We all have at least a few.
August 29, 2021
Every investor has made some mistakes. Maybe you never bought shares in a company that you believe in or maybe you sold shares way too soon. It’s nearly impossible to have a record that contains no mistakes or if-onlys, because the very nature of investing requires us to make choices.
If you buy one stock that might mean you don’t buy another. That can result in big wins or spectacular fails where you know the exact moment in time where you cost yourself money.
The reality, however, is that many stock market mistakes aren’t actually mistakes. Maybe you missed out on big gains or purchased shares of a stock that went nowhere over one that tripled in a year, but every move you make offers an opportunity for learning.
If you bought one stock over another for a well-reasoned, thoughtful reason, did you really do something wrong? Stocks don’t always perform in a rational way and it’s not worth kicking yourself over decisions made for the right reasons that end up not turning well. Instead, as Dan Kline and Steve Symington shared on the August 23 edition of 7investing Now, it’s better to have a laugh and look back to see what you might do differently next time.
A full transcript follows the video.
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Dan Kline: We’re gonna hit the homestretch here and talk stock market regrets Ravi Shah, we will take your question towards the end of the show, we will take any other questions people want to ask, towards the end of the show.
This is going to be sort of a quick hit segment, we’ve just got a whole bunch of things you shared on Twitter. And Sam, if you could share the tweet that I put out there that went pretty viral. “What’s your biggest financial risk or stock market regret”?
Mine is not buying Amazon many years ago when it first became an important part of my shopping life. And then we have a few others that sort of agreed with me on this if we want to show them in pretty rapid fire here, Sam. Mine was buying in 2000 and selling it, that’s in reference to Amazon. “So much Amazon, shopped there at their opening in Germany in April 1998. Thought it was freaking genius never bought it”.
I believe there was one more after that, if you want to share it, Sam, my biggest regret is buying Amazon convertibles in 2001, that is 20 years ago, not converting them selling the bonds, doubling my money and missing the next 6,000,000%. I probably could have retired on that $5,000.
Now that is not typical. But that is kind of typical. Like if you own a good company, you should hold on to it. In my case, my stock investing structure is often looking at things that are part of my life, researching them, and then buying them. The problem is when I first became enamored with Amazon, I wasn’t really an investor, I was much younger, and that wasn’t the world I was in. And then sort of when it came time, when I started doing this, I do I own Amazon indirectly in my 401k I have exposure to it. But it always just seemed to be like too expensive. Now, in the past couple of years, when fractional shares became an option, I need to buy Amazon. I just opened a Stockpile account for my son and 30% of his earnings, every paycheck are going into that account, and it is very likely that he will buy some fractional Amazon.
So look, if you’ve made a mistake, correct it. I had a conversation with someone today who who saw me on the Spaces. He said, oh, all those tech companies you mentioned are so expensive. And I said yeah, you would have said that 10 years ago as well. And you’d feel really dumb about it. Steve, you want to weigh in here?
Steve Symington: Yeah. Actually, one of my biggest regret maybe is in line with what Chooch shared. If you can share that one, by Chooch, he says “not starting much earlier time is your biggest ally and I’m running short”. I wouldn’t necessarily say I’m running short at this point, but definitely shorter than I was. And I’d wish I’d started investing when my kids have started investing, right? I’ve got an 11-year-old and a 13-year-old and a six-year-old. He’s not really he didn’t know anything yet.
But you know those early years can do a lot for you. And you know you don’t have to start investing when you’re 11. That was when Warren Buffett bought his first stock by the way, he was 11 years old. And his dad was a stockbroker back then. But, even when you’re a teenager, just a teenager. I think that’s not too early to get started investing. Investing should not be an intimidating thing. And it always kind of felt that way for me. When I was younger, until I started getting more into it, I kind of cut my teeth as an investor a few years before the 2008-2009 craziness in that crash. And I got to experience that, and learn a lot of lessons, with not a lot to lose. So that’s one silver lining, I guess. But I do wish I’d started much earlier.
Dan Kline: As a parent, I also thought it was pretty important when my son wanted to work, I made it very clear that he was going to have a bank account that I had access to. So I can see what he’s buying and what he’s spending. And that every time he got paid, that 30%, and I’m going to give them a little bit of a match, I’m going to put like 5% in so he, he can feel like he’s making money, even if the stocks he buys take a little bit of time. But he’s 17, he’s going to live with me for at least, probably three or four more years, if he works that whole time. And he’ll probably start some college and take some classes during that as well.
But I don’t think he’s gonna go to traditional college, when he starts working full time, and making whatever, call it $15 an hour and clears I don’t know, $500 or $600 a week, not a lot of money, but his expenses are zero, because he lives with me. So if he puts away 50%, all of a sudden, he’s going to be 21 and have a meaningful amount of money invested. And that can be a down payment on a house, that can be Oh my God, I really want to go, work for the Peace Corps for a year and see, other countries. Or I want to, go take a bad job, but so I can go travel around the world, or whatever it is, he’s gonna have some financial wherewithal to do that. But also understand, oh, my God, I only put this much money in, and it got me to here.
