How you treat your parents might be related to how well you think your life has turned out. Once you’re near the pinnacle of your life you’ll probably ponder how you arrived there. You’ll realize your dad was grooming you for success and deserves much of the credit or sometimes parents tried their best but it wasn’t quite good enough. Sometimes their best was pathetic and should have been illegal. If your parents were unsuccessful in life then you’re at a disadvantage.
If I had a dad or mom who had an interest in the stock market it would have at least given me an edge. The most common Canadian investments in the stock market are Canadian banks due to the oligopolistic banking system and conservative regulations. Even as a considerably safe stock they generate good returns.
In 1995 an 18-year-old could have about $1000 worth of Royal Bank stock or they could have bought a sound system for their car that went boom…boom…boom. Look at me…boom…boom…boom. If one could have delayed gratification that $1000 could be in the area of $15,000 today…BOOM! One could and probably would entertain the idea that a stock can go to zero. The odds of someone stealing your boom box within 1 year at 3 AM is about 1000 times greater though.
If I was someone’s dad I would say to my kid, “hey butthead, you want to spend all of your money looking cool to your friends for 5 minutes or do you want an opportunity to laugh at them forever?” Even better, I’d get them started when they’re pre-teen and buy them shares of a company to get their interest. 10 years will go by and they’ll be like, holy shit!You can’t tell kids anything, you have to inspire them.
Above is a Toronto Dominion bank investment calculator. Just $1000 invested in 1973 with dividends reinvested would be $517,758 today. This beats investing in real estate on many fronts. You don’t have to mow your stock’s lawn or worry about your loser tenants plugging up the toilet.
If this stock chart could go back to the beginning the line would be touching your feet. Sure, past performance is not a guarantee of future returns but if I had to invest my money this option looks promising.
No one in my family embraced the stock market which is why it was never included in the family curriculum. They probably heard you could make money in the stock market but more importantly to them you could also lose money. Humans are very uncomfortable with anything that involves risk especially if there is any possibility in their mind of their money going to zero.
I’ve learned that sometimes it’s too risky to feel safe.
The stock price of Canadian energy, gas and oil stocks were said to be low. A BNN Guest, Eric Nutall, one who may be perceived as a stock expert in this field had been recommending Trican Well Service for months even as the stock price kept falling. To him it was ridiculous how low many of these stocks in the sector were.
Because I had just clocked in some easy money I thought I’d foolishly put it to work. Since Eric was so adamant about Trican’s outlook I decided to pick up some shares. It sounds like I’m blaming him but it’s more that I’m disappointed with myself and I’m using his face for my imaginary dartboard.
Throughout the year after I bought the stock it kept falling and Eric confesses one day on BNN that he had sold the stock since his last visit. It’s like your wife telling you she loves you to death and 5 months later you come home to your bed sheets that hold the smell of a musky man.
Another stock that would have broken my new rule: Would I tell my friend to buy it? I definitely would not have. Maybe this serves me right for investing in a company that fracks. By the looks of the chart the only thing the company is drilling for is zero.
This one is the most embarrassing stock pick of them all. A classic penny stock pump & dump. At first I thought of this stock as such but they had some interesting projects, and then a reputable guy in the cannabis stock industry had some semi-supportive words for this company. This same guy had also been picking many winners that I had missed so I thought I found my guy. It’s very possible this guy was paid by LGC to mention some supportive words in an article because I don’t think any professional would semi-recommend this company for free.
The stock went from $0.12 to $1 then it fell like diarrhea — fast and disgustingly. I caught the falling piece of shit at $0.50. Once again, after having cashed out some big profits I became loose with my money. It fell back to $0.12 in no time.
- Don’t catch a falling knife especially if it has shit all over it. A falling blue chip stock ain’t so bad.
- In a volatile hot industry it’s best to stick with the leaders.
- 50% off a penny stock is not a great deal.
- a CFA designation and a nice suit don’t mean shit much of the time.
I’m not sure if this stock is a lost cause but I’m going to have to quadruple from where it is to get back to even. I’ll cut my losses if I get 3/4 of my money back.
Would I have told my friends to buy it? Hell no. I should have asked myself that before I pulled the trigger.
When you’re barely out of the sophomore gates of investing you will make some rookie mistakes. After selling some marijuana stock that I made a nice profit on I became a little loose with my money. A few guys on BNN had no negative things to say about this one stock that had dropped 30% in recent months.
Without any good reason other than listening to so-called experts in suits, I bought stock in Grande West Transportation, a bus manufacturer in Canada. From $2.15 it kept falling steadily and is now trading at $0.95.
