about $3000 between the three of us. I didn’t sell right away, I actually ended up doubling down when the price was down, and as it rose, I sold and only lost a few hundred dollars.
Lesson: Stop trying to get rich quick. The stock market is meant to be for long-term investors. There is a way higher chance that you’ll end up losing money by investing in penny stocks. If you can’t picture the company being here in 10 years, you shouldn’t be investing in it.
Investing Mistakes 3: Too Big To Fail
Financials were in a bad spot in those years. But a good investor buys when on others are scared right? Washington Mutual was the biggest deposit bank in the United States, and as they were my personal bank, I figured there was no way the company would go under. There were rumors of course, but every bank was in trouble. I go in with about $1000 and made about $700 in a day or two. I sold to keep those $700 on a Friday. Monday morning they had declared bankruptcy. The government seized the bank and sold it to JPMorgan Chase. My shares were worthless.
Lesson: Where there’s smoke there’s fire. I don’t solely invest on financials, but you do have to somewhat accounts for the finances in the company, In those days, Washington Mutual gave everything away for free. Bring in $1 and you can open an account with free checks, free savings, free debit card, etc. That was great for the customer, but the bank pays to maintain all those accounts and they were bleeding money left and right. Mix that in with bad mortgages, and it became a sinking ship.
These are just some of the mistakes I made in those years, but I don’t regret any of them. The investing mistakes I made would end up teaching me more than any class could. Ultimately there are a few major lessons you can learn from me to avoid an investment mess:
- It’s not a get rich quick scheme. Before investing, look up what your bank account pays you in your savings account. If it’s 1%, and you earn 2% in the stock market, consider it a success.
- Don’t Be Greedy. The goal is to make money, but a good part of being profitable is learning when to walk away with your winnings.
- Don’t Gamble. The Casino is way more fun and you might get a few free drinks from it. The market is to earn a return from a company you wouldn’t mind being the owner of.
Learn more about the basics to investing here.
What investment mistakes did you learn from when starting out?