I started investing about 9 years ago when I was in college. I took a hiatus and gave up after a few years because I felt it was too difficult to analyze the stocks I was buying (I don’t think the internet was as advanced as it is now, and I don’t think there were personal finance blogs at the time). I think I made a little bit of money at the time, but nothing to get overly excited about. After I finished college and got a job, that’s when my passion for investing surfaced again. I wanted to invest my hard earned money and wasn’t happy to simply see it grow in a high interest savings account earning 2.5% interest (yeah, interest rates were higher then!)
This is when I got my money involved with various financial advisors mutual fund advisors including Investor’s Group. After learning about Questrade, I decided to go at it alone and practice “DIY finances” in 2007-2008 because I wanted control and I wanted to feel remorse for making my own investing mistakes, and not watching others not give two cents about my finances and hard earned money.
I have certainly made my fair share of mistakes.
Confessions of a DIY Investor
Although I have made a few “winning” decisions (as Charlie Sheen would say), I have made more than my fair share of bogus decisions in investing.
I learned a lot throughout the years that I have invested my money and most importantly learned that my will power isn’t that great when it comes to not using my emotions to make investing decisions.
Penny Stock Pauper
Lesson #1: Avoid penny stocks if you don’t know what you’re doing! I bought a few thousand shares of a penny stock (it was $0.65) from a “hot stock tip” (who hasn’t fallen for one of those?) that my mother’s hot shot financial advisor gave me. He said this company was rolling in cash, had lots of cash reserves, and had lots of potential for growth.
Initially I had made money with it by buying it and then selling it and then buying it again and selling it. It had a very cyclical nature to it. Then I think 2009 happened and unlike other larger market cap stocks, this stock never recovered. There is even fewer trading activity now and it’s sitting at $0.23 or so.
Yup. Ouch. Last year I sold half of the losing shares for a capital loss and I’m still waiting to share these ones if I need to offset capital gains. I just hope this company doesn’t get de-listed from the stock market lol.
Never Buy at a Company’s Zenith
Lesson #2: Don’t Buy a Stock at its Peak. Just don’t. After receiving another hot stock tip (MAJOR LESSON: Stock tips don’t work!) from a friend who worked in the oil and gas industry saying Suncor is expanding and doing really well, I bought Suncor. I bought at its all time high at around $72 a share. It now sits at about $30 a share. I didn’t buy that many shares, but it’s still sitting in my account and sticking out like a sore thumb. I even tried to average down but this hasn’t been so effective as of late. I haven’t sold it yet.
Jim Cramer’s Advice Probably Isn’t the Best One to Take
Lesson #3: Don’t listen to Jim Cramer… at least for the long term. I haven’t watched an episode featuring Jim Cramer in years, but I used to be addicted to watching him on Business News Network. He seemed so passionate and so excited about the stocks he was talking about. It has to be good if he talks about it, right? Wrong.
Well, this one wasn’t so bad but I had bought shares in a retail sunglasses company that Jim Cramer had recommended (UGH is this another HOT STOCK TIP but from a TV source?! See a pattern here?). The problem with me listening to Jim Cramer was that I kept holding onto it even after he set the timeline for the target price. We all know of the effect that Jim Cramer can have on a stock- it rises, rises, rises, and then crashes. It didn’t do very well after the 2009 crash and managed to recover. After holding on to it for a few years, I managed to eek out a meager $100 profit but glad that I came out somewhat unscathed.
And the Moral of the Story Is…
I’ll admit, with the advent of the discount online brokerage it has been easier than ever to buy and sell stocks. It’s important that if you start to invest, you do it with a sound mind and a sound heart!
The best way to avoid all of these difficult lessons (they were hard pills to swallow for me) is to invest in index funds (like the TD eseries) or ETFs or choose strong blue chip dividend companies. Don’t try to beat the market because it’s more than likely that you won’t. In fact, the absolute easiest way to get into investing today is through robo advisors. These guys basically take all of the stress out of getting started in the investing world, and have a very simple, easy-to-understand way of managing your investment portfolio. Check out my Wealthsimple review for more on how I decided to automate my TFSA portfolio – and I have been loving the results so far!
Readers, do you have some ugly DIY investing scars? How has your investing style evolved?