Hi Justin, I think its cool that you have an interest in investments at such an early age. When I was your age I wouldn't have had the patience for this. I think you need to ask some other questions while you are at it...Its important to read and learn and read widely. There are differing ways of viewing the same facts and always differences in opinions when it comes to spending money...Advice is sometimes cheap and not necessarily beneficial. There are a lot of people in this country who would love to part you with your money. You must learn to beware of the golden tongued ones, who present such compelling deals that they seem almost too good to be true. They are.
You must also learn a lot about yourself. How do you feel, are you a
risk taker or conservative ? Do you go through exhaustive analysis before venturing out to take a plunge, or do crash through the barriers with an adrenaline rush of "Bloody the Torpedoes, Full Speed Ahead..." You should think about purpose and goals. Is this like a substitute of going to Vegas, or is it something that you seriously want to be good at ? How patient are you ?
I would guess you have the brashness of youth and exhuberence compelling you to make some quick profits. This is not necessarily a good or bad thing. A mutual fund is a means to diversify which implies some measure of safety trading off between safety and lower total return. Moving your wealth from this environment to look for
a particular stock means that you are willing to give up much of that safety net for a chance to increase the returns. This is risk taking, does it feel good or scary ? If you learn that you like risk then this sort of investment may be quite appropriate for you. What if you pick wrong and you say lose $2000 or so over the next couple weeks, and you decide that there's no realistic chance of it recovering in the next 3 years ? Will this devastate you ? Is this money planned for your college ? I'm making an assumption here that you're inclined to continue your education.
Theres really a jillion or so stocks, options, futures and other trading vehicles to stick your money into. Whats really important is what you know about yourself and what you think about for your situation, everybody is different. Theres a difference between the company and the stock that represents ownership in the company. A lot of people confuse and intertwine these two. Great companies are not necessarily great investments, and vice versa. Timing is very important, maybe more so than the underlying company or its reputation. To give a concrete example, my wife, has a fundamental gut-level liking for OakT. So she had some money available a while back and I encouraged her to pick up 100 shares. It was 17.5. As this vehicle was passing down through 11, we revisited that decision and decided that the basic rational was okay, just lousy timing, so
she picked up another 300. Still losing equity, but she has a very long event horizon and is content to wait. In reality these are both bad trades, value has been lost whether realized for tax purposes or not. A solid investment strategy would say prune off the loss before it grows too great. Feed that recovered money into an investment thats turning a profit. In her case, I know her nature, and she is willing to wait and ignore the loss. Hoping for a recovery. For her it isn't enough money to change her lifestyle.
A lot of people are like her. Have made a poorly timed investment in
a stock like Oakt and are content to wait...What are they waiting for ? A lot of them are waiting to recover their full principle and plan to sell off when the price recovers to their level. So you'll see a stock like Oakt go through a process of bottoming, then crawl agonizingly slowly upwards running into these layers of sellers who are trying to break even. As these levels get penetrated they become support levels on the way up.
So Oakt may be a great investment for you. Or not. Only you can know. Its certainly a lot cheaper now than a month ago. It does have a lot of cash reserves, and is in an interesting and volatile market.
But not every stock once high price now quite a bit cheaper is a good buy. In fact some investment advisors argue strongly that the opposite is likely to be true. Bottom-feeding a once high priced stock can sometimes demand a great deal of patience.
I wish you luck with your future investments, an open, skeptical and searching mind is a very good investment, spending some of that money
on yours will give a good return in the longer run. The biggest money is made in the long run, not too many day traders ever make the billionaire list. Once you have mastered yourself, its good to listen to your inner self. You must become able to sense when things are likely to be good before the confirming evidence is present, by then
it will be a higher or lower plateau. Thats what "doing your own research" is all about.
Regards, Mike |
