You know that investing in a single stock is gambling right?
Long ago I decided that I would never take part in the lotto. There’s something about losing money every time I played that kept me from enjoying the practice. However, you’ve got to play to win, which kept me wishing I’d play. I figured that the stock market was a good alternative, which is why I put a very small amount in a few single stocks. It’s gambling, but it’s legalized gambling.
I Bought Stock
At the beginning of the recession, I was looking to gamble on a few companies I thought were strong, but unfairly punished by the stock market downturn. That brought me to a beverage company that primarily sells alcohol. My thinking went a little like this:
- I like adult beverages
- People drink more when things are going poorly
- How can I lose
I’d love to claim to be a skilled investor with a mind for stock picks like Warren Buffet. However, I’m just an average guy, with an online brokerage account. My pick didn’t wow, but it did seem to keep up with the market, so I held onto it for a few years.
It seems my gamble paid off last year. The company announced a new and lucrative acquisition. It seems as though my little lotto stock pick was paying off. The stock shot up about 90 percent from last summer to the beginning of winter.
It’s amazing the crazy things you think when things are going well. Part of me was wondering if I shouldn’t be gambling more of my money in the stock? Perhaps there was something to this gambling in the stock market thing. All I needed to do was make 90 percent on all my picks and early retirement was within my grasp.
Deal Falls Through
That’s when the deal fell through. Apparently, announcing an acquisition and having an acquisition are not the same things. The deal fell apart and the stock tanked.
My original plan was to cash out right after the deal and reap the most of the stock gains. The worst part was I didn’t really follow the stock on a regular basis. I didn’t find out until several days later after the stock plummeted over 30 percentage points.
It was time to cash out. Better a 60 percent return based on purchase price than nothing. The only thing standing between me and a sell order was my password.
For some reason, my password for my trading account was not working. My job is hectic right now with year end and the constant barrage of meetings was preventing me from making the necessary phone call to remedy the situation.
After a few days of forgetting to call and finding no time to call, I gave up. The stock selling seemed to subside already and it seemed like I’d already missed the cash out express.
New Deal is Struck
Losing my password was great strategy luck on my part. The company renegotiated the acquisition, more favorably than the original. The news nearly doubled the stock in a few days.
Having regained access to my trading account, I sold and received a nice return in the process.
Single Stock Purchasing is Gambling
I know my story ends well for me, but all too often we evaluate bad mistakes through the lense of results, then overlook the red flags.
When a password is making the ultimate determination between whether you double your gains or halve your return, you know you are asking to lose sooner than later. Thankfully, I learned my lesson on a positive note. Others have not been so lucky. Before you go picking up an entire portfolio of single stocks, consider the risks and the alternatives.