However, a Silicon Investor member from Pompano Beach, Fla. who goes
by the name of "Dealer," tried to be circumspect about her declining
fortunes.
"I was a Qualcomm millionaire earlier this year, but that's all gone now,"
she said. "I've learned there are more important things in life than money --
the best things in life are free."
And Dealer was thankful that she didn't face one of investors' most
common foes in a plunging market: a margin call. "I learned my lesson last
year when the market tanked," she said.
A margin call occurs when the equity in the account of an investor who has
bought stocks with money borrowed from his brokerage firm falls below a
certain minimum. When that happens, the firm usually demands that the
investor puts up more cash or securities to cover the loan. If the investor
doesn't, the firm could sell securities from his account to cover the debt.
But many investors didn't escape the dreaded margin call Thursday.
Melissa Gitter, a spokeswoman for TD Waterhouse, the No. 4 online
brokerage firm, said it has seen an increase in margin call activity that is
"commensurate with the dramatic movements" in the market. Mr. Gable, of
Schwab, the No. 1 online broker, echoed those comments.
One interesting aspect of Thursday's drop is that it was centered on the
Old Economy stocks that had been considered dependable and almost
immune from the volatility that had become a normal occurrence for
high-growth technology and Internet shares. Many online brokers in the
past had tightened margin lending for some of those volatile New Economy
stocks. But now, blue chip investors were the ones facing the pain.
Mr. Taylor, the investor from North Carolina, said he still trades every day
and still likes New Economy semiconductor stocks and Cisco Systems Inc.
And though it was Home Depot Inc.'s earnings warning on Thursday that
helped trigger the sell-off, he still likes retailers. "I think Christmas shopping
will be good, so I'm buying the retailers."
Mr. Yeagin, from Texas, also does see a buying opportunity in the
market's volatility. "It's given me a chance to step in and out when
everyone else is selling like mad."
But buying or selling stocks on a whim is a strategy that many financial
professionals try to discourage. Indeed, in previous market routs, some
online brokerage firms have cautioned their do-it-yourself customers that
investing is long term and that they should ignore the market's wiggles.
Write to Mike Anderson at mike.anderson@wsj.com, Aaron Elstein at
aaron.elstein@wsj.com, Stacy Forster at stacy.forster@wsj.com and
Andrew Fraser at andrew.fraser@wsj.com |
