“The wealthiest 10% of American households now own 89% of all U.S. stocks.“ - CNBC article from 2021 -
I look at my investments too much. I’ll open my brokerage or stock app, look at the stocks I own, and then close it. I do this at least once a day. I know it’s unhealthy but I kind of like to just see how much I am up or down. Right now I am down. A lot. The stocks I own are off their highs by at least 20% or more. One is down more than 50%. Needless to say, I still like to look at them even though it hurts to see how much money I am losing. (Though none of it is a loss until you sell).
To put it bluntly, seeing your portfolio drop significantly sucks. But it’s not all bad. On one hand, you get to buy at cheaper prices. I bought stock ABC at $140 a share and now it’s trading at $100. That’s what we call a buying opportunity. Back up the truck. But on the other hand, when your stocks drop 10% one week, 20% the next, then 50% the following, you do not know if the stock will recover in one month, one year, or never. I am glad I have the temperament to buy and hold even when the assets I own are getting hammered. It’s not easy to do, so you have to be comfortable with what you own. In my brokerage account, I own four stocks and two ETFs. Three stocks I own will be fine. I do not worry about them. But the 4th one is truly a testament to how strong I will be in terms of holding. This is my speculative play. The stock has been cut in half. It was once trading between $14 - $18 a share and now it’s sitting just below $8 per share. So that is bad. The crazy thing is I once could have sold it for a $2K profit, but instead I held thinking it would continue going up which it did not. It dropped and dropped and now I am down more than $3K. How fun. Bulls make money. Bears make money. Pigs get slaughtered.
Stock picking is hard. I knew this well-known fact but I still wanted to try it out. Warren Buffet says the average investor should just buy an S&P 500 index fund and they will be fine. I did that when I first started investing and I still own it. And it’s doing rather well compared to the rest of my portfolio. So why didn’t I listen to this Buffet guy? Well, I think it’s due to me constantly reading and learning about investing and the stock market. When I knew very little all I did was invest in one ETF. But then over the years, I started learning more and more and I wanted to try out individual stocks. So now instead of contributing solely to the one ETF, I have a portfolio with various holdings.
I’m in my fourth year of owning individual stocks. When I first started, I made some common mistakes such as trying to time the market, lack of patience, or not understanding what I own. I am not a pro by any means but I have learned from my past experiences. And I think the best way to learn is by doing. Every day I am in the market, I learn something new. It’s one thing to hear people say this can happen and then it’s another thing to experience it happen. Watching a stock I own go up 60% in three months was exhilarating. Then watching the stock drop 70% in three weeks was a nightmare. Stairway up, elevator down. Is picking stocks easy? No, which is why Warren Buffet said most people should not pick individual stocks. It’s a lot of work to follow and understand how these companies operate.
So will I stop buying individual stocks? No. While I do not trade stocks near as much as I once did, I am now buying and holding long-term. I am forcing myself to learn about the companies I own shares of. When you own stock of a company there is a reason you chose it. You believe in the company. You looked at the financials, the management, the market they operate in, etc… If you do not know the difference between the company you own and its competitors then you should not own that stock. Most people in this country play a part in the stock market. Some are active but most are passive. Your 401k, pension, or any other retirement account is most likely invested in the market. It’s an awesome feeling to see your money grow. It’s a gut-wrenching experience to see your money lose value significantly. But what makes a great investor is seeing both things happen and doing nothing about it. Simply leaving it alone is sometimes the best method. This is why when I open my brokerage app, I look and then close it. No action is necessary. I’m in it for the long term.