I have come to the realization that market ups and downs are too stressful for my gentile stomach. My ah ha moment came to me when I invested in the little known publicly traded company, Powerwave Technologies. Back in 2008-09, Powerwave was supposed to be my ‘home run’, or at least according to all the message boards I so diligently followed. Powerwave
provides provided (not sure if they are still in business) antennas and switches for the highly coveted 4g technology. They were going to build the wireless network for the first responders, they owned many patents, and allegedly had numerous government contracts which were to be funded by the Obama Administrations stimulus program in 2009. Heck, they even had Tom Ridge (former Secretary of Homeland Security) on their board of directors. I thought it had great potential. Needless to say, I learned potential meant nothing when it relied on their expenses and profit. They spent like drunken sailors, had poor management, and their stock price was reflective of it. However, I did get in at the right time, paid 40 cents per share for 10,000 shares, but this wasn’t the problem. My foolishness reared its ugly head when I failed to recognize (as Kenny Rogers says) when to fold em!
Sure .$40 is cheap and, on my tight budget I could feasibly buy 10,000 shares and wait it out. This is the strategy I took, and it paid off handsomely, so handsomely, I failed to take profits! Yep, I figured it was going to the moon, and it did. Problem was greed got the best of me. Like the novice investor fool I was, I though the 400% increase in the stock price, was going to be 500, 1000%, but not to be, it soon tanked and I failed to take profits. As of today, Powerwave Technologies trades at zero (0) and is working through Chapter 11 bankruptcy and I am no longer a shareholder, argh! However, I consider myself one of the lucky ones, I got out before the ship sank and was able to surrender my shares for $.04. All in all it was a fun ride, it was an educational experience where I learned a great deal about message boards, company sales, shareholder enthusiasm and the lack of correlation these have to generating quarterly profits. I hated to lose this $3600, but to tell you the truth, I would contemplate paying $3600 to have the understanding I now have as a result of my experience. I now know what not to do, I know where to put my nest egg, and I now have a keen understanding of how market euphoria works, and I want no part of it!
My $3600 lesson:
Going forward I will invest in what I know, what I can control, what I can see, what I can touch, and these will not be Wall Street products. I know, I know, many people say, well I was up 400% I should be looking for the next stock that will yield this and just perfect my exit strategy. I am here to tell you, I cannot stomach the intracasies of timing the market, and truth be told, I don’t have the interest. I know many of you out there actively invest in stocks, bonds, mutual funds and I got no beef with that, I have shown you can make money at it. It’s just that it is not for me, I want an investment within my control, which is why I have a Self-directed IRA and invest in cattle, real estate and tax liens.
Investing in what you know:
Self-directed IRA’s are such a great, little known option. So little that only 2% of total investment dollars are in Self-directed IRA’s. They are, for all intents and purposes, an IRA which allows you to invest in…. well just about anything! That’s not to say there are no rules and regulations, they are after all, still governed by our friends in Washington! However, they are more flexible than your companies 401k, your traditional or Roth IRA’s. Like I said, I learned a very valuable (and costly) lesson but it changed my perspective, and for that I am grateful and excited.
What are your thoughts on timing the market and small cap stocks?