How To Recover Your Portfolio, (Even After a 26% Loss)
The awful thing about losing investments is that making it up is always harder than you would think. Think of it this way. If your portfolio drops 50% then your account would then need to double in order to get back to where you started. Such was my situation in the beginning of September of last year. I had lost slightly over 26% of the $3,000 I initially seeded my stock trading account with. That means that the remaining $2,208.96 had to grow by 35.8% to get my money back.
Lesson Learned Number 1: Don’t Pick Stocks Blindly, Do Some Homework
I liked Apple. But was it a good stock? The iPhone was on the horizon, one of the worst kept secrets on the street. But the iPhone would not make or break Apple’s core business. That title undoubtedly belonged to the Mac. I listened in on their earnings conference call on the 25th of July and noted that over 50% of their business came from Mac sales. A full 50% of Mac sales where to customers who had never used a Mac before. Good things were coming for Apple so I did the math.
Trailing twelve month earnings stood at $3.55 giving a price to earnings ratio of 36.2, (Apple was selling around $128 at the time). I reasoned that Apple could grow earnings an additional 30% over the next year. They had a history of doing so already and their own guidance for the next quarter was inline with that expectation. Another thing Apple likes to do is low ball earnings guidance only to exceed investors expectations. Armed with this knowledge, I reasoned that Apple’s growth was worth a 40 P/E ratio.
Assuming earnings grow according to guidance, the next year would see earnings per share of $4.61. Multiplying the P/E by expected earnings yielded a fair price for Apple of $184.40. Since Apple was trading around $128, I saw fit to plunge in and hope for the best.
Buy 16 shares of AAPL @ $128.54.
Lesson Learned Number 2: Don’t Panic, Buy Low and Sell High
In the following months, Apple stock rose to a 52 week high of $202.96. Shortly after the start of the new year, Apple, along with the rest of the S&P, Dow and Nasdaq, started a major correction. Apple fell to a low of $115.44, ironically very near where I had sold it once before last September.
I did not panic. I held my ground. It was a terrifying ride but slowly but surely, the market as a whole bottomed and after trading sideways for a bit, Apple began to rise.
As of the writing of this article, Apple is trading at $175.05. I am very, very close to seeing my account balance back at $3000 again.
Looking back at the rest of my purchases is alarming.
| Stock | Price Bought | Price Sold | Price Today |
| Advanced Micro Devices (AMD) | $15.41 | $15.70 | $6.02 |
| Intel (INTC) | $25.908 | $25.30 | $22.62 |
| Freeport McMoran (FCX) | $97.74 | $80.38 | $110.72 |
| Ultra Short Real Estate (SRS) | $115.12 | $99.23 | $83.62 |
| Apple (AAPL) | $140.22 | $116.91 | $175.05 |
I dodged a bullet in AMD and SRS. Those turned out to be horrible in the last six months. SRS isn’t exactly a surprise though. While markets do wane from time to time, they always recover. The housing market is no different.
If I had bought and HELD FCX and AAPL when I first purchased them, my initial $3,000 investment would be worth $3,411.30 today. I’d be more than just breaking even today.
You live and learn every day. Take a lesson from my miss adventure in investing. Perhaps you will save yourself some heart ache. My experience has not deterred me from adding to my investments. I plan to continue on and make the most of my future dollars. I am a bit smarter and wiser now when it comes to investing and I have plenty of time to swing for the fences.