A $200,000 Life Lesson with Investing

For the last few years, Jeff Bezos (yes the guy who started Amazon) insist on reminding me about one of my life’s biggest mistake.

Back in 2001, in my more testosterone fueled days of youthful know it all knowledge, I was a trader, not an investor.  I traded stock, like I was trading baseball cards at the age of 8.  I thought, like many do, that day trading was a way to make quick profits and outperform the markets.  Sure, I already was armed with the knowledge of index vs active investing, guys like Buffet made billions buying and holding for the really long term, and taxes and transaction cost can eat away at returns.

In 2001, I had the foresight to see Amazon as a worthy investment prior to the events of 9/11 and in the midst of a weak economy.  The company was largely still known as an online book retailer and starting to expand into other goods.  On 8/13/2001 I purchased 100 shares of Amazon stock at $9.99, for a total cost of $1,009.00 dollars.  At the time I was in grad school, not making much money, so $1000 was a large block trade for me at the time.

Here’s where the life lesson would come into play and change the way I invest forever…

 

The above are slices of trade confirmations.  I’m a bit of a dork in that I keep copies of every trade confirm of every stock I have ever purchased for tax purposes.  The top half is the purchase order for 1000 shares of Amazon stock at $9.99 for a total of $1009.00 with trading cost.

The bottom half is the gut buster.  On May 1, 2002, not even 1 year later, I sold out on 100 shares of Amazon (AMZN) at $16.9610 for a total net amount of $1,688.04.  This netted a short term capital gain of $679.04 in under 1 year for a gain of 67.29%.

It wouldn’t take but a couple years to realize that trading wasn’t the way to go.  Investing involves taking a long term perspective, looking beyond just the face value.  Really looking at where a business is heading, how it can disrupt and shake up an industry or industries, and shake things up.

This is where I fall as an investor.  I’m not an index investor, but at the same time I’m not an active investor.  I simply buy and hold forever…

With buy and hold investing, you delay taxes until you sell (if ever), you don’t run into transaction cost beyond the purchase cost.  You ignore the daily noise in the markets.

Had I had this philosophy back in 2001-2002, I would still be holding onto Amazon to this day.  It has benefited me well through out the years, as I have several multi-bagger returns in the 200-1000% returns range, and several companies who have gotten bought out throughout the years.

But like they say in love, you never forget the one that got away. AMZN stock currently sits at $1,822.49 as of 7/16/2018, meaning I’d be sitting on $182,249 worth of AMZN stock and would be by far my largest holding over WWE and MO combined.

So what does that return work out to on the one that got away from me. How about 17,962.33%.  No typo.  Comparing the performance to the S&P500 from 2002 until today, it looks like this…

The S&P500 looks like it’s on life support in comparison.

I’m glad to have learned from my mistakes early enough to hit FI and become a millionaire early on in life.  But you never forget the one that got away.  I will never in my life be able to get another pick like that one.

Happy Prime Day!

 

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