Monthly Archive: September 2013

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!

I expect you’re probably wondering how dividend stock investing has anything to do with video games. I am a gamer, but I also have bills to pay. It can be difficult to rationalize spending money on games when money is tight, especially if you’re saving money. I propose that you save the money you can now, so that your investments buy the video games for you later. So how does dividend investment benefit gamers?

Automate Your Gaming Costs

I have a history with MMORPGs, specifically World of Warcraft. This means every month, I need to pay a subscription fee if I want to play. In the past, this would mean that if I couldn’t justify the cost, I wouldn’t play. Dividend Stocks pay a set amount of money on a regular schedule, which can make them ideal for reliably covering the costs of your subscriptions. Additionally, any increase in value to the share price is adding to your savings. For instance, to cover a $14 per month subscription, you would need 55 Shares of McDonald’s (MCD) paying out a little over $42 every quarter. If subscription based games aren’t your thing, 78 shares of McDonald’s makes your quarterly dividend over $60, which pays for a brand new console game. These examples may seem like large investments, but once you start saving you’ll be surprised how quickly your wealth builds up. Additionally, these dividends essentially allow you to keep your hobby covered without breaking your budget.

Free Time to Work Less And Play More

The last example was more of a Level 1 Investor example. Once you’ve been saving and investing for a long time, your dividends can replace part of your income (or all in the case of retirment). What this means is that you can afford to have more time to yourself to game. Time is the most valuable resource any of us have. Maybe video games aren’t your dream and you’d rather travel, read, or enjoy your time in your own way. When your dividends are covering your costs of living, you have the freedom to use your time however you see fit.

Taking Back Control

One of the most appealing aspects of a video game is the sense of agency. In the real world it feels like we have no control, our lives are governed by bosses and/or clients. Video games put you back in control, and you are the master of your destiny. You may not be able to control how the market values shares of a stock, but you can choose where you want to invest your money. If you don’t want to buy shares of Johnson and Johnson (JNJ), you don’t have to. If you’d rather roll the dice on a riskier higher yield dividend stock, that’s your choice, just make sure you do your research. I take a lot of pleasure in picking stocks each month, because I’m in complete control of where that money goes.

Time is money, and dividends create time. What hobbies or games would you pay for with your dividends? Or would you just reinvest them to grow your wealth?

Let me know in the comments!

You’ve got your 5 stacks of Nephelem Valor, you run down the Tower of the Damned and spot a pack of Elite Phase Beasts. Their affixes are Vortex, Frozen, Damage Reflection, and Molten. “No Problem,” you think to yourself, “With my gear, this will be cake.” Sure enough, you beat them and collect the loot and gold. Combined with your current stash, this new chunk of change means you can afford some new pants, so you’ll be able to farm faster and make more gold. Additionally, you can make back some gold by selling your current pants.

This scenario is really not that different from dividend stock investing. You’ve been working to make money, and once you’ve saved up enough, you can put it to use to increase your capability to earn more money buy purchasing shares of a good quality dividend stock. That’s what’s great about dividend stock investing, you’re always moving forward and increasing your means. Also, just like your old pants in Diablo 3, if the stock isn’t performing, you can sell it and get a new one.

The Good Gear Deserves Good Gems

However, unlike Diablo 3, when your dividend stock is sending you money each month or quarter (and the returns are good because you did your research), you can take the extra money you’ve saved and buy more of that stock, further increasing its output. If you could just feed your pants more gold in Diablo 3 and their stats would increase, you’d never need a new pair of pants! The closest you can get to that freedom in Diablo 3 is adding expensive gems, or if Blizzard ever adds enchanting. I can tell you from experience, it feels great to know that your dividend stock is performing well, and being able to invest further in it is an epic victory.

Dividend income is completely passive. While you’d have to use your pants and other gear in Diablo 3 to earn more gold, your dividend stocks are earning you money without you even doing anything.

Scan The Auction House

auctionhouseIn Diablo 3, you wouldn’t just buy any item on the auction house and assume it’s going to make your character down elites/champions faster. You would make sure it had good resistances, your primary stat (in my case Intelligence for my Wizard), attack speed, critical hit chance, etc. It’s no different for stocks. You need to know which statistics to focus on so your stock performs well enough to be worth your gold, -ehrm money. Make sure the stock has a P/E Ratio under 20, a decent dividend yield, a healthy payout ratio, and has increased their dividend consistently for the past several years.

What other similarities do you see between Diablo 3 and investing? If you’ve haven’t played Diablo 3, maybe there’s another RPG you can draw similarities to.

Let me know in the comments!

I started this blog and built this site to encourage young gamers like myself to learn about finances and the stock market. When I first started, I had almost no financial literacy, and no clue of how to buy a stock much less determine its value. By using game analogies and other nerdy topics, I hope to inspire you to take charge of your future and ensure that you’ll have a stress-free retirement where you can play all of the video games you like.