I have invested in the stock market with my very first paycheck out of college. Initially, my stock ownership was strictly through my employer’s 401k program. That system was very easy- pick some stock ‘types’ (large cap, small cap, etc) and the individual stock investing was done by the brokerage.
About a year later, I started investing a couple hundred dollars a month in mutual funds. I set it up so that $200 was deducted from my bank account each month and that money was invested in a group of stock for me.
Over time, I learned more and started purchasing my own stocks. I made some money, but there was something about it that I didn’t like: I agonized over my decisions, even the good ones. I was reminded of why I prefer index fund investing when I read the following headline:
“Will iPad 3 Send Apple (AAPL) Shares Above $500?”
$500 a share????
I remember back in 2009 when I considered buying Apple stock when it was $125/share. However, for some reason, I have a mental issue about paying such a high price for a share of stock. (Stock splits were made for people like me. Technicals and financial data be damned, I just really struggle with paying that much for 1 share of a stock. Stupid, I know.) In this case though, I almost pulled the trigger and dove in. However, I was waiting for a pullback before I invested.
I am still waiting for that pullback…
What Would Have Happened Had I Bought the Apple Stock
Let’s pretend for a minute thought that I did take the plunge at $125. I would have been biting my fingernails over my decision I am sure. However, I would not have fretted for long, because the stock never looked back from that point. By the end of 2009, the stock was at $200/shr. At the end of 2010 it was at $322/shr. At the end of 2011 it was at $405/shr. Here we are now, about a month and a half later, and it is all the way up to $493/shr.
Anyway, I am guessing that I would have sold the Apple stock before it ever hit $200, just to lock in profits and move on to some other investment. (Or sold it exactly one year after purchase.) Then, as time passed by, I would have kept monitoring the stock. I would probably ended up so mad at myself for selling my investment as the stock just kept climbing and climbing, year after year. Then, I probably would have thought about ditching my ‘lock in profits’ strategy with the next stock I bought and held a stock that ended up tanking overnight because it missed analyst estimates by a haypenny.
My Current Investment Strategy
Right now, I have a mixture of investments. Besides retirement and college funds, I have also begun investing in dividend stocks. I have 5 stocks that I invest in occasionally. Each month, I usually invest some money in whichever of the five companies looks to be the best investment at that point in time. I don’t plan to sell any of these stocks as I would like to use the dividends as an income stream in the future. I am not saying that I will never sell any of these stocks, but I don’t have plans to at this time.
I also have some index funds that I have invested in, although I have not contributed as much to those funds as I have the dividend stocks lately. Basically, I just think about buying and not so much about selling.
My Investment Advice:
With my current approach, I don’t have as much opportunity to second guess myself, and that strategy is what suits ME. However, everyone is different, and I think it is very important to invest in a manner that YOU are comfortable with. Profits are great, but so is peace of mind. Before you make any huge leaps when investing, think about your own personality and comfort level. Are you nervous investing in stocks period? If so, consider bonds and and other options. Keep an eye on CD rates and educate yourself so you can recognize when it is the right time is to invest in different financial vehicles. It took me years to get to the middle ground I am at where I am comfortable with my investment strategy. My strategy may change over time, and that is OK. However, I like that I don’t over-think my investments. Don’t get me wrong, I still monitor my money, but I don’t micro-manage it like I used to.
Has your investment strategy changed over time? Do you have a tried-and-true plan that works well for you?
{ 14 comments… read them below or add one }
If it makes you feel better, I sold apple stock at under $200, but it was because I bought a high tech index fund that also had apple in it..although nit as much i don’t really regret it because I sold some dogs with it too.
I have been totally lazy and just do index funds now or those age based things ( which is what my work offers exclusively).
My asset allocation include healthcare, biotech, dividend stocks, TIPS and funds. As I get old(er) I am adding to the income side, although I will have a large fixed income portion of my retirement in the form of a pension and Social Security.
Most of my investments are in mutual funds and ETF too. It’s much easier to just keep investing.
I have some dividend stocks and plan to add to those as well. I have a few hold over growth stocks left and will slowly move them to dividend stocks and ETF.
I’m more of a set it and forget it investor. Has been working pretty well for me.
I have bought several blocks of Apple shares along the way. The first time was in 2005 just after I bought our first Apple device–an iPod Shuffle (1st generation). The next thing I bought were Apple shares @ 64/share. I still see the stock with upside potential.
Hi Thad- do you still have those $64 shares??
You should have bought Apple when it almost went out of business. You could have picked it up for 4 or 5 bucks a share. Technology stocks come and go (just ask Nokia, Blackberry, Lucent, Atari, Wang, Wordperfect, etc.). It is rare that they have a second act like Apple. Even mighty IBM has turned itself into more of a services company than a technology company to provide its shareholders more sustainable performance. Somebody will leapfrog Apple; it is only a matter of time.
Individual stock picking is difficult because of emotions. But index and dividend payers seem to be easier for individuals to stick with.
YES, Much less stock picking and an asset allocation funded with index and etf funds. Much easier. I only hold a few stocks in our personal portfolio and none in the professional portfolio I manage.
Actually if you go back a little further Apple Computer traded at just 5 dollars a share in 1998 amazing isn’t it. The place where I found this information was yahoo financial under interactive charts. Apple computer was trading under five dollars a share in january 1998. Today its trading at 500 dollars a share.
I saw that too. Hindsight is definitely 20/20, although I can guarantee I would have sold wayyyy before the price was 100x my purchase price.
I haven’t made any investments yet, but I think about doing that.Thank you for sharing your experience, I think that I will start from investments in stocks and then I will see where it can get me.It’s great that you have never over-think your investments and trying different types.I will do the same and will try, hopefully I will find the one that suits me,or later I will mix it,but I agree that it’s very important to have your own investment strategy that suits for you.Anyway, thanks for your advices!
I think I would be plagued by the same emotions if I tried to pick stocks for capital growth. That’s why my investment strategy so far has consisted of index funds and Dividend Aristocrats. Though I’m just beginning, from what I’ve read so far, I believe this will be a good strategy for the long term.
Hi Kris:
I hope you have had a chance to read my earlier email. I sent it earlier this A.M.
After reading the above article and comments, I’ll say it again. “TRAILING STOP LOSE”
This would have been an ideal approach with APPL. If the stock drops below your predetermined
sell point, either a dollar amount or a percentage, it’s gone. Otherwise, it just keeps percolating onward and upwards!
Happier Investing,
Jim in Edmonds, Wa
Review regularly is one of the best investment advices. You should review your portfolio on regular bases to ensure that you are rebalancing the things but remember that do not overdo it. Annual reviews are perfectly fine.