personal Finance Story

Step one, get excited. Get very excited. I just graduated college. Never in my life have I made so much money. I was ready to tackle the world with my investing acumen. I was in a word, invincible (financially speaking of course).

After filling out all of the applications, I transfered a tidy sum of $3,000 into my account. It took almost a week to clear. Far too long in my mind. In fact, by the time the money was available to trade I was actually on travel for work. So from a hotel room, with a crappy internet connection I plotted my first purchase.

Step two, make rash decisions and bias the outcome. I thought to myself, What’s a good stock to buy? Instinctively, I went with the very first that came to mind, a company I had used personally and trusted. Advanced Micro Devices. I never looked at their balance sheet. Never glanced at their earnings. I just knew that this was the stock to buy.

Buy 190 shares of AMD @ $15.41.

After no more than three days, I felt on top of the world when my investment went up to $15.70. Obviously, I sold immediately.

Sell 190 shares of AMD @ $15.70. Profit after fees was $48.05.

I was a king of stock trading. No more than three days into the endeavor and my account was already sporting a 1.6% gain. Millionaire status here I come! But what next? What now? What investment would make the most sense after making a profit from one of the worlds most popular computer processor manufacturer? Of course! Their direct competitor, Intel.

Buy 115 shares of INTC @ $25.908.

And after three days, my hopes were dashed when the stock dropped. A whole 60 cents! Calamity! So I did what any prudent investor would do in such a situation. I sold immediately.

Sell 115 shares of INTC @ $25.30. Loss after fees was $69.87.

So now I was down a little more than $20.00 but that Ok. It was a minor setback. I was still a investing power house just waiting for the right moment to pounce. And pounce I did. I fact, I didn’t even make it to the end of the day. I bought my next two stocks the same day I sold Intel. Apple computers and Freehold McMoran Mining Company were on my list.

Buy 15 shares of FCX @ $97.74.

Buy 10 shares of AAPL @ $140.22.

Step three, PANIC!!! (this step also known as buy high and sell low…) Within a few days of buying both stocks, each saw a precipitous dive. It was nerve wracking. Each day I saw my portfolio drop little by little. Never mind the fact that the rest of the market as a whole was also in a decline I was ready to stem my losses. I had to stop the bleeding.

Sell 15 shares of FCX @ $80.38. Loss after fees was $246.38.

Sell 10 shares of AAPL @ $116.91. Loss after fees was $219.08.

I was beside myself. I just could not believe that I let myself lose so much money. As hard as that was, I was determined to recoup my losses. I had not learned my lesson yet. Equities seemed like it was in a tailspin and the buzz word on the street was sub prime. I knew what to do. Bet against the market. It was a bulletproof plan. I jumped into a leveraged short ETF that was intended to match double the inverse of the real estate market. I was betting against the housing market. How could I lose?

Buy 20 shares of SRS @ $115.12.

The day after I bought the shares, the Federal Reserve slashed interest rates in a surprise move before the market open. Real estate stocks rallied, and rallied hard. It took five days for me to capitulate and take the most staggering loss yet.

Sell 20 shares of SRS @ $99.23. Loss after fees was $303.76.

So there I was, staring at a aggregate loss of $791.04, a 26% decline in exactly 40 days since opening my account. If ever there was a cautionary tale for the novice investor this is it. I made all the wrong moves and I paid the price.

There is a silver lining though. Amid such an awful performance, there would be a recovery and in a way, retribution.

To be continued.

This entry was posted on Tuesday, April 29th, 2008 at 4:31 am and is filed under Investing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.