In life, one makes numerous mistakes; some costly from a personal relationship perspective and some costly from a financial perspective. A friend of mine was recently complaining about a dumb move he made in the stock market and it got me to thinking of some of the less than intelligent moves I have made investing.
For anyone who is a reader of my blog, my Resverlolgix investment is definitely the number one costly mistake. For those who have not read the blog, it is a January, 2011 blog called Resverlogix: A Cautionary Tale (https://seekingalpha.com/article/246783-resverlogix-a-cautionary-tale) and it is one of my better ones (blogs and investment mistakes) if I do say so myself.
Notwithstanding that disaster, I have also made two errors in regard to playing cute with the bid and ask price on both the sale of a stock and the purchase of a stock. About ten years ago I purchased a stock involved with the debit machines at grocery stores and alike. It was actually a great call on technology which I will discuss further below, but the company was bleeding and I decided to sell. The stock was $2.10 to $2.12 and I was so upset with the stock that I decided I was not going to lose any more money and put my shares up for sale at $2.12. My order did not get filled and the next day the company came out with bad financial news. When everything settled, the stock was worth 40 cents and I had lost another $1.70 per share over two cents.
What do they say about it being okay to make an error once, but if you make the same mistake twice then you’re an idiot? Well, hello. This year I decided to purchase a stock that was trading around $3.90 to $4.10. It was in that trading range for weeks, so I put in a bid for $3.90. I got a partial fill at $3.90, but it hovered around $3.95 to $4.00 for days. Of course, a week later it announced some good news and went to $4.40 and I decided I would not chase it, which is a good rule in general. The only problem is two weeks later they announced a significant licensing agreement and the stock went to $8. At least I had a small fill, but still, I lost out on a $4 gain by trying to buy for ten cents less.
So, lesson number one: once you decide to buy or sell, just do it if the bid and ask is within a reasonable range.
As noted above, I had made a good call on the debit card technology; however, I was too early to the game. Stocks in companies promoting disruptive technologies have unbelievable upside, however, the more disruptive the technology, the longer to market and the more financing problems the company is likely to have.
Thus, lesson number two: stay away from a stock involved in a disruptive technology unless you are willing to put it in the speculative portion of your portfolio and to leave it there for up to ten years, if it survives.
Lesson number three: stick to your guns.
I had a couple of stocks that I held for years during which they barely moved from the initial purchase price. I lost patience and sold and saw both the stocks triple within one year of my selling.
This lesson can also be called the “Ask Mark what he has recently sold and then buy it” lesson.
The above is pretty tongue-in-cheek, but it is really important to establish personal guidelines in regard to buying, selling and holding stocks and similar investments.