I love the stock market. I enjoy how people are able to make money on it, trade shares of companies, make fortunes and more. I’ve made a serious run at playing the market twice, and both times I lost. I’d like to talk about the second time that I tried (the first being a gradual bleeding of money, and not very interesting).
Like I said, I love the stock market, but I haven’t developed great strategies to make money. It’s something that I’ll likely try again when I have money, but I know that it’s like ‘crack’ to me, highly addictive and detrimental. Right now, my primary investment is with Prosper, and it’s going to stay that way for a while.
Last year, I cleared out my 401K. I desparately needed the money, as my freelance writing business wasn’t taking off. I wanted liquid funds to tide me over until I could figure out the ‘thing’ that I was missing (that ‘thing’ was seriousness, and I’m going to write more about that later). The total amount that I withdrew was $8K.
Of that $8K, much of it went to pay off lingering student loans and a car. A small amount went to daily living expenses. The logic was that if I had fewer bills to pay each month, I would save a whole lot of money in the long run in interest charges and more. I’d set aside $3K to play with on the stock market.
The plan was simple. Look for a stock which had a regular ‘sine wave’ pattern in its ups and downs. There was no need to pay attention to the other stuff, because the stock would be regular, right? I was excited, because I had several candidates – all of which were going to make me something. So, I took the $3K and put it into ENER. It was the steadiest of all, ranging between $4.50 and $5 a share, like clockwork.
In fact, the first day that I had it, the stock spanned its range, and I was poised to make some money. Unfortunately, due to my triggers, I was one or two cents below the automatic sell point. I was angry at my fumbling fingers, but I still had the money. I decided that I would hold off for a little while until the stock did it again. The stock, unfortunately, had other plans. It sunk below the $4.50 and then a bit further.
During this time, my mother got sick and needed medical attention. Her finances were in shambles because of poor money management skills, and I was her resource for living expenses and unexpected expenses. How I felt about that obligation is a different story, one which isn’t going to be shared. Her unemployment and her medical bills were getting out of hand, so I had to do something.
I liquidated the stock, taking a $500 loss. I knew that there would be other opportunities, and if I got rid of the stock, I’d be able to support her a little as well as support myself. Frankly, I was livid, because I was dead sure that the stock that I’d just liquidated would be shooting back up and had taken only a temporary dip. This obligation was pressing, and I did what needed to be done. The emergency was averted, and my mother was safe.
It took nearly all of the cash to make sure that her medical bills and living expenses were accounted for. I was still struggling with figuring out my own finances, and was eventually left with nothing. I’d gone through my safety net, and I wasn’t going to be able to get that back again. My mother would pay me back, I knew that, but it would more than likely be in dribs and drabs, not the lump sum that would allow me to get back to playing.
As it turned out, the stock didn’t recover. Not at all. The company itself had filed for bankruptcy and was leaking money like it was going out of style. It was on the down elevator, and it wasn’t going to be able to get off. As of the last check, the stock had reached a low of $.19, and the company’s resources were going to be bought by someone else. The temporary spike from that news brought it up to $1.50 for a single day, then it plummeted. After seeing this news, I was so very thankful that I’d lost only $500, because I had totally planned to keep the stock.
The Lessons Learned
Some people shouldn’t play the stock market
I’m one of those people. I’m too emotional and impulsive, and feel that most of the activity on it should be *doing* instead of waiting. I get emotionally involved in the stocks, and find that I get *extremely* wrapped up in their rise and fall. For those who are out there dreaming of the stock market, the best way to avoid this is to set triggers so that you can go off and do other things rather than worrying about what your investments are doing.
Crappy things happen for a reason
My mother tapped me out of all available cash, but I thank her every time that I think about this particular event. She effectively saved me from losing the entire thing by being sick and needing the money. I would currently be sitting on an investment of a hundred bucks with no chance of recovery if it weren’t for her. I might have been extremely mad about it at the time, but the decision that I made to get the money out saved me more.
Things Change Quickly
In a matter of a week or so, I had gone from having a wonderful little nest of an emergency fund to nothing. I would not hesitate to do it again. I have seen situations change in seconds, whether it be from accidents on the road, to revelations made by friends. We are constantly bucking the changes, but they keep rolling on and on.
Losing that $500 really really sucked at the time. I felt embarrassed, silly, stupid, and a lot of other things. I resented the hell out of my mother for a few weeks because I knew that I could have done better by everyone involved. As it turned out, I did the best that I could and I effectively won. The crisis was handled, and my purse was (comparatively) only a little bit lighter.
Image courtesy of Mikael Miettinen at Flickr.
Have you had a situation which looked ugly, but it turned out that it was one of those better situations which could have happened to you? I’d love to hear about it.