Because the one, my probably biggest regret, really, is that nobody told me when I was making no money, just put 2% away, just it was harder to automatically do that. I mean, I used to get a physical paycheck, my first probably like 15 years working. But now when I put money, like I have automatic money transferred into my brokerage account, I’m automatic money rounded up into my Acorns account, which is actually a Roth IRA. So it’s tax beneficial. Like there’s a lot of things you can do that make it not painful. And I get it when I was making $28,000 a year, taking 2% out of that felt more painful, but oh boy, I wish I had done that because it piles up really quickly.
Let’s go to 307$fool. I have no idea how you pronounce that one. I stopped investing in individual companies for a little over a decade. I missed out on some absolute monsters, including Monster (NASDAQ: MNST).
Yeah, we are big believers in investing in individual stocks. But you have to do your homework. If you’re not a member of a service, like 7investing, we recommend 7investing. It is a lot of work. And there are people who just invest in ETFs, or mutual funds or whatever it might be. That might work for them. For us, though, Steve, that is not how we do it.
Steve Symington: Yeah, we we like to focus on individual companies. And he mentioned Monster. It’s interesting. That was actually one of the 100 baggers that Chris Mayer focused on in his book 100 Baggers. And the the fun part about it is, I’ve seen some of the best investors in the world, say if you’re right 50% of the time, you’re doing pretty darn good. Right?
And people don’t think that way. They think 50% of the test is an F right? Like no, your winners will significantly outpace your losers and only a few really big winners can make your portfolio and drive your returns. So it doesn’t take much but it takes time to realize that. A lot of people want to get into like get rich quick, right? And they want this money fast. But it takes years to get those really big winners. I’m not talking about, a two bagger or a four bagger even, I’m talking about 10, 15, 20, 30 baggers, and that’s that’s when it gets really fun.
Dan Kline: He mentioned Monster and I also think it’s important to, it’s fine to use a company like Monster as a data point when you’re researching other beverage companies. But I think we saw a lot of people get behind Celsius (NASDAQ: CELH) which is a another publicly-traded energy drink company. And there are only things, you can make a case for Celsius I don’t but but but but you can make a case for it. But your case can’t be it’s an energy drink and so was Monster. You have to look at how it’s being accepted in the market. And I would argue that Celsius has done really well in like the gym and exercise world. It has not done well in the grocery store world. It flamed out really quickly in Publix here in Florida and that’s anecdotal, but you have to dig into what their reorders are like.
Monster was a, and Red Bull, were very much like pop culture phenomenons and they’re not necessarily duplicatable. We may not need the next Monster because we have Monster. I know, I drink red bull and I did try Celsius. I don’t I think a lot of any of these things anymore, and I prefer Red Bull. So I think there’s gonna be a lot of sort of false equivalencies when people are analyzing stocks, you have to be careful with that. Just because Tesla (NASDAQ: TSLA) is a great stock doesn’t mean that all electric vehicle stock. So we all saw that we saw a lot of that happen.
I want to take a few more of your tweets here. And then we’ve got a couple of questions. Ravi and Stock Investor, we will get to those. And feel free to add your questions, ask us whatever you like, we will try our best to get to it.
So Paul [unknown name], and again, I apologize for reading this from a little bit far away. So, “waiting till 40 to move from residential property investments to having a blend of both by both”, I assume he means equities and stocks. Yeah. Look, I always when I was younger, took the belief that well, I own a house, and I’m building equity in my house. And that’s an investment. But of course, I’ve been through two boom periods in the real estate world, one pre-2008 crash, and one now. Where the property I’m sitting in where I’m doing this show is worth $60,000 more than I paid for it three months ago, it might be worth $75,000. More that’s where like the starting asking prices are, and they’re selling in a day. That is, of course, the equivalent of like picking a stock that, goes up astronomically quickly. But that’s not typical.
So I am a believer that you largely should own real estate, because we all need a place to sleep. And in my case, at the moment, I don’t own my principal residence that we are looking at, and probably will will change that soon. But I do fully own my secondary residence. And I do consider that a good investment. But owning stocks is the best way for the average person to get rich slowly to make money over the long term. Steve, I know you agree with me. So I’ll let you weigh in here as well.
Steve Symington: Yep, no, I can just say I definitely agree. The stock market is undeniably the greatest wealth generating vehicle we have available to us. And I would say that, you’d have some people say, oh, crypto. And there’s other ways to do that. But there, there are more ways to invest now, then there were more vehicles to put money to work for everyday investors. So there’s that. But the stock market is a fantastic wealth generation tool. And it’s silly not to take advantage of it.
