summary of what I have learned with my funny money

[u500_insulin]

I thought I would post my experience after starting to play in the market a little.

I wanted to be able to do some stocks in a taxable account to get some real life experience.

I put 3k into an account and would buy different stocks based on the news or how I felt a particular day.

 

At the end of the 3 months, I have not gained any money nor lost. I have lost time and gained stress thinking about my individual stocks:

I bought Apple, netflix, NVDA etc.

I ended up buying at wrong time and selling at wrong time

Example for this week: Sold Chesapeake energy after holding it for a while to cut my losses, then it goes on a three day tear    Earlier this month I saw that other stocks soared just after a week or two selling them for a small profit or just at even.

 

I realize now by my own experience, it is better to have rules and stick to those

My rules are as follows for play money:

if you buy certain stocks: for me: Berkshire Hathaway or Apple (never sell) hold until absolute need to sell or in old age. Just forget that you even own them, that way cannot be tempted to sell.

I am glad that I got the real life experience which is echoed in passive investing (Bogle). You can't outsmart the market in the long term.

 

Love to hear other people's experience

 

 

[q-school]

Only three thousand makes it hard. It's basically gambling. Especially with your desire to almost day trade. Plus the tax hits are significant.

I didn't start investing individual stocks until I had quite a bit more and even then I held for years.

Glad you recognize it's play money

[Dicast]

There is also the pain of tax time.  Lots of in and out purchases, gains/losses.  It is easily doable but annoying.  I did the same thing when I was in college with about $1500 and never want to deal with it again.

[Dreamgiver]

If that's what floats your boat, get into options. Much bigger upside for funny money.

[ajm184]

Not sure you have learned anything except that emotion is bad and costs money.  Not sure there are 'rules' when is comes to individual stocks, but a couple of guidelines I have used in past when holding individual stocks in my Roth IRA:

a. Research.  Know about a companies  business, customers, competitors, financials.  It is tedious and painful, but useful.  There are plenty of really good equity analysts out there who base their recommendations on nothing but a company's SEC filings.

b. Have a view.  Why do you believe this stock will increase in price?  Write it down so that you can re-examine your premise over time.

c. Price points- What point will you get in and or out?  A number of years ago, I bought INTC (Intel) for $19.22/share, my thought being 'It's beaten down stock trading within 3% of its 3 year low, I think I can get 3 to 4 dollars and move on'.  I was foolish, because when it moved to like $24, I ignored the 'get out' price I had set.  Ended up working out, as I sold at $36/share, but discipline needs to work on both entry and exit.

d. Dividends mean you don't have to be right, right away.  I've never owned Amazon individually either.  Dividends allowed me on several stocks to do get out slightly above break even or lessen the losses (GM in 2000 or 2001 comes to mind).

e. Conviction- If your view and circumstances haven't changed have the ability/willingness to buy more if the price drops beyond your initial entry point. This worked well for me in the last year, bought Nucor at $46/share because both presidential candidates were talking up infrastructure spending and love the company's business model, prices drops to 40'ish put more money (an additional original investment amount).  Sold at like $60 $61/share earlier this year.

f.  You will lose money despite a. through e. above.  I owned CS (Credit Suisse) ADR's at like $28/share, thinking the CEO was the right person to offrisk assets and transitions its business model to greater focus on Wealth Management.  Instead, some idiot CS traders hid their book from risk management creating huge issues when they came to light.  Ended up selling at just over $15/share.

g. You are shooting for above 50% (and your a rock star if you get to 52% LT) on winners versus losers.  Ideally, lessen the losers and crush it (2 or 3 bagger in Peter Lynch parlance) with the winners.

g. Re-examine your assumptions around b. all the time.

[Zaphod]

I dont know that you've learned anything in 3 months. Really should give it some time (not that it will change the answer, but you could say the same about any endeavor viewed under doomed to fail circumstances). What you've really learned is the emotional toll of individual stocks I'd guess.

Agree with the above your picking is pointless unless you have entry/exit guides and timelines for it to happen in. Have rules. Otherwise, you'll do exactly as you did and cause yourself stress in between. If you have rules there is no need to stress if nothing happens or not to a degree enough to change anything, and if some parameter is hit, you just follow the plan. Makes things easier.

I decided a while back I wanted little to do with individual stocks and switched to etf index funds.

[lernd]

I put my fun (or funny) money into small/micro cap biotechs in late stage drug development.  I figure at least this way I know as much as the next guy.  I try to read the existing research/studies and make a "best guess" as to whether the drug will gain approval or have a successful Phase III based on a previous IIB study.  Companies like Facebook or Apple have teams of analysts working full time analyzing price, future performance etc.  There is no way I could ever know as much as they do so picking those stocks is like guessing.  I figure that the small cap Biotechs don't have as much surveillance and financial analysts probably can't read a medical research study like I can.  As one might guess, I've had some home runs and some major whiffs.  Counting only realized gains and losses, I'm only about 1-2% better than a total stock market fund (which is obviously not good considering the increased risk), and that isn't factoring in taxes, which I keep to LT gains only.

