Friday, July 12, 2013

Irrational Investor

Because I've been fortunate with my app store ventures, I have some money to invest. I want to share with you the story behind my worst investment, so that others may learn from my mistakes. When it comes to investing, it is hard to remain rational. One of the psychological hurdles to take, is to let go of buy-price. You should be able to reassess your holding at any time, and sell below cost if necessary. If you can't you are 'anchored' and this will hurt you. Here is what happened to me when I first started investing on the Toronto Stock Exchange:

My instinct was telling me that solar energy would be a growth opportunity, so I sought out solar panel producers. I found these two on the Toronto Stock Exchange:

  • Day4 Energy Inc. (DFE)
  • ARISE Technologies Corporation. (APV)

So I studied them carefully: the earnings, the price, their debt, the news items on them. After this study I decided to go with Day4, as it had just got certified in an important market. So I made the online trade, worth $9000, using the online investment website of my broker (RBC). The thing is: I had typed in the wrong symbol. So there I was, holding $9000,- APV instead of $9000,- DFE.

If I had been rational, I would have sold the APV and bought the DFE. However, I really did not like to spend two more transaction fees of $9.95 each. Psychologically, I was not prepared to take my $20,- loss on a stupid mistake, so I let it be. Hopefully, APV would see some nice yield. In reality, APV was bankrupt within a year, and I lost my entire $9000,- investment in 'green technology.'

I can laugh about it now, but darn, did I feel like a fool. Trying to penny pinch and save $20,- transaction costs, ending up losing my $9000,- principle. Talk about being anchored... Anyway, I still hope that for the rest of my holdings, all I have to do is wait long enough and everything will be in the plus. I'm a long term investor, and see much wisdom in the ideas of Warren Buffet. Currently, my largest holding is AAPL, which currently yielded -24% for me (not counting dividend.) I'm pretty confident that within a 5 years it will be the shooting star it once was, so I don't plan on selling before that one hits the cool $1000,- milestone (or $100,- when the stock finally splits 1:10 or so.)


Bram Stolk Sr said...

Met geld maak,je geen geld, je raakt het uiteindelijk allemaal weer kwijt...
Ook de profis raken de kluts kwijt, gewoon werken voor je centen is de beste investering

Bram said...

I started investing in Canada in 2011, and so far, CA portfolio is up 11% and US portfolio up 12% so it is making money. I do lose money on currency conversions though, so the actual US performance is a lot worse.