Humble Beginnings – Adventures of a Stock Investing Newbie
… the market literally imploded. How I reacted to it was epic in all proportions.
To kickoff the INVESTING category, it’s only appropriate to narrate how my stock market career started. I’m not going to lie. It was disastrous. =p
…..
I was very fortunate to have found the stock market at a very early age. However, If you had seen my portfolio in the beginning, you wouldn’t have called it so “fortunate”. From the outside, it was actually quite regrettable. I, like most amateur stock market investors, began my career on a whimsical dream of getting rich quick.
In 1999, I opened up an Ameritrade account. I was going to be rich, and I knew it. The day that my account was settled and funded, I got up early in anticipation of the market open. I tuned into the “Money Honey”, launched my trading platform, and began trading with my eyes wide open and emotions on my sleeves. I fell in love with the game instantly. Everyone was so bullish, the economy was rosy, and dotcomguy was still alive and thriving. This was so easy cavemen could do it. Who said money didn’t grow on trees? It did for me.
And then came March 10, 2000. The first time I cried.
With one pinprick, the market literally imploded. How I reacted to it was epic in all proportions. Instead of selling like an astute investor, I DID ABSOLUTELY NOTHING. I held on in hope that it couldn’t get any lower. As the market tanked, so did my weight. I was constantly anxious, never ate, and slept irregularly. I watched my positions like a hawk as if staring at it would miraculously stop the bleeding. After a few months, I was forced to capitulate. I came to the conclusion that I had no idea what I was doing and should have never been in the stock market in the first place.
My second chance
Towards the end of 2000, the markets began to rebound. I couldn’t believe it. I was going to get my money back! I told myself that once I broke even, I was out. Things were looking good and I knew that my initial inclinations were right. I told myself that I was an idiot for panicking. Well, I broke even and was back at square one. Did I sell? NOPE. I was so excited and knew that we were on the up and up, only a fool would sell. I certainly was no fool.
And there it goes
The market hit another top and we went down a few hundred points. I wasn’t worried, lightning never strikes twice (my rationalization at the time). Unfortunately, it did strike twice, in the form of a double top, a charting pattern that suggests the market has gone bearish. Like that old saying goes, “A fool and his money are soon parted.” I was the fool and my money left me like I was going out of style. The market picked up downward momentum, however this time it wasn’t as forgiving. It kept on falling… and falling… and falling. I held on to my positions the ENTIRE time because I kept telling myself that I was investing for the LONG TERM (a strategy that you’ll learn in time that I oppose). Like a never-ending free fall, my heart was in my throat indefinitely. I was a bag holder.
A time of reflection
Looking back, I was so naïve and ill-prepared to handle the responsibilities of managing a stock portfolio. I, like thousands of investors, was a victim to a market collapse and slave to the onslaught of emotions associated with the market. I had no trading discipline and certainly had no educational background to make any prudent decisions. I jumped in head first and played whatever hand I was dealt. I speculated and I lost. I lost a lot of money.
Without risk, there is no reward
This horrific market introduction was the best learning experience of my life. It’s my goal to make sure that what happened to me does not befall you. Chances are it has, possibly during the same tech bubble collapse and more recently during the financial meltdown of 2008. But hey, at least I am here now to help you mitigate any further substantial loss in the future. Follow me and learn from my mistakes. I can assure you, that no matter what financial expertise you currently possess, you will pick up something new and possibly even become a BETTER investor moving forward.
Do you manage your own stock portfolio? How did you get started? Even if you don’t, I’m sure most of you have gone through the same emotional roller coaster as I have. =p
Happy Hunting!
photo credit: Niklas Norklund
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Thanks for posting your story Zen. The market always has something to teach us. Every great investor has had at least a few large losses to humble oneself and losses are simply part of the game and learning when to stop out losses and ride the gains are keys to success for master traders/investors.
I’ve had similar stories of amounting large losses in the past. Although I’ve also had success in trading in the past, my losses have made me too risk averse now to get back into trading for many years already and my current finance/investment strategy for the last 3 years is to payoff all credit card debt first. Perhaps, I will trade again in the future when my liabilities are under control and have some excess savings to play with.
I recommend reading Reminiscences of a Stock Operator and Market Wizards for anyone interested in trading or investing.
Good luck
Reminiscences of a Stock Operator, a great read. I’ll have to look up Market Wizards.
The story above is just the tip of the iceberg with my experience with trading. The rest of it will unfold in the next couple of months.
I am just grateful that I was humbled by the market early in my career. IMO, if you haven’t been already, it’s just a matter of time.
[...] The best way to start investing is NOT by jumping in head first and putting down $2000 on some random company that you hope to appreciate over time. That’s the way I started in high school. It hurt. With ill-preparation, I was not able to control my emotions, I did not understand the financial tools available to me, I was inundated with simple financial information, and I lacked the decision making skills when it counted the most. It’s my goal to prepare you the right way so you don’t relive my experience. [...]
Zen,
Thanks for sharing your experiences. I also went through what you did during the .com crash. I also had held onto a IPO for too long just watching it drop. Being a noob was very costly. One thing also is that this current rebound/recovery is like watching the ship sail by. What are your thoughts on that? Do you see some stocks that are way undervalued and can still be had at a bargain? 08/09 was/is a rebuilding year for me so now that im at where i am, i have some discretionary funds to put in the market… oh and are you option trading too?
peace
@Tamayo: Sorry it took so long to respond, I’ve been pretty darn busy recently. I predominately hold ETFs and Index funds for my retirement account. As far as trading, I mainly do advanced option trades (ie bull puts, bear calls, condors, etc). My strategy is very different than most people because with options I can make money in any market (up, down, sideways). I shoot for consecutive singles and doubles and tend not to trade for Homeruns (although a homerun every now and then is nice).
People call this recovery a suckers rally. IMO, the sucker is the one on the sidelines. I understand that we are in the midst of a jobless recovery with unemployment still high, but I believe high unemployment is here to stay. Natural unemployment is usually around 4%, when the dust settles, I think it’ll be 1-3% above that. Simply an opinion.
Companies have been cutting costs for almost a year and now they’re beginning to realize they are more efficient than they ever were.
I personally believe we’ve already hit the bottom since March. Before I launched this site, I ran a stock group and was active on many stock forums. Sorry, I won’t say which ones for anonymity.
I would look into tech for opportunities.
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Any of you come into a significant amounts of £ from humble beginnings? Did you manage to keep a normal life and not tell? Most importantly, how do you keep your relationship as blissful as it is? In what unexpected ways do you change as a person, or what unexpected things are different?
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