I was going to name this post “financial wisdom from my experience” but the fact of the matter is that I can only write about how I’ve lost money and that’s where the title lies. Now I know the age range of people who read this varies but since I seem to be aging at an alarming rate, I’ve piled up some years of “trading” that I’m going to be happy to share with all of you so you don’t have to be as stupid as I am. I’m going to add that learning this at the age of 26 is still certainly young enough to learn from past mistakes. If you are younger than that than be happy to that you are reading this because I promise you I will give you good advice on what not to do. What you choose to do is up to you.
I was 21 when I graduated Pitt with a degree in Finance. I went to work full time for my dad about 3-4 weeks after graduating. I’ve been working 40 hour weeks ever since. In the first two years I lived at home and soon realized that some portion of my graduating class chose to continue with school and prolong entering the real world. This living at home period is prime time saving up money that will come in handy years down the road. I didn’t have a car either so my expenses to survive were literally 0 and if I could do it again I would have done a better job. CK4 and I didn’t have much going on at this point of our lives and probably visited AC 2 times a month. Needless to say this will be my first words of wisdom. It seems so obvious but the house will always win. Sure we had some winning nights but they are always followed by losing. Casino’s are not a way to profit and they will erase your money, no if’s, and’s, or buts. Aside from spending money on alcohol this was my only real vice and it probably costs me a couple of K.
After 2 years I moved out and got a place that was a hole in the wall and cost 550 a month to live. However, at this point I needed a car to get around so now we are starting to tack on some expenses at this point. Paying for food becomes a necessity and saving becomes all the more difficult. Here’s where the fun begins. It was the fall of 2007 and I had saved up a decent sum of money, opened up a Roth IRA, and was beginning to get my feet wet with the market. Well what do you know, books and experts rave that mutual funds are a great way to play the market because of their diversity. So naturally I put about 65% of my money in mutual funds which then proceed to lose about 40% of their value at an alarming rate. As I watch the Dow go from 14,000 to 7,000 in a little over a year and the financial world in complete turmoil, I decide to sell some of the shares which would go against the buy low, sell high philosophy. So I miss out on some of the rebound to where we are at now 10,000.
About a year ago I do realize that we probably may not see these levels again so I take the money I had in the mutual funds, move them to a Scottrade account and start buying individual stocks. Needless to say, knowing at what price to buy a stock and then being bright enough to sell it at a point where the stock isn’t going to keep going up, isn’t very easy. I could go into my individual trades but they really aren’t necessary to make the point. You can buy solid companies like MSFT and watch them go from 20 to 25 and then be ecstatic how you just made 25% in whatever your time span is. Or you can try to smack a winner like picking up SIRI at $.06 and it climbing to a dollar now for a whopping 1667% gain. So obviously I have these high expectations about these lower priced stocks that can go to the moon. I’ve invested in some “penny” stocks and I can assure you it’s most likely just a pipe dream of hitting it big. These plays don’t tend to work out and I’ve learned that first hand.
The reasoning behind investing money in these plays is pure gambling. It’s sort of like the lottery except it doesn’t make you come off as much as a degen (you are however). The logic behind it is simple though. All you really need is one lucky hit to make up for bad plays. This is flawed logic though because the game is so slanted against you that you are just a simpleton to the Wall Street personnel who manipulate the game.
So you will hear this from me now, after being beat down year after year I’m licking my wounds and getting ready to implement a new system. First off, financial advisers are crocks of shit. I had a call from a 23 year old from ING trying to sell me his services. I ask him what his credentials are and he tells me he passed some test. If you think I’m going to let this pea brain play with my money, you are out of your mind. Financial advisers are all greedy people who are in it for their own self interest. If they don’t make you money, it doesn’t matter because they still get paid either way. The individual gets screwed all the time. So my system is to get out of equities, sit on the sideline because shit is going to hit the fan again. Unemployment is too high, our nation’s trade deficit continues to grow, banks have no reason to lend to people who can’t pay back the money, housing prices continue to slide, and our country as a whole gives out way too much money to people who do way to little work. As an American I’m scared to death of our future because there is so much corporate greed and much more political persuasion that the individual is fucked. These aren’t good times. Obama isn’t a savior. Be happy if you have a roof over your head and a job.