Sherman, set the wayback machine to the winter of 1999! This was a time when everyone thought they were a financial genius. You couldn’t loose, or so we thought. I was a conservative investor even in those days but a co-worker was talking about a great investment tip he heard from a friend who had heard it from their doctor. That in it self should have been a sign.

My co-worker had heard about a company called Socket (SCKT) and while he wasn’t sure what they did, he was certain that they would do it well and their stock would skyrocket. I looked into the company and I must admit I was not impressed with their financials. They had been in the red for a long time but they did make a needed product. The stock was trading very low at around $1.29 so I bought in.

My co-worker’s friend’s doctor had been correct and the price soon started to rise. It kept going up and I was amazed. I went into work one day and asked for the latest news. I was told it would easily hit $50 so I put in an order to sell at $50.

It never made that mark; it stopped at around $49.50. Can you believe it? It would never see those heights again. Everyday my wife would tell me to sell, everyday I clung to a hope that it would go back up. One day my co-worker said the doctor was putting another $10,000 in because he heard it was going to go to $200. In a couple of days I sold at around $18 and I was so mad. I kept thinking about how I lost almost $3200 and how it had gotten so close to the magic number.

Lessons learned; there are many but here are a few for every investor.

  • If you ask a group of random people to pick a number between 1 and 100 they will almost always pick a whole number. That’s being human, it is the way we think but it is not the way the market works. When you decide to sell, sell.
  • The only two numbers that count are the price you paid and the price at which you sell, everything else is imaginary.
  • Finally, do your homework; a company that is in the red is a questionable investment. I am still working on this one and maybe I haven’t learned my lesson as I now hold a good bit of Fiat (fia) but I am thinking they can pull it off.

I wanted to write this short piece to share my mistakes and encourage others to share theirs; something very few people like to do. Hopefully we can set pride aside and learn from our failings. One last note; SCKT can still be bought today for about the same amount of pocket-change I paid almost 7 years ago. Maybe some day it will be worth $50 a share. I can only hope.

Comments (3)

Thanks for sharing, Kevin.

It can be very hard to let go of a falling stock, especially when your plan (sell at $50) doesn’t work out as expected. Backup plans are important.

People correctly nailed me on my SIRI trading before, where I should have let go earlier.

It’s good that we’re getting this all out of our system early, while our savings accounts are smaller relative to our incomes. In retirement a similar mistake would have cost you much more.

Next up, let’s hear about one of your great success stories.

It’s always great when people share their personal stories. Mistakes are how we learn and grow right? Must be the week for it- I did a series (yes, I made that many mistakes in one business! lol) about my first business! Hey, if it helps someone else learn too…

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