| I readily admit that I have been enamored with the new "darlings of the Web" technology stocks. All my life I've missed out on moneymaking opportunities. In my hometown, I could kick myself for not buying real estate on the outskirts of town that was selling for .10 an acre. Of course, I was only 6-years old at the time, but still…you can't touch that land now, which is selling for $1.5 million dollars an acre! A once-in-a-lifetime opportunity…and I missed it.
And I missed out on some of the home improvement super stores whose original asking price for stocks was under a dollar a share. A short 15 years later those stocks have surpassed the $100.00 mark. Another reason to kick myself.
Well…now with the explosion of the Internet, I've made a solemn vow. There's gold in them there "cyberhills" and I'm not going to pass-up this golden opportunity. While my portfolio contains many Blue Chip stocks, I just can't seem to keep my fingers out of those hot, new technology stocks.
Throwing caution to the wind, I purchased two of them. Now, there is nothing wrong with purchasing Web technology stocks. What IS wrong, however, is that I didn't study the companies carefully. Just as we have learned in the past, we need to study our companies through a magnifying glass.
I didn't. Instead I just assumed with the little bit of knowledge I had accrued, that I could just "pluck some winners" out of thin air. Mr. Carlson, in his book Eight $teps to $even Figure$, informs us that "Overconfidence leads to abandoning sound investment principles to pursue higher-risk strategies."
That overconfidence cost me dearly. As I checked on one of my stocks this morning, I was humbled by my own tragic mistake. That stock is now valued at .19 cents. I originally had $250.00 invested in that company. Sadly, the total value is now $4.34.
I originally "plucked" this winner on a whim. I didn't study the balance sheet nor did I check the previous quarterly earnings for this company. Had I done that I would have noticed a company that wasn't even close to meeting its quarterly projections.
My original feelings of being a "genius" and somehow having the ability to pick "winners" without doing my homework, was, as Mr. Carlson so aptly warned us, a major "goof". I learned my lesson the hard way. There is no such thing as picking a winner on a whim.
Sound investment strategies involve doing our homework and not looking for shortcuts to easy wealth. And again, from Mr. Carlson's Eight $teps to $even Figure$, a wonderful quotation from an investor whose portfolio is worth $1.4 million.
"I've always taken the attitude that I'm stupid," says Cal Akers, forty-eight. "I know I am not, but that mentality helps me because if I start with the assumption that I know nothing, I have to acquire knowledge. So I read everything I can get my hands on."
And Mr. Akers' advice is well taken. My 19-cent stock is proof positive that a little bit of knowledge can be disastrous financially. I've learned my lesson and now I can only hope that my company will somehow rally and become profitable again.
And you can rest assured that the over-confidence in my abilities has been replaced by a more humble, albeit poorer, investor. Lessons learned the hard way can be painful, but I'll not make that one again any time soon.
Next week we'll look at another goof - the "herd mentality" - in the hopes of avoiding potentially costly mistakes.
Thank you for joining me,
Joyce |