 

Josh

[Zaphod]

lernd wrote:

I put my fun (or funny) money into small/micro cap biotechs in late stage drug development.  I figure at least this way I know as much as the next guy.  I try to read the existing research/studies and make a “best guess” as to whether the drug will gain approval or have a successful Phase III based on a previous IIB study.  Companies like Facebook or Apple have teams of analysts working full time analyzing price, future performance etc.  There is no way I could ever know as much as they do so picking those stocks is like guessing.  I figure that the small cap Biotechs don’t have as much surveillance and financial analysts probably can’t read a medical research study like I can.  As one might guess, I’ve had some home runs and some major whiffs.  Counting only realized gains and losses, I’m only about 1-2% better than a total stock market fund (which is obviously not good considering the increased risk), and that isn’t factoring in taxes, which I keep to LT gains only.

 

Josh

Click to expand...

biotech in general is littered with fraudulent companies. I've picked apart so many crazy bull arguments from sites like Seeking Alpha, but those guys are nuts that on the bandwagons, and it can take companies years to die. Not worth it. Far easier to spot crap or those with unlikely scientific processes/goals, poor study designs, etc...or a tiny nanocap with a bazillion dollar idea with great clinical results, sure, thats why no ones bought them yet.

Most of what I've learned is when I have stocks, Im too impatient to hold til it works out. Literally have had several 100% plus moves that have happened in last years if I would have held. A couple of those I knew were big possible winners, but I was transitioning to indexes only at the time anyway due to above noted personal limitations. I dont think I had at the time of initiation an exit/timing strategy for my thesis to play out, but even if I had, it would have been difficult to not overplay.

[lernd]

Zaphod wrote:

lernd wrote:

I put my fun (or funny) money into small/micro cap biotechs in late stage drug development.  I figure at least this way I know as much as the next guy.  I try to read the existing research/studies and make a “best guess” as to whether the drug will gain approval or have a successful Phase III based on a previous IIB study.  Companies like Facebook or Apple have teams of analysts working full time analyzing price, future performance etc.  There is no way I could ever know as much as they do so picking those stocks is like guessing.  I figure that the small cap Biotechs don’t have as much surveillance and financial analysts probably can’t read a medical research study like I can.  As one might guess, I’ve had some home runs and some major whiffs.  Counting only realized gains and losses, I’m only about 1-2% better than a total stock market fund (which is obviously not good considering the increased risk), and that isn’t factoring in taxes, which I keep to LT gains only.

 

Josh

Click to expand…

biotech in general is littered with fraudulent companies. I’ve picked apart so many crazy bull arguments from sites like Seeking Alpha, but those guys are nuts that on the bandwagons, and it can take companies years to die. Not worth it. Far easier to spot crap or those with unlikely scientific processes/goals, poor study designs, etc…or a tiny nanocap with a bazillion dollar idea with great clinical results, sure, thats why no ones bought them yet.

Most of what I’ve learned is when I have stocks, Im too impatient to hold til it works out. Literally have had several 100% plus moves that have happened in last years if I would have held. A couple of those I knew were big possible winners, but I was transitioning to indexes only at the time anyway due to above noted personal limitations. I dont think I had at the time of initiation an exit/timing strategy for my thesis to play out, but even if I had, it would have been difficult to not overplay.

Click to expand...

Agree that there is a lot of fraud - and those sites like seeking alpha (and motley fool) likely have agendas of their own to promote stocks etc.  That is why I do my own research.  A simple Market Cap/Industry screener will obtain a list of companies.  I also weed out companies not in the US or Western Europe (I figure more likely fraudulent if based elsewhere?), with market caps that are too small or stock prices that are too low (likely to get delisted from a major exchange).  Then I start looking the companies up directly by going to their websites - all should have a publications section.  Another method of finding companies is to simply peruse a big journal and look at large drug trials and who supported them.

[Hatton]

I used to do quite a lot of individual stock investing.  The only individual stock that I own is Apple.  I bought it in 2008.  It has done very well. Please buy your iPhone Xs. Individual stocks require that you do lots of reading about individual stocks.  You need some familiarity with balance sheets and technical charts.  I used to pour over IBD before going into work.  I quit individual stocks and now index around 2008.  Individual stocks are much more work.  indexes never bankrupt

[Donnie]

Please don't buy individual stocks and definitely don't buy options unless it's for entertainment purposes. No one on this board knows what they are doing with regards to individual stocks, myself included.

[Neuro-doc]

I own one individual stock. It's down about 90%. I bought it years ago after reading a "this is a great stock" article in the newspaper and doing a bit of (useless) background research.

Fortunately, it represents less than 0.01% of my otherwise fully indexed portfolio.

I could sell the individual stock to harvest the capital loss. But instead, I keep it because even though it is only a tiny piece of my overall asset allocation, it serves a critical role in my portfolio:

Every time I log onto my investment account and see that stock in my list of holdings, the 90% loss slaps me in the face and reminds me not to do dumb things with my money ever again.

[Matas]

OP - doesn't sound like "funny money" if you're stressing out about it. Maybe sell them and use the proceeds to something that is actually fun. Ski, mountain bike, race car school, travel, whatever.

[VagabondMD]

I purchased stocks in the past and did not have the temperament for it. In my "real account", we own two stocks, a small position in a local bank that I serve on an advisory board, and my wife's company, for which she is required to own a percentage of her salary at her retirement executive level.

I have a play account at Robin Hood, about $3000, which gets an additional $100/month. In it, I buy whatever tickles my fancy at the moment. No stress at all. Current holdings include two China ETFs, Berkshire Hathaway, B of A, Starbucks, JNJ, Target, and a couple others. I made a killing in Tessa a while back, but took it in the shorts with Chipotle. All in good fun!

[Guest]

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