I made some recent purchases during the volatility in the stock markets. Being quite new to stock investing, I feel like a bit of a “green recruit” being tested in the first skirmishes of a war. I think in “A Random Walk Down Wall Street” they talk about investing on paper (not actually buying the stocks, just tracking an imaginary portfolio) is like a virgin reading about sex. The real experience is different.
Losing money isn’t fun. At the end of the dot-com bubble, I lost about 75% of what I’d invested ($15K of a $20K investment). As bizarre as it may seem (you might not believe this if you’ve been reading my blog for a while), I’m actually not all that motivated by money and I pretty well just shrugged my shoulders and carried on with my life. a couple of years ago I finally sold my position (it hadn’t done anything since) and just recently got around to re-thinking about the stock market and getting into it again.
I *really* wish I could have put that $20K into Canadian dividends 7 years ago, but such is life.
Most people don’t seem to react this way. Losing 75% of their money would make them freak out in a major way (like jumping out of a window). I’ve always followed the advice “don’t invest what you can’t afford to lose”, which is maybe what lets me be a bit more detached.
Losing 5-10% recently was nothing. More then anything I worried about missing the bottom, which as I mentioned yesterday I may have done with NA. I guess this makes me more greedy then fearful :-). If the market dropped enough to trigger a margin call, as I mentioned yesterday (say 20%), I *HOPE* that I’d respond by paying the call and transferring in more cash and buying more.
Buying on margin was scarier than I expected. My $28K margin debt is the second largest debt I’ve ever had (my $95K mortgage is the largest). With both of these debts, the things they were used to buy (the condo and the stocks) are still there and still worth money. Its *NOT* the same as $28K credit card debt. I’m not losing sleep over either debt (which I tend to be a worrier, so I think that means I’m very comfortable with them).
With both the BMO and the NA, I’m comfortable with the businesses. Every time the prices drops 5% from the lowest price I bought at, it seems to me that they’re worth buying more of (if it was worth X, its should definitely be worth 95%of X). I’m confident these are secure, strong companies that will be around for the long term (or at worst, would be acquired for a healthy portion of what I’ve paid). I felt the same way when I signed on the dotted line to purchase my condo, and that’s worked out well so far.