In For Beginners, Investing, Money

Investing Series: Trust your instincts

So in lieu of teaching you something, I’m going to tell you something I learned recently: When you feel uneasy about a stock you’ve purchased based on what you’ve been reading.. GET OUT.

As an experiment, I “spent” about $3300 buying some Blackberry stock (BBRY) when it had hit a low of about $11.75, just out of sheer curiousity and let’s admit it, greediness to see if I could turn a profit.

I saw it hit the heights of $18 and thought:

Hmm.. should I sell?

I have a profit of about $1000 for the taking after only a month or two in.

Stupidly ignoring my instincts to grab the money and run, I didn’t sell the stock.

…then I watched it slowly drain down, lower and lower, losing profit along the way until it was unbearable to me that I might actually LOSE MONEY, and I couldn’t eat the poisoned pie that Blackberry CEO Heins was trying to proffer.

Photograph-Travel-Portugal-Wild-Blackberry-Bush-Food

 

(The only blackberries I’ll buy from now on)

So I set a limit sell price of just about the same price I bought it at.

This time, I didn’t ignore my instincts the second time around that it would plummet and I would lose the entire amount, and I sold.


Luckily, the market on some freak bit of news, shot up to the point where my stocks actually sold, and I was left with a loss of only $10, plus any buying/selling fees incurred by Questrade.

PHEW!

Still, I’d like to point out that even if I had lost EVERYTHING it would have only been about $3300 down the drain at its maximum damage. Not exactly a crushing blow to my net worth, but I’d rather not lose it if I can help it.

Today, I feel totally justified and vindicated for having dumped the stock the second time around, which soothed the bruising taken from the first time I ignored my instincts, because the stock took a real beating today (September 20th):

Thank goodness.

Learn from my mistake.

DO NOT IGNORE YOUR INSTINCTS!

If it walks like a duck, quacks like a duck and looks like a duck… it’s probably a duck and not a swan or something exotic.

I shouldn’t have ignored my instincts when I saw the share price hit $18, but sheer greediness blinded me and I can only thank my lucky stars that my hard-learned lesson only cost me $10 or so, rather than having it end up being a far more expensive lesson.

Actually, maybe EVERYONE should learn this lesson first-hand to really grasp it at its core, but I suggest you go in with only what you can afford to lose (which I did), so that you don’t lose your shirt.

 


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Sherry of Save. Spend. Splurge.

I got out of $60,000 of debt in 18 months using TheBudgetingTool.com. Since then, I have worked 50% of my career (taking 1-2 year breaks), and quadrupled my income within 2 years of graduating, going from $65K to $260K (savings rate = 85%). I could retire today if I wanted, but love my work-life balance as a freelancing consultant in STEM (Science, Technology, Engineering, Math). I also post daily on Instagram @saverspender.

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4 Comments

  1. J
    Jane

    Here’s an interesting tidbit that I picked up in some law enforcement training. Women have great instincts, the problem is that women do not follow them because they shrug off all the warning bells in their head. Following your instincts is not only important in investing, but it could very well save your life one day.

    Reply
    1. save. spend. splurge.

      *nods* I keep that in mind when I am outside for my own safety, but for stocks? I was too greedy.

      Reply
      1. d
        dunny

        @save. spend. splurge.:
        This is sooo hard to do. I am learning to get out sooner (held on too long to Cameco after the tsunami, likewise SNC after the first whiff), but still have not developed a rule, other than I track on Yahoo finance, the high since I bought the stock, and 5% less than that. I don’t sell automatically at 95% of my high though. Learned that the hard way too. I also have a limit on a loss — try not to let it go more than $500 for any one stock. I now have lots of Canadiana and US stocks that have run up a lot and I am dithering on taking profits. Would love a discussion on this and also an easy way to track 5 and 10% below my own highs.

        Reply
        1. save. spend. splurge.

          @dunny: I’m just greedy. I know it. It’s hard to fight against your human irrationality that if it’s going up.. it has to go up forever.. RIGHT!?

          I do the same thing by limiting my losses now to a certain dollar amount.

          I’d sell any stock you don’t want to keep for the very long term. I hold on to dividend stocks because I chose them for passive income for the long-term, but the rest are capital gains, so I sell them (now) when I can.

          Reply

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