As the Fed caused a bit of a ripple in the market today and I considered vacating a position (but ultimately didn't). I thought a little bit about my journey over the years and thought I'd share a story and a few things I've learned.
Back in 2003, I made my first move in the stock market by taking an $1800 tax return and buying 200 shares of a coal company called Consol. At the time it traded under the symbol CNX. I bought it with almost no DD simply because it paid a pretty good dividend. (Around .50/share if I recall correctly.) This is back when internet trading really wasn't a thing. I bought it through my bank and the trade cost me $40! (I actually had to call a broker at my bank and place the trade over the phone. Ancient times, right?) lol I figured, win lose or draw, eventually this stock will pay for itself with the dividend. I didn't follow the market much after that because I was really holding for the dividend, but realized a couple of years later, it had climbed into the 30s. Around 2007 it had hit 55 and I decided to sell. Still with my bank, the trade cost me another forty bucks! I took the money and put it in a basic savings account where it basically sat doing nothing until 2016. (I missed the crash of 08, by being liquid at the time, but this was pure luck. Nobody saw that coming.)
In 2016, after some reading I decided I had more confidence in trading so I took the money and opened an investor's checking/trading account with Charles Schwab. I was amazed at trades costing $4.99 and done on my laptop! lol After quite a bit of DD I decided to buy 300 shares of NVIDIA. At around $24 a share, it cost me about $7200. (I took the rest and made a down payment on a new (used) car and an AK-47.) lol…
After that, I just held the stock. Diamond handed it as the kids say. I've bought and sold quite a few other stocks over the years, but those two trades are where I started. Two trades over the course of 17 years turned an $1800 tax return into a nice safety net worth over $200,000 with almost no effort on my part.
What have I learned?
Even a small amount of money in the stock market can lead to a big return. But don't invest more than you can afford. For me, a tax return one year was about all I could throw at it in my 20s. “YOLOing” your rent check is never a good idea.
Be PATIENT. You're not going to get rich overnight. That type of thing is rare and risky. Do your DD and hold onto what you're confident in.
When the market takes a downturn, BUY! One of my biggest regrets is not investing heavily in 2008 when I was very liquid and the market had taken a nose dive. I did not repeat this mistake last April/May when the pandemic caused another crash. I bought everything I could. Particularly old giants like Ford, and GE which were no brainer bargains at >$5. The worst thing you can do is panic sell. The market will come back. Hold on and accumulate. (I actually figured it might take 2 years for a comeback this time, but we bounced back much earlier.) This thinking is what got me to hold the position I was thinking of bailing on today, when I realized I would just be panic selling in advance of some Fed news. Regardless of the news, the market would bounce back.
Never let savings sit in a traditional savings account. (like I did for 8 years from 2007-2016…lol) Even if compound interest is all you're after, there are much better rates with other financial products.
Be patient, but don't be afraid to take profits. Don't fall in love. Have an exit plan. I sold Consol around 55 with a 9 entry. Pretty good… Later that same year, it climbed into the 90s. Made me wince, but I didn't regret it. Unless you have a crystal ball, you're never going to enter at a historic low and exit at an all time high and that's ok. I realized at the time that coal was cyclical and was most likely going to decline in value in the coming years. I stuck to the plan. When I saw a spike, I sold. For perspective, that high in the 90s in 08 hasn't been repeated since. Consol trades in the high teens now and offers no dividend. (New ticker CEIX) So in hindight I exited on a bubble that could have been better, but if I waited too long, it could have been much worse.
It's never too late to start. If you look at those two simple trades over the span of 17 years, you could potentially do the same thing in your late 40s with a small amount of money (remember nothing you can't afford to lose) and have a decent nest egg by the time you hit 100% retirement in your 60s.
I hope to have given a little insight here. I thought it was worth sharing. If you disagree, don't be too hard on me. I'm not a financial professional… 😀
Have a good'un!
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