Everyone's investment strategy is different, depending on their
goals, the amount of risk they're willing to take on, etc.
I started learning about investing and buying and selling stocks in May 1998. I still have a lot to learn but have learned a fair bit about it in the past year or so. This page has some notes on my experiences so far.
This page is now way out of date, unfortunately; most of it was written back in late 1999 when investing was fun because it was impossible to lose money :)
Here's some free advice on investing: don't take my advice on investing.
Ha, ha.
Seriously: buy low, sell high.
Ha! Where do I come up with these?
Everyone's investment strategy is different, depending on their
goals, the amount of risk they're willing to take on, etc.
My risk tolerance is currently very high, and I'm looking to grow my money quickly rather than saving for retirement. I figure my income will continue to grow for years to come, and since my taxes will grow as a result there will never be a time in the near future when I'll want to take money out of a tax-sheltered account. And what's the point with having a bunch of money socked away for retirement? I can put it to much better use today. I'm sure I'd change my views a lot if I had a family to support, but for now nobody else is dependent on me having any money, and losing the money I have invested would be disappointing but it wouldn't really impact my lifestyle much.
So given that I'm willing to take more risk than most people, and I have specialized knowledge of an industry that happens to be booming (technology/networking), I think I ought to be able to outperform the market as a whole. I'm actually hoping for quite a bit more than that -- I'm hoping I can approximately double my money every year; if I could do that consistently for a few years, I could quit my job, spend a few hours a week investing and the rest of my time hacking and travelling. (unpaid hacking is more productive anyway!) So far I have fallen short of that goal, but I just started and I made a couple stupid mistakes in 1998. In 1999 I did much better, though I still have a lot to learn.
(this is all as of March 2000, no longer accurate) I have about 90% of my total savings in my trading accounts, of which about 120% is currently invested in stocks. (more than 100% since I'm trading a bit on margin.) Earlier in 1999 I had planned to sell my stocks gradually towards the end of the year to avoid an end-of-year drop in the market due to Y2K fears, but now I think that will generally turn out to be a non-issue and the markets will actually surge upwards early in the new year when the people that have been holding back realize the world didn't end and they can start buying again. I might set some automatic sell orders just in case, though.
My money has typically been invested in about 10-15 various
stocks, all of them tech companies of one kind or another
("Buy what you know" -- Lynch? Buffett?)
I don't have any mutual funds, since almost all mutual funds
underperform the market as a whole. If I were
to invest in a mutual fund, I would probably go with either a
no-brainer like a Vanguard index fund or
something aggressive like the Thurlow Funds --
from what I've read I really like this guy's investing style.
Investing in something very volatile like tech stocks requires a certain temperament that I think I'm lucky to have. You need to be able to deal with huge gains and losses without getting emotional, and you need to be able to make decisions without obsessing over choices you made in the past that turned out to be wrong or opportunities that you missed (cf. Red Hat), and you need patience (but not irrational loyalty!)
October-November 1999 have been amazing for me: at the beginning of October I was up only about 5% overall this year, and at the beginning of December I'm up to about +90%. I almost doubled my money in 2 months! Wow!
These recent gains have been thanks to Apple, CMGi, Go2Net, Motorola, Nortel, SGI, and especially Corel, which is up more than 500% since I bought it in January. (it more than doubled the week ending Dec 10 thanks to recent excitement over Linux, especially due to the record-breaking 733% IPO of VA Linux on Dec 9.)
I was going to sell most of my Corel the morning of Friday Dec 10 (it was up to $45 in after-hours trading the day before), but unfortunately I slept in and by the time I woke up it had dropped to $30. (Pretty expensive snooze!) I sold most of my position at $30.13 on Dec 14; I still have a bit just in case Corel Linux takes off and its stock does likewise. (I don't have much long-term confidence in the company.)
My investing strategy so far has varied a lot between choosing quality companies that I think will outperform the market in the mid- to long-term (IBM, Apple, Motorola, Nortel) and daytrading other highly speculative stocks. Both strategies have worked and not worked, so far.
One day I'd like to have detailed info on my trading history online (for my own benefit, mainly); in the meantime, here are a couple of the more interesting bits:
I bought some Red Hat on its opening day (Aug 11, 1999) at $42 (almost as low as possible -- the day's low was $40), and after 3 days it had more than doubled to $90.69, a nice return for 3 days' work. (well, not really work.)
I greedily held onto it past Friday's close with visions of an early retirement around the corner. Then it dropped a bunch on Monday and Tuesday, and I bailed out at $67 at 10am Tues Aug 17, thinking it might continue downward. (here's a 5-day chart capturing that week's action.)
This turned out to be pretty much the worst possible time to sell, since it bottomed out at $61 and from there it has skyrocketed to more than $300 in less than 4 months.
Even though missing out on a quick 6-bagger like that is a little disappointing, it didn't bother me that much. I made a decision with the information I had at the time, and it turned out to be wrong but that doesn't really matter as long as my overall performance is okay, which it has been. Besides, I did make a 60% return in 4 days.
I forget why I decided to buy this one, but after watching it for a while I bought some at $12 in early May, 1998. From there it proceeded to drop, and drop, and drop, down to $3 by the end of August. Check out this chart, it's really quite funny how awful my timing was and the degree of the downward slope once I bought it.
Undaunted, I picked up some more at $9 and again at $7.19 on the way down, then doubled up again at $3. By sticking with it and buying and selling over the next while, I was able to reduce my cost basis for this stock down to negative $2.88 -- I had made enough profit by trading it that if the stock's price dropped to $0 I would still be ahead $2.88 for every share I owned. I'm sure there's a lesson to be learned there, but I don't quite know what it is.
I held some of it for a while in case it ever did go somewhere, then eventually got bored with it and sold it for $6.50 on Nov 18, 1999. Of course, within 2 weeks it shot up to $9.38, a new 52-week high.
One of the first things I did when I got my trading account was short Yahoo. (duh!)
What a rough way to start your investing career! I think at some point during fall of 1998 I had lost about 40% of the money I had started with.
For no-nonsense, quick-loading, comprehensive coverage and charts, Yahoo! Finance rules.
I use Datek for my trading and am reasonably happy with them so far. Actually, at first I wasn't happy with them, but then I heard a bunch of horror stories about other brokerages, and decided Datek was okay. Since then they've managed to improve from "okay" to "fairly reliable". But in general, it seems that Yahoo! is the only site on the net that knows how to build scalable Internet services; if they started a brokerage I'd open an account with them instantly.
I recently opened an E*Trade account as part of a promotion to get a free computer, and from a quick glance their site seems much better than Datek's in terms of design/usability. I don't have much experience with it yet though.
The Motley Fool was a great source of early clues for me. I bought one of their books, The Motley Fool Investment Guide, and highly recommend it to others. I haven't read any of their other books.
Last modified: $Date: 2002/04/18 06:43:20 $
Gerald Oskoboiny, <gerald@impressive.net>
