Have you ever been playing a game and all of a sudden the difficulty just ramps up on you unexpectedly? For me, the first thing that comes to mind is the Trials of Archimedes in God of War Ascension. You’re going through the game, and everything is fine and dandy, then WHAM! you get smacked in the face by an encounter that is far more difficult and unforgiving than anything you faced before. Unfortunately this can happen in the stock market as well.
Today, I’m going to share with you one of my stock trading blunders, and the lesson I learned. I am a big fan of the service Netflix provides, and as such, figured I should invest in their stock. It was 2011 and NFLX had been steadily rising since their IPO. I bought a few shares at $245. Those of you who know your NFLX history know that their share price plummeted sharply late in 2011 due to their change in policy to have streaming and dvd services separated. Ignoring the signs, at $225 per share, I doubled down on my investment. The price continued to fall and I lost thousands of dollars, selling all of my shares at $135. Luckily, I had sold before it hit bottom, but it didn’t matter, I’m still recovering from the damage.
I did the one thing that no serious gamer should ever do, “give up.” When I got to the Trial of Archimedes, I cursed the gods over the relentless enemies and lack of healing items, but I kept on fighting. I fought, and died, and fought, and died, and fought until I beat that game. When you believe in yourself, you should never give up, and if you believe in a company, you need to tough it out. If you look up NFLX on the day I’m writing this, you’ll find that it is valued at a little over $300 per share. That is over 25% higher than my cost basis, and that is a solid ROI for 2 years. A solid ROI I missed out on because I gave up on a company I believed in. Naturally, I also kick myself for not buying back in when NFLX was about $80 per share in 2012, but that’s another topic.
In a video game, you can tough it out by trying harder, even when the odds are stacked against you. However, when you’re investing, all of the “challenge” is mental. Watching your net worth go down is more emotional than you may realize. The fear takes over, and you make stupid irrational mistakes. It takes discipline to make the right decision when emotions run high.
I can’t tell you how many times I’ve bought a stock and watched it fall over 2% within hours. That’s just my luck, or lack of timing skills, but a lot of those stocks have turned into profitable assets in my portfolio. You should absolutely sell a stock that is not healthy, but I would much rather you do your proper research ahead of time, and tough it out through the market noise, just as you would step up to the challenge as a gamer.
How about you, have you ever stepped up to an unreasonable challenge and overcame it? or maybe you’ve made some big mistakes with your finances in the past.
Let me know in the comments!