Post by zendancer on Jan 10, 2011 16:17:22 GMT -5
To answer Popee's question, no, I don't trade stocks for a living, but I enjoy the stock market and personal finance issues, and am intellectually curious about everything imaginable. Like E. my primary business is contracting, but I trade stocks almost every day and love to read about economics, demographics, and lots of other stuff. I am always fascinated by what is happening at the cutting edge of technology even though I'm a certified Luddite. If it were up to me, every appliance and every electronic gadget would only have two buttons--on and off. I have no idea how to program a VCR or anything else, and I don't care. I don't even know how to enter names in my cellphone for quick dialing! At the same time, though somewhat stupid, I often see patterns that have potential significance. Take that for what its worth, and take everything else I write here with a big grain of salt.
Because our business was risky Carol never wanted us to put any retirement savings into the stock market. So, year after year, we put a tiny amount of cash into CD's paying almost nothing. During the nineties the stock market zoomed into the stratosphere and finally Carol agreed that maybe we should be a bit more adventuresome. LOL. I therefore invested $20,000 in a Growth and Income mutual fund and $10,000 in a no-load index fund. For the next two or three years I occasionally checked the two accounts and they both rose in lockstep. Then, in about the third year I looked at the accounts and was shocked to discover that each account had approximately the same amount of money in them. How could that be? I looked at the chart of the index fund and it was a nice steady climb that mirrored the S&P 500 and the market as a whole. The chart of the G&I fund rose in the same way until a particular day when it dropped a huge amount in value. This was my first lesson in the stock market and it is the reason that I liquidated the G&I fund, put that money into the index fund, and never again bought a mutual fund. I discovered that only about 5% of money managers can beat the S&P 500 consistently and the management fees for mutual funds are exorbitant.
This experience led me to the Motley Fools and some similarly-minded folks who extolled the virtues of buying individual stocks. Because I am impulsive, optimistic, a do-it-your-selfer, and often stupid, I was ready to leap into stocks without knowing anything. Unfortunately, I decided to do this just as the dot-com bubble was on the verge of popping! Ha ha; the joke is always on me.
My daughter's college finance professor told his class about a great hi-tech stock, and she told me. I looked at the stock. It was selling for $90/share. The next day it rose to $100/share, and the following day it hit $110/share. I thought, "Wow, if I had only bought it two days ago, I'd already have a big gain." These were famous last words because the next day the stock dropped back to $90/share and I thought, "What a bargain! This will be like shooting fish in a barrel." I put $25,000 into the stock and the following day it fell to $80/share. This was an even bigger bargain than the day before so I sunk another $25,000 into the stock. I also bought two or there other great bargains at the same time. I don't think I need to explain what happened over the next few months. I learned my next fantastic lesson about the stock market, which could be summarized as, "I don;t know anything about the stock market and now I know that I don't know anything about the stock market." What a wonderful learning experience. LOL
Losing $50,000 of hard-earned money in only a few weeks had a way of focusing my attention upon my level of ignorance rather spectacularly. I realized that I needed to learn a lot, so I checked out a ton of books from the library and started reading. It didn't take long before I had learned exactly how stupid I really was.
AAR, I kept trading stocks and reading about companies and gradually earned back the money I had lost and more besides. It then took another few years to refine my strategy and find ways to maximize probabilities in my favor. Lest anyone think about following in my crooked footsteps, let me issue a few words of warning. First, I have an incredible tolerance for risk, and if I think I'm right about a stock, I will buy it all the way to the bottom even if it has lost 90% of its value. Second, the stock market is a game rigged in favor of big money, and it helps to understand and accept this fact. Third, if you are not interested in learning about companies and financial ratios or are risk averse, don;t even think about getting into the stock market in anything other than an index fund.
The only time I ever lost sleep as a result of something I did in the market was when I sold a bunch of stocks in several family members' accounts and dumped a half million bucks on one single stock. Even though I made a lot of money on that trade in a very short period of time, I hope that I never do that sort of thing again. It wasn't worth three nights of limited sleep.
Uh oh. Gotta change computers again. Stay tuned......
Because our business was risky Carol never wanted us to put any retirement savings into the stock market. So, year after year, we put a tiny amount of cash into CD's paying almost nothing. During the nineties the stock market zoomed into the stratosphere and finally Carol agreed that maybe we should be a bit more adventuresome. LOL. I therefore invested $20,000 in a Growth and Income mutual fund and $10,000 in a no-load index fund. For the next two or three years I occasionally checked the two accounts and they both rose in lockstep. Then, in about the third year I looked at the accounts and was shocked to discover that each account had approximately the same amount of money in them. How could that be? I looked at the chart of the index fund and it was a nice steady climb that mirrored the S&P 500 and the market as a whole. The chart of the G&I fund rose in the same way until a particular day when it dropped a huge amount in value. This was my first lesson in the stock market and it is the reason that I liquidated the G&I fund, put that money into the index fund, and never again bought a mutual fund. I discovered that only about 5% of money managers can beat the S&P 500 consistently and the management fees for mutual funds are exorbitant.
This experience led me to the Motley Fools and some similarly-minded folks who extolled the virtues of buying individual stocks. Because I am impulsive, optimistic, a do-it-your-selfer, and often stupid, I was ready to leap into stocks without knowing anything. Unfortunately, I decided to do this just as the dot-com bubble was on the verge of popping! Ha ha; the joke is always on me.
My daughter's college finance professor told his class about a great hi-tech stock, and she told me. I looked at the stock. It was selling for $90/share. The next day it rose to $100/share, and the following day it hit $110/share. I thought, "Wow, if I had only bought it two days ago, I'd already have a big gain." These were famous last words because the next day the stock dropped back to $90/share and I thought, "What a bargain! This will be like shooting fish in a barrel." I put $25,000 into the stock and the following day it fell to $80/share. This was an even bigger bargain than the day before so I sunk another $25,000 into the stock. I also bought two or there other great bargains at the same time. I don't think I need to explain what happened over the next few months. I learned my next fantastic lesson about the stock market, which could be summarized as, "I don;t know anything about the stock market and now I know that I don't know anything about the stock market." What a wonderful learning experience. LOL
Losing $50,000 of hard-earned money in only a few weeks had a way of focusing my attention upon my level of ignorance rather spectacularly. I realized that I needed to learn a lot, so I checked out a ton of books from the library and started reading. It didn't take long before I had learned exactly how stupid I really was.
AAR, I kept trading stocks and reading about companies and gradually earned back the money I had lost and more besides. It then took another few years to refine my strategy and find ways to maximize probabilities in my favor. Lest anyone think about following in my crooked footsteps, let me issue a few words of warning. First, I have an incredible tolerance for risk, and if I think I'm right about a stock, I will buy it all the way to the bottom even if it has lost 90% of its value. Second, the stock market is a game rigged in favor of big money, and it helps to understand and accept this fact. Third, if you are not interested in learning about companies and financial ratios or are risk averse, don;t even think about getting into the stock market in anything other than an index fund.
The only time I ever lost sleep as a result of something I did in the market was when I sold a bunch of stocks in several family members' accounts and dumped a half million bucks on one single stock. Even though I made a lot of money on that trade in a very short period of time, I hope that I never do that sort of thing again. It wasn't worth three nights of limited sleep.
Uh oh. Gotta change computers again. Stay tuned......
