For years, I stayed away from investing in individual stocks. Sure, I could do index funds and bonds, no problem! The moment I had my first $5,500 saved up after graduate school, I opened a retirement account.Wham, bam, boom and suddenly, I was an investor with a diversified portfolio! YAY! *spirit hands waving*
It was the smartest way I could invest money without a degree in finance and an encyclopedic knowledge of investing, or so I thought at the time. (Probably true, I was a bit of an idiot.) In 2007, Warren Buffett (who's basically the living Buddha of value investing, which is what most people think of when contemplating stocks) famously bet 1 MILLION BUCKS that an index fund would out perform a collection of hedge funds over the course of 10 years. Guess what? Despite a ton of people trying, Buffett won (surprise, surprise) and a charity named Girls, Inc. won, cause Good Guy Warren donated that million dollar prize to them.
That was the philosophy I subscribed to for years. Invest in an index fund, because you sure as hell won't beat the market! And it worked, because I made a decent return (around 8-10%) over the years.
Then, last year, I grew a pair (figuratively) and started really looking at investing in individual stocks. It took a lot for me to get to this point. For a long time, I wasn't comfortable with my limited knowledge of stocks and investing. I didn't trust myself and for the most part, I still don't. Part of me still thinks of investing in stocks as a form of high stakes gambling. How well do you know the market and the factors at play? How do you know if the competitors have something in the pipeline? What if a new player comes to the table? What if there's a better option?
Unless you do extensive research in the industry of the stock you want to invest in, there are a lot of known unknowns and unknown unknowns. It's a frankly terrifying idea, how little you know about something before dropping a cool $1,000 on a couple of shares of stock. But that was what I started doing. (Shout out to the r/Stocks thread on Reddit, because a lot of my initial stock picks stemmed from there.)
It was there that I first heard about AMD. At the time, Nvidia (NVDA) was the big ticket item on everyone's comments. The computer hardware company was doing incredibly well, and the stock price was skyrocketing like nothing else. The dark horse in this race was Advanced Micro Devices, Inc. (AMD), a smaller hardware company that made computer chips. It was similar to NVDA, but significantly cheaper. However, when I looked into the company, I saw that it had potential and solid deals, including one with Dell. Also, I could afford it on my limited budget.
So I dropped a few hundred dollars on around 45 shares for $12 each...and watched the price continue to plummet. I watched as the price dropped to $11 per share, and then to $10. Along with the price of the stock, the value of my shares dropped as well. I was losing money. I waited as it stayed in that range for a long time.
I held on. I definitely wanted to pull out a few time, but I knew that once it started to pick up steam, it would do well. It had the backing of Dell behind it, and I had faith that this was a company that might do badly in the short term, but in the long term, would bounce back and produce a return on my investment. It's like going to college; yeah, it's pricey and yeah, you're going to have to take some classes you don't like, but in the long run, you'll appreciate that class you took on political philosophy (maybe).
And it did start to bounce back. When it finally hit $15, I was so relieved that I sold some shares just to recoup some of that money back. Dumb mistake, but it's a lesson learned because....
Today, AMD shares sell at $32.72. Yeah, that's right, from the ignominious drop to $10, it's jumped to three times that price. To this day, it's one of my best performing stocks and it the one that really taught me the value of patience.
In conclusion, do your research, buy what you can afford, have faith in your decisions, and wait it out.
It was the smartest way I could invest money without a degree in finance and an encyclopedic knowledge of investing, or so I thought at the time. (Probably true, I was a bit of an idiot.) In 2007, Warren Buffett (who's basically the living Buddha of value investing, which is what most people think of when contemplating stocks) famously bet 1 MILLION BUCKS that an index fund would out perform a collection of hedge funds over the course of 10 years. Guess what? Despite a ton of people trying, Buffett won (surprise, surprise) and a charity named Girls, Inc. won, cause Good Guy Warren donated that million dollar prize to them.
That was the philosophy I subscribed to for years. Invest in an index fund, because you sure as hell won't beat the market! And it worked, because I made a decent return (around 8-10%) over the years.
Then, last year, I grew a pair (figuratively) and started really looking at investing in individual stocks. It took a lot for me to get to this point. For a long time, I wasn't comfortable with my limited knowledge of stocks and investing. I didn't trust myself and for the most part, I still don't. Part of me still thinks of investing in stocks as a form of high stakes gambling. How well do you know the market and the factors at play? How do you know if the competitors have something in the pipeline? What if a new player comes to the table? What if there's a better option?
Unless you do extensive research in the industry of the stock you want to invest in, there are a lot of known unknowns and unknown unknowns. It's a frankly terrifying idea, how little you know about something before dropping a cool $1,000 on a couple of shares of stock. But that was what I started doing. (Shout out to the r/Stocks thread on Reddit, because a lot of my initial stock picks stemmed from there.)
It was there that I first heard about AMD. At the time, Nvidia (NVDA) was the big ticket item on everyone's comments. The computer hardware company was doing incredibly well, and the stock price was skyrocketing like nothing else. The dark horse in this race was Advanced Micro Devices, Inc. (AMD), a smaller hardware company that made computer chips. It was similar to NVDA, but significantly cheaper. However, when I looked into the company, I saw that it had potential and solid deals, including one with Dell. Also, I could afford it on my limited budget.
So I dropped a few hundred dollars on around 45 shares for $12 each...and watched the price continue to plummet. I watched as the price dropped to $11 per share, and then to $10. Along with the price of the stock, the value of my shares dropped as well. I was losing money. I waited as it stayed in that range for a long time.
I held on. I definitely wanted to pull out a few time, but I knew that once it started to pick up steam, it would do well. It had the backing of Dell behind it, and I had faith that this was a company that might do badly in the short term, but in the long term, would bounce back and produce a return on my investment. It's like going to college; yeah, it's pricey and yeah, you're going to have to take some classes you don't like, but in the long run, you'll appreciate that class you took on political philosophy (maybe).
And it did start to bounce back. When it finally hit $15, I was so relieved that I sold some shares just to recoup some of that money back. Dumb mistake, but it's a lesson learned because....
Today, AMD shares sell at $32.72. Yeah, that's right, from the ignominious drop to $10, it's jumped to three times that price. To this day, it's one of my best performing stocks and it the one that really taught me the value of patience.
In conclusion, do your research, buy what you can afford, have faith in your decisions, and wait it out.
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