Sunday, March 12, 2006

I Hate To Admit it

I do hate to admit it but I made a mistake so far in investing. As you may know from reading this blog I got started with investing around Thanksgiving 2005. See my first post to get an idea of how I started.

Anyway, about the same time that I figured out that I did not want to go the mutual fund route (mid-December) but before I had figured out what of investors I wanted to be (aka before I read Grahams Intelligent investor) I signed up for a newsletter that is a pure TA strategy.

At the time I was thinking that I would do a little value using screens and a little TA using this newsletters picks.

Now this newsletter is put out by a reputable guy. He has written books, has is own regular article on one of the leading investing websites, and I mainly bought it because I had followed his writings off and on. It has been published since September 03 and his picks have returned 25-30 percent in 04 and 05.

I took a trial of the newsletter, liked it, and laid out a couple of hundred bucks for a year subscription (I know I know if I had know then what I know now I would have just sent my money to Bill, Geoff, Shai, or any of the other blogs that I have learned from). This was in late December.

Anyway about a week after I signed up I found out that the newsletter was changing from a small inhouse operation to being run buy one of those big websites that pushes all kinds of investment strategies. Anyway the cost of a years subscription was going to go way up and so out of fear/greed, and thinking I was going to use the system... I signed up for another year before the price went up...yup another couple of hundred bucks..I know I know don't say it...And don't tell my wife either...

Anyway by mid January I had read Graham's book..And like Buffett said about the first time he read it the light just came on. While Greenblatt's book (little blue book see my earlier post) laid out a general idea of value investing, reading Graham's book made me understand the difference between investing and speculating. And I realized I was not a speculator. That's why I recommend you read Graham. Because I think that if you truly are wired to be a "value" investor it will crystallize your approach to thinking about how to go about it.

Anyway the newsletters system is pretty simple..The guy has a system that picks ten stocks a month..You buy on the last trading day of the month...Sell one month later and buy the next ten...He also throws in a few picks here and there that are not pure system plays but his own picks based on certain criteria...

now like I said...So far the system does work...This year it is up a little over 5%....But it is just not for me and i am not using it...For a lot of different reasons...Mainly i am not going to do some thing I don't feel comfortable just in hope of making my money back.

But that does not mean it is not right for you. This post is not a knock on the newsletter..It is a knock on me.

My moral to this story is simply that before you go out and buy this or that to help you invest...Figure out first what kind of investor you are going to be...If you are a value, growth, TA, or whatever it does not matter...But do some serious thinking about your investing philosophy before you start paying for anything...

And you can do that for free by reading blogs...Books (before you buy check your local library)...Magazines...

my mistake was not taking the time to figure out what style suited me best before I jumped...I hope you don't make the same mistake.

Moreover, it was a desire to make things easy that also lost me money. I mean who would not want to make 25% a year just buying and selling when told to without having to think...I mean I musta broke every rule in the book on this one...

Anyway it is pretty hard to stand up in public and tell you how big of a dope I was to waste my money...But I started this blog in hopes of helping other new investors like myself and I felt that it is important to not only to talk about the good but the bad and ugly as well.

Most importantly we need to remember that making the mistake is not the bad thing...Repeating it is...And believe me when I tell you that I think about my mistake everyday...Wasting the money hurts...

but thinking about the opportunity cost (meaning thinking about all the other things I could have use the money on like actual stock purchases) hurts a hell of a lot more.

So in the words of Sgt. Phil Esterhaus "let's be careful out there."


1 comment:


Interesting and outstanding material.