I have enjoyed reading the "Happiest memory (thus far) of trading?" thread. Kind of reminds me of reading Jack Schwager's wizzards books back in the day. So I thought I would start another thread about "worst" experiences to hear about the other side of things. I've had quite a few blunders myself, but I'll highlight just a few.
I first got interested in markets when I heard about the great market crash my first year working full time after college (1987). I remember thinking that I had read people who bought after past crashes eventually did well. Unfortunately, I didn't have any money to invest, so I watched the quick recovery from the sidelines. Then two years later, there was the "mini-crash" of 1989. By then I had money to invest. So I spent plenty of time reading up on how markets work. In early 1990, I began buying stocks. I remember I would go to the library and they had books (by Standards and Poors I think) that had a page showing fundamentals and a price graph for each stock. No internet back in those days. I looked through these books and picked a few stocks that were attractive to me. I had beginner's luck, and my largest holding (Telecom USA - TTT) got taken over a couple months later. I nearly doubled my money, and was convinced I was a market guru (even though my other stocks were basically flat). So I started telling anyone who would listen how much I knew about the stock market. I wanted to impress my father, who I knew owned a few stocks. I knew he was big into utilities and dividend stocks, so I searched and found the utility stock I was sure would make a fortune for him (Public Service of New Hampshire - PNH). As I recall, it was trading somewhere around $2 or $3 a share. It was so low in price, and I knew people would always need electricity, so I told him it would be a great stock to buy. He bought some, and it immediately began moving lower. Soon it got de-listed! He was not angry at me, but I was very embarrassed whenever the topic came up. Shortly after that, in August 1990, Iraq invaded Kuwait, causing a bear market to begin. My other stocks lost a significant percentage of their value. Not having been through a bear market before, I got scared and sold everything at a substantial loss. As for PNH, eventually they got bought out by another company, with shareholders receiving a complex combination of stock, bonds, and other securities. My father had no idea what the securities even were, so he offered to give them to me! But I was too embarrassed to take them so said I didn't need them either!
In the mid 1990s, I decided I wanted to play with options. I understood how they worked, and knew that the majority of retail traders who buy options blow their money. But I thought I was different, since I worked in IT and felt I had a better understanding than the general public of which technology companies were likely to do well and which ones were not. In particular, I remember I wanted to "bet" against America Online (AOL). I picked a full-service broker, because one I talked with did his own screening on a computer (back in the days before this was easily done by anyone), and he was going to find companies for me to consider. Anyway, I bought put options on AOL, plus on one or two other companies he had showed me. Sure enough, AOL went down, and within a couple weeks my AOL puts were up over 50%. My broker called saying he recommended I sell. But I told him no, AOL was going to zero and I could do much better. The puts continued going up. My broker called again a couple weeks later, again recommending I sell, since some important news could be coming out the next day (earnings?), but again I said I knew what I was doing and held on. The news was positive for AOL, and my puts lost the majority of their value. I sold at a substantial loss a few days later. Meanwhile, the puts on the other two companies, which has been steady, began dropping rapidly as the time premium began to run out. I also sold them at a loss. I lost about half the money in my account. A couple months later, I decided to close the account. My broker knew what I was going to do as soon as I called him that day. I guess he had seen the same scenario play out before in others who speculated in options. He only made feeble attempts to talk me out of it.
In 2000, I was amazed to discover that it was now possible to trade online, and for only $7 a trade, at Scottsdale Securities (later called ScottTrade). I was used to paying closer to $40 to buy and sell stocks. I realized that we were in the late stages of a bull market, but decided to open an account nonetheless. I bought a bunch of tech companies just in time for the 2000-2001 bear market. However, this time I had done my research. I knew I owned solid companies, and that they were likely to recover. Ultimately, the companies all recovered and went on to substantial gains. I continued to trade stocks, many with great profits, in coming years. I still trade in that account today (the company is now owned by TD Ameritrade).
The most recent embarrassing blunder was in 2015. I had some money I wanted to get out of a bank account that was paying almost no interest. But I didn't have much time to research tech companies. Normally in that situation, I just buy an index fund until I decide what to do, but in this case I decided to "diversity". I bought Kroger (KR). I figured - it's pretty conservative. People will always need groceries. Well, I bought very close to the high. Although I was smart enough to get out in late 2016 (well before an even bigger drop in early 2017 due to the Whole Foods situation), I still lost something like 1/3 of my money in that stock in under a year.
