What I’ve Learned from Playing with Stocks [in a Pandemic]

Well, here I am sitting in my room staring at a blinking cursor while trying to find the perfect way to start this blog post. Nothing has come to mind so we might as well just pull off the band-aid. I picked this topic because it’s what’s relevant to me in this moment and what better to write endlessly and pointlessly about than what’s still fresh in my short-term memory laden mind? So, let’s take a brief, but maybe not so short, walk down memory lane to four months ago…

The date was March somethingth, 2020 and the world was in the beginning stages of the COVID-19 pandemic and the stock market was crashing harder than the Hindenburg (too soon?) Everyone was adjusting to their new work from home lives and I was no exception, with a bunch of extra time on my hands from the lack of early morning commutes, parking, and trudging to the cubicle before grabbing my morning coffee to surly be diverted into a 20-minute conversation about the latest office Rubix cube record or last weekends epic powder. I’ve always been one of those weirdos that uses every bit of my free time to balance my budget and check on the progress of my financial goals, while consuming as much Dave Ramsey and personal finance podcasts as are available. It's only natural that all my newly found free time was channeled into a deep obsession of my personal fiances. But a funny thing happened around the same time; I was debt free, had a fully stocked 6-month emergency fund, auto-deposits for my eventual car replacement, finally finished saving up for my first house down payment, and beefed up my retirement savings (maxed out this year’s IRA and last year’s thanks to the CARE Act and bumped up the 401k to 25% to make up for some lost time while saving for the house down payment.)

After the dust had settled and my post-completed-financial-goals budget was balanced, I still had some money left over! This was mostly in part to half my budget items becoming obsolete in the new quarantine world (i.e. amusement (thank you roommates Netflix account), haircuts (brought back the buzz cut, aka. quarantine cut), ride shares (is that still a thing?), gym membership (bye-bye muscles and morning routine), gas (yep, all that $1/gallon gas just sitting there and no one to use it), clothing (WebEx calls mimicked the classic mullet, business on the top and the same sweatpants everyday on the bottom!), and my "Shit Happens" bucket, since not much shit happens when you’re stuck inside every day.)

Stockpiling all my money into a Scrooge McDuck vault sized money market account offering 2% APR, at best, always came natural to me. I liked the idea of keeping my money free to use at any time and away from risk so that I could spend it if the need or want presented itself. I had every plan to continue to stockpile money into an online savings account earmarked for “extra mortgage payments”, which was now making 1.25% APR thanks to COVID, but the universe had other plans for me and my extra money.

One day, as I was settling into my makeshift at-home office desk, I opened my phone to a flurry of text messages from my group of friends back in Houston, and the chat was abuzz of speculations and white paper links with “must buy” propositions. Normally I would ignore such unsolicited advice but today I took the bait. I don’t know if I was just getting bored or if it would have naturally happened in the “normal world” but I said “fuck it! I’ll dip my proverbial toe into the boiling stock market water." Being Houston, TX, you could hit someone working in Oil & Gas from a mile away, and one of these oilmen said that he had “bought a bunch of [enter oil tanker company stock ticker here] this morning” and that “these guys are going to make a killing in the next few months.” That's all it took for me to get the itch enough to finally pull the trigger. I asked around for the best platform to use and heard Robinhood a few times, so I downloaded the app, set up my account, transferred in $500, and no more than 2 mins later, I was the proud owner of 10 shares of my very first individual stock!

My entire investment experience up to this point had consisted of a set amount of money coming out of every paycheck into index funds where they quietly do what they do, without me being any the wiser, so it was entertaining to follow the up-to-the-second graphs and blinking price indicators of this app. The price had started to go up and that got me even more excited, so I bought 5 more shares to take advantage of this quickly rising star. Up and up it went, as I followed the updates religiously. It wasn’t long before I used the remaining funds to purchase shares of MGM and Delta Airlines, under the advice of my desk jockey “investor” friends. There wasn’t a free second that I wasn’t scrolling through my portfolio for updates. It had become an addiction, with it being the first thing I did when I woke up in the morning to the last thing I did before I went to bed, even though it never changed much from the thousands of times I had checked it from market closed to then.

Fast forward back to today and if you’ve watched any movie, you could tell how this “too good to be true” story ends. Those original 15 shares tanked (no pun intended), netting me a sweet -20% return as of typing this sentence. But the lessons that I’ve learned from those initial 15 shares easily outweigh the now measly 3% percentage of my overall individual stock portfolio that they now represent.

All that to say, the main lessons I’ve learned from my very short career in individual stock trading are as follows:

• Never invest more than you are willing to loss – the rule of thumb is to never have more than 5% of your net worth tied up in individual stocks. I got into individual stocks in order to invest my spare capital over years and years to make more than what I could get in a savings account while being able to pull it out before retirement age. I know this takes time, so I’m prepared for the volatility that comes with individual stocks, and thoroughly enjoy the ride!

• Never invest in something because someone told you to – as we can see from my tales of woe; if you're hearing about the next big thing, it is most likely already too late. This rule has made Warren Buffet a very wealthy man and I can see that from my experience, it’s much easier to take a lose in a company that you believe in and actually use.

• Timing the market is almost impossible so don’t get upset if you don’t strike gold every time – I would say that I was "lucky" enough to buy most of the shares in my current portfolio in April 2020 during an economic recession driven by a pandemic, while in the beginning period of a drastic recovery (aka the near bottom). But this is not to say that I have not also bought at the very top, just to see the price plummet, what seems, instantly after. If you buy low and see the price rise, be happy that your dollar is now worth cents more; if you see it drop, be happy that you can now buy more at a cheaper price.

• Don’t get trapped in the appeal of the ticker – The amount of time that I’ve spent watching a stock go up or down just to settle at a few dollars difference, may have cost me thousands of dollars in lost productivity, so the best advice I can give is to not get addicted to the flashy gimmicks deployed to keep your eyes glued to these new-age investment apps, albeit my admiration for their effortless and elegant designs.

• Diversity is still key – Even though you are investing in individual stocks, it’s still important not to put all your eggs in one basket. If I would have placed my entire current portfolio amount into that original company stock, it would currently be down over a thousand dollars instead of being up 11% as of today.

• Never sell (to time the market) – Recently I decided that I started to understand the market so well than I could recognize a bubble when I saw one. I had grabbed one share of Tesla at $964 and decided to get out while the getting was good a couple of weeks later at $1,275. Not bad; a $311 return in less than a month! As of today, Tesla is trading at $1,663 and climbing with no sign of stopping. This is only one share of one stock, but it still hits me as if my entire life savings was invested. That's the emotional risk and strain that comes with individual stocks.

In conclusion-- while investing in individual stocks can be a fun and lucrative hobby, that’s all it should be; a hobby. Long-term investing should still be done methodically by dollar cost averaging in well diversified retirement investment vehicles such as 401k's or IRA's using low-cost index funds consistently over a long period of time. If you have the extra dough to throw away into the stock market, learn what you can from my experiences and enjoy the ride!