?

Log in

No account? Create an account

Previous Entry | Next Entry

What to do with my losing stocks?

So I've written before about my adventures in the stock market, basically under the influence of some coworkers I thought it'd be fun to open a scottrade account and learn to trade stocks... it didn't go so well. I mean it went okay, I had some great picks that I made money on, but here's the problem: Pretend you find ten different companies that are all trading for around $10. On average, they say the stock market climbs 10% a year, but that doesn't mean all your stocks are going to be $11 next year. Some will be $12, some will be $15... one might be $1.

And that one that tanked? Unless you picked a really awesome winner that's now $20, your portfolio has not evened out. I now feel like that's how the "average" works... there are a lot of pretty good climbers. But the total losers outweigh the tiny winners, and unless you can buy into 100 different companies, the loser isn't going to have anything to even it out.

Then people told me "well don't sell when it's low or you'll lose your money!" so that's where I'm at now... I have a couple hundred dollars (which used to be closer to $1000) in my "loser stocks" that I'm sort of praying go back up, but reality is, they won't.

Here's what I own:

AMD - in 2005-2006 it was always going back and forth between $20-30, sometimes up to $40. I bought in 2006 at $20. It then spent 2007 going down to $5, and has not been over $10 since November 2007. Currently trading at $2.67.

KID - this company went public in 2010 and consistently traded in the $10 range for a year before I got in. Then in 2011, it dropped below $6 for most of the year. Currently $1.70.

GAIA - A dividend-paying stock in 2010 for $8. Dropped and has been below $5 since the middle of 2011. Currently $3.13.

So all of these stocks have been really low for more than a year, which tells me they're probably not going up any time soon. Sure, there's always a chance that if I sit on them for decades they'll come back, but... really?

Please do not tell me that I am the worst person ever at picking stocks. You all know I'm a smart girl. I'd read reviews of these companies, see what Motley Fool and other places said, then I'd buy. When I realized I wasn't winning, I sold my "high" stocks and am now sitting on these "low" stocks.

The question I'm struggling with now is whether to just cut my losses and sell them and REALLY be done with the stock market... it's exactly what they tell you NOT to do, don't sell low. But none of these stocks have done much over the past few years, and my money may very well do better in a credit union savings account.

And I'm kinda posting this as a cautionary tale too, for why I would not recommend opening your own trading account for fun. For me, it ended up being not very fun at all, and now that I've read some financial books I'm not the only one who thinks so. Both Dave Ramsey and Elizabeth Warren, two opposites who do not agree on anything, agree on this: low-risk mutual and index funds are the best choice for individuals who want to use the stock market to invest. It was just my gung-ho coworkers who talked me into scottrade... and this is not the only bit of bad financial advice I've gotten from my fellow engineers! But I do think it's one of the worst tips I actually tried to follow.

Comments

( 7 comments — Leave a comment )
motorharp
Jan. 11th, 2013 04:27 pm (UTC)
Reading between the lines, it seems like you want to be done with the stock trading experiment. Consider it just that: an experiment. You tried x and got y results. Yes, you will lose money, but you seem to be really good and conscientious with your money in general, so I would just chalk this up to life experience.

A couple things to consider (if you do want to continue trading):
+ Stocks are usually lowest in January.

+ Use conditional orders - I decided before I started trading how much I was willing to lose, and set up automatic stop orders. I started out with 8%, but that wasn't enough of a cushion to allow for fluctuations of the market and I ended up doing something more like day-trading (not what I wanted to do), and settled on 20%. I've finally recouped my losses from experimenting and am slightly ahead.
sandokai
Jan. 11th, 2013 05:32 pm (UTC)
Indeed, I've seen enough people lose money on them to know one should never bother with individual stocks...

that being said, my grandmother gave me 100 stocks of Microsoft like 15 years ago and I am just letting them sit there reinvesting dividends, thinking someday maybe it will go up... LOL

But other than than, mutual funds all the way baby!

binaryprecision
Jan. 11th, 2013 06:19 pm (UTC)
I have some coworkers who do the day trading thing, and besides the fact that I just don't have the energy to keep up with knowing enough to even have an inkling of an idea how things will trend in the future, they have more stories about losing money than winning big. It really is like gambling, only in most games you have set odds of winning. Single stocks are driven so much by emotion and things that can't be numerically quantified that they're too flipping risky, as you have seen. Mutual funds are much more stable and the good ones have a proven history of relatively consistent growth over decades.
Ckwop
Jan. 11th, 2013 08:26 pm (UTC)
It's a casino.. go for a hybrid solution
There's an adage in the investments industry that it takes great skill to turn £5,000 in to £10,000. In contrast, to turn £250,000,000 to £500,000,000 requires only patience.

At the level of an individual stock, the market is nothing but gambling. Like poker, deep knowledge of the discipline can make it profitable but to acquire the requisite level of skill in too time consuming for the casual player.

And like poker, the professionals get paid by the army of amateurs willing to hand over their money on poorly reasoned decisions.

I manage my own pension but I do it through investing in funds, which are managed by an expert. This is the best of both worlds. I've had ten percent growth this year. However, I get to choose which funds I invest in.

Last year, I focused on the corporate bonds market and a basket of government bonds. I avoided the stock market for the most part, I invested in one fund that dealt with global stocks. I was careful with the stocks fund so that no single economy tanking would wreck the value.

It sounds like you want the hybrid solution I'm using.
chezmax
Jan. 11th, 2013 10:52 pm (UTC)
I agree with the financial wizards: stock picking is riskybsns, and is not for us plebs. :) You can either sit on those stocks forever, where they may dwindle to nothing or rebound, or you can cash out, and consider it a couple hundred dollar lesson that the stock market isn't for you.
peacegood
Jan. 12th, 2013 02:49 am (UTC)
This might be a dumb question, but at this point, what do you have to lose? I mean they are so low, you can't really lose that much more money, right? So what harm is there is holding on to them longer to see if they go up?
paranoidandroid
Jan. 12th, 2013 02:20 pm (UTC)
I came here to say pretty much the same as peacegood did. If you have no pressing need for the couple hundred dollars, and it's not costing you anything to hold these stocks - leave it there because who knows what the future may bring?
( 7 comments — Leave a comment )

Latest Month

August 2018
S M T W T F S
   1234
567891011
12131415161718
19202122232425
262728293031 
Powered by LiveJournal.com
Designed by Tiffany Chow