I first got interested in markets when I heard about the great market crash my first year working full time after college (1987). I remember thinking that I had read people who bought after past crashes eventually did well. Unfortunately, I didn't have any money to invest, so I watched the quick recovery from the sidelines. Then two years later, there was the "mini-crash" of 1989. By then I had money to invest. So I spent plenty of time reading up on how markets work. In early 1990, I began buying stocks. I remember I would go to the library and they had books (by Standards and Poors I think) that had a page showing fundamentals and a price graph for each stock. No internet back in those days. I looked through these books and picked a few stocks that were attractive to me. I had beginner's luck, and my largest holding (Telecom USA - TTT) got taken over a couple months later. I nearly doubled my money, and was convinced I was a market guru (even though my other stocks were basically flat). So I started telling anyone who would listen how much I knew about the stock market. I wanted to impress my father, who I knew owned a few stocks. I knew he was big into utilities and dividend stocks, so I searched and found the utility stock I was sure would make a fortune for him (Public Service of New Hampshire - PNH). As I recall, it was trading somewhere around $2 or $3 a share. It was so low in price, and I knew people would always need electricity, so I told him it would be a great stock to buy. He bought some, and it immediately began moving lower. Soon it got de-listed! He was not angry at me, but I was very embarrassed whenever the topic came up. Shortly after that, in August 1990, Iraq invaded Kuwait, causing a bear market to begin. My other stocks lost a significant percentage of their value. Not having been through a bear market before, I got scared and sold everything at a substantial loss. As for PNH, eventually they got bought out by another company, with shareholders receiving a complex combination of stock, bonds, and other securities. My father had no idea what the securities even were, so he offered to give them to me! But I was too embarrassed to take them so said I didn't need them either!
In the mid 1990s, I decided I wanted to play with options. I understood how they worked, and knew that the majority of retail traders who buy options blow their money. But I thought I was different, since I worked in IT and felt I had a better understanding than the general public of which technology companies were likely to do well and which ones were not. In particular, I remember I wanted to "bet" against America Online (AOL). I picked a full-service broker, because one I talked with did his own screening on a computer (back in the days before this was easily done by anyone), and he was going to find companies for me to consider. Anyway, I bought put options on AOL, plus on one or two other companies he had showed me. Sure enough, AOL went down, and within a couple weeks my AOL puts were up over 50%. My broker called saying he recommended I sell. But I told him no, AOL was going to zero and I could do much better. The puts continued going up. My broker called again a couple weeks later, again recommending I sell, since some important news could be coming out the next day (earnings?), but again I said I knew what I was doing and held on. The news was positive for AOL, and my puts lost the majority of their value. I sold at a substantial loss a few days later. Meanwhile, the puts on the other two companies, which has been steady, began dropping rapidly as the time premium began to run out. I also sold them at a loss. I lost about half the money in my account. A couple months later, I decided to close the account. My broker knew what I was going to do as soon as I called him that day. I guess he had seen the same scenario play out before in others who speculated in options. He only made feeble attempts to talk me out of it.
In 2000, I was amazed to discover that it was now possible to trade online, and for only $7 a trade, at Scottsdale Securities (later called ScottTrade). I was used to paying closer to $40 to buy and sell stocks. I realized that we were in the late stages of a bull market, but decided to open an account nonetheless. I bought a bunch of tech companies just in time for the 2000-2001 bear market. However, this time I had done my research. I knew I owned solid companies, and that they were likely to recover. Ultimately, the companies all recovered and went on to substantial gains. I continued to trade stocks, many with great profits, in coming years. I still trade in that account today (the company is now owned by TD Ameritrade).
The most recent embarrassing blunder was in 2015. I had some money I wanted to get out of a bank account that was paying almost no interest. But I didn't have much time to research tech companies. Normally in that situation, I just buy an index fund until I decide what to do, but in this case I decided to "diversity". I bought Kroger (KR). I figured - it's pretty conservative. People will always need groceries. Well, I bought very close to the high. Although I was smart enough to get out in late 2016 (well before an even bigger drop in early 2017 due to the Whole Foods situation), I still lost something like 1/3 of my money in that stock in under a year.
