Tuesday, February 21, 2006


Stockcoach: The early years

It wasn't always this way. Although the track record that I maintain in my spreadsheet and post on this blog begins in November 2000, this actually represents my second foray into the stock market. My first foray into the competitive world of investing didn't go nearly as well. Back in 1998, when I was still a university student, I put about $8000 into the market.

It takes a certain level of genius to lose money when everyone else is making money hand over first, and back then, it certainly seemed like everyone was making money in the market. And what genius I was: I don't know exactly, but I would estimate that within the course of one year, my portfolio lost about 50 percent in value. I'm still embarrassed to think about all those garbage stocks that I bought. By late 1999, I had enough. I sold almost all my remaining positions, bought a bike, and went on a cycling trip across Europe.

Yet, as many of you can relate, once you've been bitten by the investing bug, you're hooked for life. After the summer of 2000, I began working at a full-time job (not related to the stock market), and started earning a nice salary. However, now that I had some experience and knowledge about what works on Wall Street, I vowed to not repeat the same mistakes. Still, it's wasn't smooth sailing. Between November 2000 and October 2002, my portfolio went basically nowhere. That doesn't sound like an accomplishment, but you have to remember that this was in the middle of a brutal bear market. Although I wasn't making money, at least I was beating the averages.

And then something awesome happened: the market turned up and some of the stocks in my portfolio began to explode. Although I sold them all much too early, I was able to buy other stocks that also did well. And so it began: a seemingly magical cycle of buying cheap stocks, waiting for them to appreciate in value, selling them, and moving on to other cheap stocks.

What's the moral here? Clearly, the moral is that you shouldn't give up. Let your failures serve as lessons for what not to do and let your successes serve as lessons for what to do more often.

Anyway, perhaps this post would be more poignant if I could say my portfolio went up today, but alas, the truth is the truth: my portfolio was dragged down with the rest of the market, falling in value by 0.3 percent.

First of all keep up the good work, I've enjoyed your blog.

I am curious to know what methods you use to find "cheap", or undervalued issues? Screening, ideas from various readings, etc. Maybe you spoke to this in a previous post, if that's the case just point me in the right direction.

It is very nice article. Thanks. I wanted to add something that disturbs me in my behavior. Generally I know how to act correct in stock market. Buy cheap, sell high and deal with quality stocks only. All the good and known rules. But sometimes I act wrong even that I know that the act is wrong. Does it happen to you?
Great blog.

I agree with the above poster. Your results prove that value investing works incredibly well. Please recommend some reading material and screening techniques you use to find your targets!
Just want to let you know, your blog is my most favorite one in all the PERSONAL trader's or investor's blogs I have been reading, even though, we use very different mothods.
I have been with you about a year now.
Thank you for the very kind words!
Dimas, I also make tonnes of mistakes. I think in the stock market, that's inevitable. I just try to learn from them as best as I can. Usually, I find that my biggest mistakes arise when I get greedy and end up taking risks I can't afford to take.
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