September 27, 2010, 9:54 am

The First Time Is Always The Worst

by: MD    Category: Miscellaneous
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They all say that your first time is usually the worst time. This was no different for me at all. I have nothing to boast about from my first time. A few minutes and it was over. I was barely even involved– yes my first time investing was that lame!

Summer work in high school

I’ve always been a greedy child. The summer after grade 9 I decided to pick up a few jobs (cutting grass, soccer ref, and part-time at a grocery store) so that I could save up lots of money. I wasn’t sure why I wanted the money but I just did. So I started working long hours and saving my money.

A great idea…

My Dad has always been a day trader. He sits by the computer with the television on the business network in all of his spare time. After working hard for two months, I managed to save $1,500 (damn minimum wage!). I didn’t like to see this money just sitting in my regular banking account. So I asked my Dad if he could invest my money for me through his discount brokerage account. After watching a random investment program, I told him what stock I wanted to purchase, based on the recommendation of one of the “experts.” I did exactly zero research on the matter. I gave my Dad the money and he purchased the stock through his account. I never really followed up until I found out that the stock had doubled in price.

The money isn’t yours!

When the stock doubled I thought that I now had double my money. Well technically I could have if I decided to sell the stock. Essentially I had an asset that I could have sold for double my money. The trick here is that you must sell the stock at the double the price if you want to make double your money. You can’t simply hold onto the stock. I was too greedy to sell the stock. Even going against everyone that advised me to sell. After a few weeks the stock ended up going down and dipping below the original price that I paid.

Lessons learned

Of course with every failure comes a handful of lessons. This time was no different. I learned a few important lessons on stock investing:

  1. You must research the company. Whenever you decide to invest your hard earned money, you need to perform extensive research on the company that you plan on investing in. You can’t just listen to rumors or to what others tell you.
  2. Don’t be greedy. I learned the hard way that I shouldn’t be greedy. If your investment appreciates greatly and you’re happy with the return, just sell! You’ll lose your mind if you start thinking about how much more you could earn.

What happened with my money at the end of the day? The stock fell below the price I paid for it. When I hit grade 12 my Dad sold the stock for me and the money that was left was used to pay for my high school graduation trip. I’ve since gone on to make some decent returns on stocks while minimizing my losses. Can’t win them all. How was your first time investing? What lessons did you learn?

Other Money Maven’s first time:

Canadian Finance Blog says “I should have bought ETF’s

Monevator’s first time.

Img src: Jay d

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Comments

A friend told me how he’d made 40% returns in a few weeks trading options. After doing about 2 hours of googling figuring out what an option even was, i felt i had enough knowledge to invest. I turned 2000 into 1100 in about 6 weeks. Lesson learned.

@DanP,
it could have been worst if you have started to make money on your first trade. It’s a good thing that you have lost $ on the first one!

I got $250 to invest when I turned 14. I chose 3 stocks to invest it in – (Dell), some spin-off technology company which had done terrible that nobody liked but had new management (LU) – I was a contrarian even then, and some small medical company I had read about on a penny stock article (VSCI).

About 2 years ago my Dad sold these stocks for me & I believe it came out to be around $450, or a 6% annualized return! Not bad for a 14 year old…

I had a similar experience with a stock I bought during the tech stock bubble, up quick then dropped through the floor. Being greedy will burn one in the stock market.

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There is a list of failure behind every success, and it happens rarely that success comes almost all of sudden. But, sometimes you just can’t afford to make mistakes and fail for any reasons. So, better to be well prepared in your very first attempt.

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