I started my investment journey in August 2007 with a few hundred dollars and big dreams. Although I was already convinced that the stock market was a much more effective means of achieving financial independence than simply hoarding cash in a savings account, I I strongly believe that we need an emergency fund.
After opening a brokerage account and receiving your first monthly payment, you're ready to buy your first stock. I had $250 in my account, which was all I could afford at the time. I thoroughly reviewed the Motley Fool's list of recommended stocks and settled on my first investment. Netflix (NASDAQ:NFLX). My discount brokerage allowed him to buy fractional shares, so he spent the entire $250 on Netflix stock, and after the $4 commission, he was the proud owner of 14.385 shares.
And with that first purchase, my investing education began in earnest.
a little context
Keen observers will note that my dive into stock ownership came at a dangerous time for investors. Just a few months later, the Great Recession began, one of the worst downturns in stock market history. After hitting an all-time high just two months after my initial investment; S&P500 The index began a decline that lasted for 17 months and finally bottomed out in March 2009, losing more than 56% of its value.
I bought quite a few stocks during the economic downturn, and frankly, most of them took a big hit. But Netflix has been one of the best for me, as a growing audience base has turned to the company's seemingly limitless viewing options to escape the economic storm.
Despite enduring the worst market conditions in history, my Netflix stock was currently up a whopping 144%.
expensive lessons
At the time, many investors – who I believed were smarter than me – were touting the importance of protecting capital. At this point, I owned stocks in 24 of his companies, and Netflix had grown to the point where he represented nearly 20% of my entire portfolio. A common story suggested that no particular investment should dominate my portfolio and that some degree of “profit taking” was appropriate. By selling some of your Netflix holdings, you can recoup your initial investment, and from there you'll be playing with “home money.”
Contrary to conventional wisdom, I sold 10 shares of Netflix stock worth $41.65 per share by the end of March 2009. The stock price rose 144% for a gain of approximately $245. And I congratulated myself for having such insight. and profitable investment moves.
You can probably guess where I'm going with this.
As of Friday's market close, Netflix stock was selling for about $636. Remember that Netflix implemented his 7-for-1 stock split in mid-2015. So his 10 shares that I sold should have increased to his 70 shares. At roughly $636, those 70 shares are worth more than $44,000, a far cry from the $245 I had in my pocket in 2009.
learn from your mistakes
Although this rookie mistake cost me $44,000, I learned a very valuable investing lesson. That said, I generally resist any form of profit taking and hold for the long term.Let me make a successful investment unless Something about the theory of investing changes dramatically.
That's not to say I don't sell it once in a while. i will do it. I cut back some of my investments to buy a car and pay off my student loans.But I please do not Sell simply because the stock has experienced an impressive increase.And, I I never have We sell based on reviews only.
That lesson and buying with the intention of holding for years, if not decades, have led me to many successful investments. These gains were as of Friday's market close:
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Netflix (in which I still own the remaining shares) rose 25,942%.
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mercadolibre Increased by 6,859%.
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chipotle pepper Increased by 6,379%.
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tesla 4,246%.
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intuitive surgery 3,597%.
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apple 2,940%.
There's a lot more to it, but you get the gist.I have owned each position at least For 14 years, I added to many of them over and over again, making my winners even bigger winners.
Selling Netflix stock too early was my most expensive investment lesson, but I learned from it and was able to reap the benefits of holding subsequent stock positions for the long term.
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Danny Vena has held positions at Apple, Chipotle Mexican Grill, Intuitive Surgical, MercadoLibre, Netflix, and Tesla. The Motley Fool has positions in and recommends Apple, Chipotle Mexican Grill, Intuitive Surgical, MercadoLibre, Netflix, and Tesla. The Motley Fool has a disclosure policy.
“The Most Expensive Investing Lesson I Ever Learned Also Turned out to Be the Most Valuable” was originally published by The Motley Fool
