I have come to the realization that market ups and downs are too stressful for my gentile stomach. My ah ha moment came to me when I invested in the little known publicly traded company, Powerwave Technologies. Back in 2008-09, Powerwave was supposed to be my ‘home run’, or at least according to all the message boards I so diligently followed. Powerwave provides provided (not sure if they are still in business) antennas and switches for the highly coveted 4g technology. They were going to build the wireless network for the first responders, they owned many patents, and allegedly had numerous government contracts which were to be funded by the Obama Administrations stimulus program in 2009. Heck, they even had Tom Ridge (former Secretary of Homeland Security) on their board of directors. I thought it had great potential. Needless to say, I learned potential meant nothing when it relied on their expenses and profit. They spent like drunken sailors, had poor management, and their stock price was reflective of it. However, I did get in at the right time, paid 40 cents per share for 10,000 shares, but this wasn’t the problem. My foolishness reared its ugly head when I failed to recognize (as Kenny Rogers says) when to fold em!
Sure .$40 is cheap and, on my tight budget I could feasibly buy 10,000 shares and wait it out. This is the strategy I took, and it paid off handsomely, so handsomely, I failed to take profits! Yep, I figured it was going to the moon, and it did. Problem was greed got the best of me. Like the novice investor fool I was, I though the 400% increase in the stock price, was going to be 500, 1000%, but not to be, it soon tanked and I failed to take profits. As of today, Powerwave Technologies trades at zero (0) and is working through Chapter 11 bankruptcy and I am no longer a shareholder, argh! However, I consider myself one of the lucky ones, I got out before the ship sank and was able to surrender my shares for $.04. All in all it was a fun ride, it was an educational experience where I learned a great deal about message boards, company sales, shareholder enthusiasm and the lack of correlation these have to generating quarterly profits. I hated to lose this $3600, but to tell you the truth, I would contemplate paying $3600 to have the understanding I now have as a result of my experience. I now know what not to do, I know where to put my nest egg, and I now have a keen understanding of how market euphoria works, and I want no part of it!
My $3600 lesson:
Going forward I will invest in what I know, what I can control, what I can see, what I can touch, and these will not be Wall Street products. I know, I know, many people say, well I was up 400% I should be looking for the next stock that will yield this and just perfect my exit strategy. I am here to tell you, I cannot stomach the intracasies of timing the market, and truth be told, I don’t have the interest. I know many of you out there actively invest in stocks, bonds, mutual funds and I got no beef with that, I have shown you can make money at it. It’s just that it is not for me, I want an investment within my control, which is why I have a Self-directed IRA and invest in cattle, real estate and tax liens.
Investing in what you know:
Self-directed IRA’s are such a great, little known option. So little that only 2% of total investment dollars are in Self-directed IRA’s. They are, for all intents and purposes, an IRA which allows you to invest in…. well just about anything! That’s not to say there are no rules and regulations, they are after all, still governed by our friends in Washington! However, they are more flexible than your companies 401k, your traditional or Roth IRA’s. Like I said, I learned a very valuable (and costly) lesson but it changed my perspective, and for that I am grateful and excited.
What are your thoughts on timing the market and small cap stocks?
Great story! I personally believe timing the market cannot be done with skill, only with luck. There will be winners, just as there are winners in the lottery or in blackjack. But it is simply gambling and bad gambling at that, since the odds are against you.
In 2014, I will make it a small goal to learn more about a self-directed IRA. I’m curious, though I’m a pretty boring investor and just stick to index funds. I’m not sure I’d get a lot out of this other IRA.
Hey Done by, nothing wrong with index funds, they are pretty safe. In fact after writing this post I have reflected on the fact that since I have virtually been out of the market these last couple years, I have missed out on some pretty substantial gains. Guess it could have been the opposite though, maybe at some point I will wade back into wall street products.
I have the same thoughts, Jim. We threw about $100k at our mortgage between 2010 and 2013 instead of putting into the markets. We missed out on a lot of gains during that time.
Opportunity costs are inevitable, I figure. You can’t always put your money in what, in retrospect, was the optimal place. I love your advice to buy what you know or, at least, what you understand.
Thanks Done By, well at least you paid your mortgage down, so when you pay it off 10-15 years early the capital you would have spent on a mortgage can be invested. Hopefully then, the market will have corrected and you can perhaps find some bargains, cause right now there are none!
We’re actually all done with the mortgage (as of this summer). How’s that for timing? I’m hoping for some bargains soon though.
Oh man that is fabulous, no house payment incredible, still got mine for 14 more years!
Way to kick it on the mortgage, DB40!!! I”m with you guys – trying to time the market is a key to financial failure, IMHO. When we pay off the debt a bit more, we’re sticking with index funds and dividend funds that feature “what we know” companies. Our tummies, too, are way too sensitive to lose too much in the market. 🙂
Buying penny stocks and then timing their purchase and sale is not my cup of tea. I lost plenty of money thinking I could time the market back in 2000. It took quite a few years to repair the damage I did to our portfolio. I am very happy with the returns we now get from low-cost passive index fund investing.
Yea Bryce, I have since learned my lesson, no more investing in penny stocks!