My Worst Trade Ever/Buy and Hold is Not Dead!

Regret, I have many in my life.  Everyone has to have at least one.  Financially speaking, I have two big regrets and they come from a lack of experience when I was younger.  If I could hop in a Delorean with a Flex Capacitor, I would go back in time to the year 2002, slap young me in the face, and say “Stop Trading Dumbass!”  One regret I can prove, the other you just have to take my word.

Financial Regret #1

Observe the following image.  The year date was August 13, 2001.  Young me would have been 21 years old at the time, sitting on top of the world, working on my graduate degree, trading stocks like they were Garbage Pal Kids.  I still remember this trade, because I was at work at a small financial services office, placing the trade and telling my boss what I just bought and he should get in and so should customers.  Financial markets were slightly stabilizing from the tech burst of 2000, accounting scandals from earlier in the year were beginning to pass, and we were pre 9/11 and the ensuing market turmoil.

In 2003, I would begin my journey as a buy and hold investor after learning as much as I can about a company, which I still believe to be the best route to long term investing, and here is why.

Below are the trade confirms that I hacked together, chopping out some personal info you don’t need. The top image is a trade confirm purchasing a company called Amazon (AMZN).  The important details are circled in red.  Purchase 100 shares AMZN on 8/13/2001 @ 9.99 per share, total net amount of $1009 (I was working part time and going to grad school, it was all i could afford at the time).  At the time, Amazon had fallen hard from the tech bubble, online book sales were still there big sales, venturing into other products was still new.  A far cry from the mega online retailer, providing digital books, everything under the sun, streaming video services of today, and future deliveries by drones.  The bottom ticket is a sell order for those shares of Amazon.  Sold on 5/1/2002  100 shares AMZN @ 16.961, net $1688.04.  A whopping 67% return in under a year.  I’m a genius…

Worst Trade

WRONG!!!

If I can ever time travel, I will go back to 5/1/2002 and wrestle the mouse out of young me’s hand.  Had I never clicked the sell button, I would be holding onto$50,077 dollars worth of AMZN as of 8/26/2015 closing prices.  A ball busting 4,863% return.  A visual picture of the growth of AMZN that makes me throw up a little.

I wish I learned about buy and hold a year earlier.

Side note, that little gain I made was taxed at the higher short term capital gains rate.

Financial Regret #2

Listening to others and going against my gut feeling.

In the fall of 2002 I was going to place an order for Apple (AAPL).  Apple was on the verge of bankruptcy back in 1997, basically was bailed out by Microsoft with a capital injection (very interesting stuff you should look up).  The company would rebound, but in 2002, I can remember the stock price being stuck below $20 a share.  The pure thinking at the time was “Man, these guys are under $20, I should just pick up a round lot (lot = 100 shares).  I wouldn’t lose much on this.” (Since the turn of the century AAPL has had 2 stock splits, a 2-1 and 7-1, the $20 referenced is not a split adjusted price).

Unfortunately for me, I don’t have any trade confirmations to show.  I had a buddy talk me out of the trade.  I have no one to blame really, but myself.  Apple has since gone on to become the greatest turn around story in business, becoming the biggest and most profitable company out there.  All I am left with is the thought of what could have become, had I clicked the button of that mouse.  Instead, I am left with a very expensive lesson.  (I won’t bother calculating the return, but the split adjusted price would be down in the $1.50 per share range.  You can do the math from there.  Hint: Higher return than the AMZN trade above).  Here is a cool video I remember seeing a while back of a couple who did it right.

AAPL is the reason I turn off the background noise, listen to myself.  If someone says they have a hot stock or opinion on the market, my audio turns into the muffled speech from the  Charlie Brown cartoons when the teacher begins to speak to the kids… inaudible.

Apple and Amazon are two reasons I believe buy and hold investing is not dead.  These were once in a lifetime opportunities to capture explosive growth in a couple of companies and participate in their respective market returns.  When you sell out of a stock, you forgo any possibility of returns from that position.  A correlation would be the current market environment we are in.  Yes the market swings are crazy.  However, I am looking forward to the next ten years of my life.  If I can even get a fraction of the rate of growth that I experience over the past decade (NET WORTH SPREADSHEET) I think I’ll be satisfied, but without being invested that is not even a possibility.

If a guy like Warren Buffett does a boring buy and hold strategy, why should it not be good for the little guys to follow.  I think I’ll just buy and hold onto my investments.

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Readers Comments (5)

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  4. David Hammerstein March 30, 2016 @ 12:41 pm

    Its like you read my mind! You seem to know a lot about this, like you wrote the book in it or something. I think that you can do with some pics to drive the message home a bit, but instead of that, this is excellent blog. A great read. I’ll definitely be back.

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