Dan Kline: If you understand crypto and want to invest in it, more power to you, or if you’re listening to our friends at Crypto EQ, and using their expertise and making investments, I think that’s great. But I think for the most part, and we talked a lot about this on the Space I did this morning, I believe in understanding what I own. Now, can I explain every aspect of some of like the tech company infrastructure? No, of course not. But I generally can make a case for why I own it, what it does, what the thesis is. Do I understand the nuance of like the Starbucks relationship with coffee growers, or every in and out of their Nestle (SWX: NESN) deal? No, but I understand selling coffee and what retail looks like and how restaurants operate.
So for me, I actually do think it is important to have that kind of touchstone. And I think most people have a core competency in some areas of investing where, hey, I am a customer of video games. I understand what the good video game makers are. And when 7investing comes out and says hey, I like this video game stock. I can go, oh, hey, yeah, I agree. Like I buy their games every year. Like I spend a lot of money on, my son buys like outfits for his characters, skins I think they’re called. That is a ridiculous purchase, in my opinion, but it works like it’s it, it is a thing. So I think there’s all sorts of expertise here.
We’re gonna take the last two on our list here. Before we get to some of your questions and comments here. So Sam, if you want to go to a [unknown name], and he says “Selling Google at $165 thinking I made a killing by the way I got in at $90 back in 2005 right after its IPO”. And the next one after this is very similar as well. Rick [unknown name] says “selling any stock ever, over the past 30 years, I’ve lost 100 times more by taking protective profits early on as compared to all of those that stayed flat or went to zero”. Yeah, we’ve actually seen this that selling is almost always a bad idea. Steve, I’ll let you comment, then. I’ll finish up a little bit here.
Steve Symington: Right, and a lot of people ask why have we haven’t issued a sell recommendation so far. We launched 7investing in March of 2020. So about a year and a half ago now.
Dan Kline: Or in pandemic time. 30 years ago?
Steve Symington: Right at the end of an 11 year bull market and right in the middle of a horrible stock market crash, start or a pandemic. Good time to launch a stock picking service. Right? And we didn’t plan it that way. But it turned out that way. And you know that that’s, selling, if you look back at it, a lot of your decisions, there’s bound to be several sell decisions, several sells that you’re going to regret later on. And almost without exception if you’ve done research on a stock and determined that it’s a promising long-term investment and you sell to take those protective profits. It ends up coming back to bite you later on. And and that’s tough, people say, No, you never went broke taking a profit. But it’s a lot harder to get rich that way as well.
So, that’s not to say you should never take take profits, sell when you need the money, and you shouldn’t put the money in the stock market that you’re going to need for a few years anyway. So that’s, kind of, that’s a tricky thing is determining when to sell. But we sell when the thesis is broken. Maybe when it’s acquired, and we’re not interested in holding shares of, if it’s a stock and cash deal, or you’re gonna get shares of the company that’s acquiring it, maybe we’re not interested in owning those. But yeah, there’s a lot of reasons to sell. And taking some profits off the table should be very seldom one of those because I’m looking at the very long term stories of stocks that I’m recommending, and I don’t mind near term pullbacks or profits,
Dan Kline: There are a couple of exceptions to that. One is pretty unique to my space in retail, I’ll talk about that in a second. The other one is, if you can’t sleep at night, because something you own has grown so much that it’s 50%, 60% of your portfolio, and you would just feel better selling part of your position, go ahead and do that. Because you don’t want your portfolio to impact your mental health. You don’t want to have, one stock be down 10% in the day, and all of a sudden, like your net worth is materially impacted and you feel bad about it.
Now, obviously, we have days where everything’s down, and we have those big drops, that’s happened a handful of times during the pandemic, but that is a lot different than being tied to one company because we know your really great companies, your Chipotle’s (NYSE: CMG) is your Microsoft’s have fallen by 50%. If you have so much.
The second scenario, and again, this is largely a retail scenario. If your company everything finishes on your thesis, and you go Okay, like I believed in I don’t know, Target, and they’ve expanded to all the countries they’re gonna expand to, they’ve opened all the stores there, their growth is really slowed. You might look at it and go, there’s a better place to put my money. In tech, that is almost never been true. Like I mean, now there are companies that have lost their way certainly. There are companies like Apple (NASDAQ: AAPL) that lost their way than found their way. There was someone in the the Twitter (NYSE: TWTR) feed here that talked about regretting not buying Apple when when Bill Gates invested money. And I just said, Well, at that point, Apple could have gone either direction, like there is no Apple could absolutely be IBM or be Atari like that could have happened.
So it’s one of those scenarios where, this is very personal, but we almost never are telling you to sell. Because the stocks we’re recommending, we believe in for the very long term. And sure, is there a point where some of these stocks like might just become mature companies that are great businesses and no longer great investments, but then they tend to pay dividends. And they tend to do things that make them good investments for different reasons. Oh, and by the way, you’re older. So those dividends, might be more beneficial to your taxes and your benefits.
We appreciate so many of you participating in this that, that Twitter post had something like 35,000 people look at it and like hundreds of people interact with it, which is always fun and exciting, especially when it’s on a Sunday afternoon, and I’m driving for three hours and I see that things start to blow up as I am driving through rainstorms.
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