Taking Stock

I have “dabbled” in the stock market over the years, making lots of money and losing lots of money. Like they say, you have to play to win. I certainly am probably better off than just leaving money in some savings account.

I started with simple stock transactions, like buying a couple of shares of Hewlett Packard and paying a massive fee to a broker for split lot purchase. Still I owned stock. I followed that with Apple and MCI stock.

In some cases I did a lot of research and in some not so much.

My biggest gains were when I cashed out before Y2K. I knew the companies would be fine but that investors who did not understand computers would pull out. I pulled out before they did. Then a spinoff of Hewlett Packard made a big announcement of hardware that would revolutionize the Internet. I bit and heavily invested. As the stock started dropping I did the stupidest thing. I hung on figuring the $140 a share stock could not drop any further. I think when I finally cashed out, the stock was at $42 a share. Because of the way I did the sale earlier and the buy and loss, I ended up paying a massive IRS tax fee. I vowed to never make those mistakes again.

So with better procedures, I invest differently. I invest in companies which I frequent or know of. I also look at long term gain and short term gain. If a company is starting to be very popular, I’ll invest some money. I do watch and pull out if I start losing money though.

Take Apple for example. I was an investor many decades ago, buying and selling and taking a profit. A few years ago I put money into Apple and rode the stock on the way up. In a short time I made $3300. That paid for most of the ATV I bought with the money. Not long after, Apple started going down. In some stocks you can actually see cycles as they ride and fall. While not the best way to gauge future action, it does help.

Many decades ago I went to a meeting at the National Institute of Health in Bethesda Maryland. A company called Upjohn wanted to interview people for a very odd reason. They said they had a medicine that would grow hair! Up until this time a suggestion like this was called Snake Oil. It was unheard of. So I asked a doctor friend of mine and he said, the medicine was a high pressure medicine that doctors said had a werewolf effect, in that it indiscriminately caused hair to grow on the body. Upjohn figured three things. 1) It might grow hair on the scalp if rubbed into the scalp. 2) It was already approved for internal use, so if it did not effect blood pressure significantly through the scalp, it might be approved for topical use. 3) If this does indeed grow hair on the head, the public would beat a path to their door and Upjohn would make significant profit! As you probably guessed, they called the product Rogaine (like to regain) and ultimately called Minoxidil.

So after hearing their spiel and talking with a doctor friend, he was impressed that the claims the company made to the people in the audience were very conservative and accurate, compared to the pie in the sky normally given by the drug companies. Because Upjohn was a conservative company and the drug already grew hair, I decided to invest. The stock at the time was about $40 a share. I told everyone I knew to mortgage the house and buy the stock. IN 9 months I had TRIPLED my investment and cashed out a short time before the FDA was set to rule on the product. I figured that even if the product was approved, investors like me would cash out and so I did. The stock went to where I would have made four times my investment and then dropped some. I got out at a good time.

When Costco decided to switch from American Express to Visa I considered the stock. MY reasoning was this, Costco is a fine store, I shop there (perhaps too often), much of their profit is based upon membership and not profit from sales. SO when they switch from Amex to Visa, I figured more people would shop there because they probably already have a Visa. Although you can buy with cash, an average sale at Costco can be $50 to many hundreds of dollars. Who wants to be running to the cash machine and carry lots of cash with them, just in case they need that much?

So how did that reasoning work for me? In 45 days my stock was up 10%. I felt this was a safe investment because even if Costco stock did not go up, it was still a good investment, just not as great as I hoped.

I also have money in some funds which are close to some of the S&P investments. I also have a bit of money in person to person lending like Prosper. Then there is the farm and the business.

While not rich, I do have a pretty good diversification of investments.

I am still amazed to hear people tell me that their money is in savings at a bank and it is just too difficult to manage things themselves. They are destined to live below their means the rest of their life.

They make no money on their savings, they pay the phone company hundreds a year for phone service, they pay cable companies hundreds to thousands a year for TV, they buy toilet paper almost a roll or two at a time, they frequent coffee shops when they could be making it at home.

There are some simple things to do to save money and make money. Find something you are comfortable with and go for it.