Looking back, my foray into the stock market was a sad venture. About two years ago, I opened an account with the online broker Questrade. I had watched various stocks for a few weeks and, over that period, they mostly ticked up a few points.
I was a big fan of Apple products, and noticed that the stock had moved higher. I recall that one day the stock opened at around $500 and by end of day was up at around $550. I did the math: if I dumped my savings, around $10,000 into Apple stock, I would have owned 20 shares. 20 shares, with a $50 gain, and I would have $1000. How had I missed this easy money?
One day at work, I decided to take the plunge and bought 10 shares at around $600. It was an exciting feeling, especially when, on cue, the stock started to rise. I started watching Apple stock obsessively. At work, I kept Questrade secretly hidden beneath spreadsheets and reports. I felt like I’d discovered a secret income generator- and it was so easy! Soon the stock had reached close to $680. I had made almost $1,300 without leaving my chair, in just over a month.
In the summer, 2012, Apple released some negative numbers. The new IPhone had not met analysts predictions. The stock, which had now reached almost $700 tumbled and within a couple of days it was at $550. All of my gains were gone, all of the time that I spend watching the numbers, wasted. My easy profits had turned into a loss of over $1000. I panicked. It seemed a foregone conclusion: Apple was doomed. I sold my stock, and felt awful- sort of like guilt and despair rolled into one.
That would be the end of the story, had I not checked Apple stock a couple of months later. While the stock had not reached its previous peaks, it had climbed back up. Had I waited, I would have at least broke even. I vowed that next time I went into the stock market, I would only do so after I was more educated. I promised myself I would read three books on investing before I bought a single other stock..
- A random walk down wall street: Burton G. Malkiel (a classic, MUST read)
- The Intelligent Investor: Benjamin Graham, Jason Zweig and Warren E. Buffet (good, but admittedly a bit above my head)
- Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School: Andrew Hallam (excellent reading for keeping on track).
I can’t overstate the importance of these books. I won’t summarize them, or give financial advice, as you can read them for yourself. But what I will say is that my Apple strategy was not investing. It was gambling. The key point made brilliantly in the above books is that you can’t “time” the market. You can make money in stocks, but the way to do so is through careful investments in a diverse portfolio, and giving it as much time as possible. In short, doing everything I failed to do in my venture with Apple.
Since then, I have a lot more invested in the market and so far I have strong earnings. I only sell after careful consideration, and never let emotions dictate anything.
Strange as it sounds that lost $1,000 was the a best investment of my financial career.