My Robinhood account opened with fifty whole dollars, and I was raring to dive in and start trading. I began naively with a basic level of understanding of the stock market, trading, and investing. In a nutshell, my understanding was that the market was nothing but a steady upward climb with an occasional dip into a valley. I was a working adult during the Great Recession; however, I was living out of the country for much of it. My interest in investing was still dormant. I paid no attention to the market. The only real negative impact I felt was in how challenging it was to find a decent job upon returning to the country.
Those first few days, weeks, and months, I had no idea who or what to invest in, and no idea of all the wonderful resources available to me. Research, valuations, technicals, and fundamentals were not on my radar. I had plenty of enthusiasm and excitement to go along with my meager funds. My operating idea was that it did not really matter what I picked since the whole market was bound to grow, grow, grow. I believe I am a wiser investor today, but I also wouldn’t trade that early enthusiasm and exploding mental growth for the dollars I lost in early mistakes.
My First Buy
Fitbit (FIT) was my first purchase. I started by looking for companies that made products that I was familiar with and products that I personally valued. I knew the wearables sector was growing. Family and friends were using the product. The other attraction was the low share price of $6.59. I could buy three shares and still have funds left over to dabble in other areas. The concept of a long term chart was foreign to me. If I had checked, I would have seen that Fitbit was on a long downward trend from its highs in 2015 in the $47 range. I felt pressure to get into the market as soon as possible. My understanding of the market at that time told me that the longer I waited, the higher the price would be. I’d never be able to invest in a company at a price as low as it is right now, today! I sold those shares five months later for a total loss of $3.50.
The Allure of Penny Stock
My next purchase came straight from a penny stock promoter’s website after I googled “best stocks under ten dollars.” I was actively pursuing penny stocks without even knowing it. Radiant Logistics (RGLT) appealed to me as I was aware of the exploding growth in shipping and logistics. Amazon, UPS, and FedEx were booming at the time. I was on the right track baby, but my fortune was not born this day. A couple of taps on my phone later, I was the proud owner of five shares of RGLT. Now I could say I had a portfolio of stock in FIT and RGLT. I watched those tickers do nothing for several months before tiring of them and selling. I lost a total of 75 pennies on my attempt with RGLT. Each your heart out Wolf of Wall Street.
Stocks at low share prices would continue to be a fatal attraction for me in my first year of trading. Why buy one share of a company priced at $50 when you can buy ten shares of another company at $5 a pop? It was hard to ignore the pull of the power of multiplication. Not to mention the psychological effect of owning multiple shares of a company. I eventually learned the value of owning one or two shares of a healthy, growing, dividend paying company. I must admit that I still feel that temptation to own hundreds of shares of an “up and coming” company trading in the one dollar range. Not all my penny stock failures are worth writing about, but in later posts I plan to share a few of those stories.
Thank you so much for following along with me. Feel free to share any of your penny stock wins, losses, or war stories in the comments.