- Be careful with listening to the ‘experts.’
- If a stock is falling for unknown reasons especially a largely unknown stock then there might be something you don’t know.
The company knew that it would not build and sell the number of buses that they said they would. Of course, people on the inside and close to the inside knew about this long before it would be made public. This was probably why the stock was falling.
It’s not a lost cause but the stock now needs to more than double for me to get back to even.
My Personal Opinion
- Don’t bother with these small caps when you don’t have a good enough understanding of the industry.
- Ask yourself before you buy a stock how you will feel if the stock goes down and you have to hold it.
- Before buying any stock would you tell your friends and family to buy it?
Many financial bloggers and professional investors have a bias against speculative investing. Speculating is not investing it’s gambling, they say.
Gambling is going to the roulette table and hoping you hit the 1 in 36 odds of winning without any reason other than hope or I have a good feeling. Speculating is making an educated decision based on the information available, your knowledge and life experience.
If you had put $1000 into Amazon stock at the IPO you would have over $1,000,000 today. Even $1000 ten years ago would now be over $20,000. You won’t get those kinds of returns in 30 years from buying the index or through blue chip dividend stocks. That’s just the reality.
Since the beginning of time the one who was able to see further into the future with better accuracy has always been valuable. Picking successful speculative stocks or even blue-chip stocks is a play on being able to predict the future better than others. Some people believed online shopping was going to be a thing and others didn’t. People will never put their credit card information online! It’s not likely you’ll have a good understanding of multiple industries but once in awhile something comes along that might be in your field of competency.
The majority of people are really good at following conventional rules and only being able to see what’s in front of their face. To them, if a stock doesn’t meet the criteria of being under 25x P/E and having several years of profit then it’s not worth looking at — if the company’s vision is not producing the numbers yet then it’s garbage. Home Depot was a speculative stock until it wasn’t.
It’s not fair to give the advice to never buy speculative stocks. Saying speculating is not investing is just semantics. It comes down to a matter of risk vs reward. You have to be careful though and know your limitations.
When news gets out that Warren Buffett buys a certain stock it usually jumps up a few percent. The morning I found out he had bought billions of dollars worth of Apple stock the price went from $90 to $93. Today, close to 2 years later it’s hovering in the $180 range.
You won’t know exactly when he bought it or for how much but you can look up that stock’s price range in the quarter he purchased it. If the price is only 10% higher than the lowest price for that quarter then you may have found a deal. If Warren Buffett puts that much money into a stock he’s betting that it’s going to go up way higher than 10%.
Buffett bought all the major American airlines in the 4th quarter of 2016. By the time I found out about it all of them had gone up significantly in price except American Airlines. Again, I didn’t pull the trigger. The stock went up as high as $59 but came back down to the range of $41 where I first saw it at.
This time I pulled the trigger on American Airlines and Southwest Airlines, $41.60 and $51.40 respectively. I feel good to own some stocks that are Warren Buffett approved. This sounds like amateur hour advice but to me it’s rational. He’s done all of the due diligence for you. A stock pick endorsed by him can only be so bad.
The S&P 500 index could be referred to as the benchmark for investing returns. In order to justify managing your own money or paying someone else, your returns have to beat this index otherwise you’re better off putting your money in a low fee S&P 500 index fund(Vanguard, Spyder).
The chart below indicates if you had put your money in at anytime in the last 90 years(except in the last couple months) you would have seen a return from your investment. There were better years than others but as long as you held you would have made money.
Although it’s next to a sure thing that you will make money if you’re in it for the long term you probably wouldn’t want to pile in all of your money at once unless if the market has took a huge beating like in early 2009.
If you had piled in all of your money at the peak of the tech boom in the year 2000 you would have seen your investment get cut by close to half at the bottom of the tech bust the following year.
That decade wasn’t the best for a long term investor due to the Great Recession that followed in 2008. The index rose back to its high after the tech bust only to get slammed even worse. It’s like falling madly in love only to get heartbroken and then have it happen all over again soon after you recovered.
If you weathered the storm until today though you’re in love again. In 2001 the index at its peak was at around 1500 points and in 2018 it’s been in the 2500-2800 range.
Instead of piling in all at once a more prudent strategy would be to put smaller portions every month so that you hedge against having all of your money invested at the top. Sure, if you go all in at once you’ll more than likely see your investment above water one day but in the case presented above you would have had to wait until 2013 to see a gain from your 2001 investment. That sucks.
If the index has taken a bad beating already though it’s probably a strategic move to put in more money than you usually would. Buying at the bottom is how you get the largest returns.