My First Year as a Wall Street Investment Mogul

So today’s writing will be somewhat outside the normal area for me. I’m not going to blather on about music, something geeky, or talk up a project. I reached a one year landmark for my stock market investment experiences, and figured it was time to review things. I decided to share and voice things in this form as it will help with my review process and possibly be of interest to somebody. And I haven’t been writing much, so it’s a good chance to do that.

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Disclaimers: As the title suggest, I’m not claiming or attempting to offer fountains of wisdom to anybody on investing. I’m also not at all looking for any advice from anyone or suggestions on how and where to invest. Please take these two things into consideration if you feel you have an overwhelming need to comment or respond to what I share here.
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So about a year ago, in April of 2010, I finally started doing some stock market investing. My research into online trading prior to that had me liking what I saw with Scottrade. (Of course, with Scott in the name it had to be spiffy, right?) They indicated a $500 requirement for starting an investment account, but it wasn’t until last April that I was in a position where I had that kind of expendable fundage. I had gotten my tax return and the house I have finally got rented after being vacant for 6 months. So I finally felt like I could start some kind of investment plan. (Just as an FYI, I also opened an IRA at the same time so I’m not betting my entire future on Wall Street…)

One of the reasons that Scottrade looked like a good choice is that there is an office just blocks away from the house. So I went in to open an account. It was an easy enough process. Well, giving people money is always an easy process, right? The only possible hint I’ll mention here, is that the $500 requirement they mention may be more of a soft minimum. So one might be able to open an account with $300 or so. But I had budgeted the $500, so I went for it. Probably anything less than that doesn’t make much sense anyway, actually.

My housemate had an account, so with their referral program we both ended up with some free trades. BTW, should somebody out there actually choose to get a Scottrade account based on what you read here, then feel free to give them my “ReferALL” code and both of us will get three free trades: JVAR3734. (Who wouldn’t like to save $21…?)

So I was ready to buy some stocks online and had some free trades (normally it’s $7 a trade). I really wanted to get some Apple stock, but given that it was up at $267 I knew I could only buy 1 share. It felt a little silly, but dang it I wanted to have some Apple stock, so I did. Now it is up at $350, so it seemed like it was a good choice. Some of my other early choices include Susquehanna (my bank), Proctor & Gamble (I was told that drug companies usually do quite well for themselves… we all know why…), Verizon (been a Verizon customer for years and the iPhone rumors were flying around then), Steinway Musical Instruments (I had to do something music related, and this seemed like a good choice), and Citibank (it was cheap and I figured it could only go up at this point!).

Without going into extreme detail of the events and decisions I made between then and now, I decided to just focus on looking at the whole thing as a yearly update. What makes this easy is the spreadsheet I developed over time. It started out fairly simple, but each time I did something or something interesting happened I realized I needed to tweak the spreadsheet for those things I felt I wanted to know at a glance.

So, in big red numbers near the top of my spreadsheet is my “Full Bottom Line” number. This number basically tells me how I would walk away financially if I were to sell all the stocks I have, convert them to cash, and dump it back into my checking account. Right now my full bottom line is a loss of $22.64. I look at this as me paying $1.87 per month over the last year for a hands-on education in stock market investing. That doesn’t look so bad to me. This bottom line number has been getting progressively better over this first year, too, so I’m pretty confident that I’ll have a bottom line in the black at some point in the next year. The worst it has ever been was $226.12 in the red back in August, but it has been at around $60 and less since the beginning of the year.

I have some other overall numbers computed that are just informative like the total spent for actual stock purchases, the potential cash value after liquidation, the value of the account minus the cash I’ve put into it, the value of the account minus what has been spent on actual stocks, etc. All these numbers are only of vague interest in comparison to the bottom line or the real cash value. Then there is a section for Individual Stock Performance.

So each stock has the “Bought@” number and then a target value that it needs to get to (including the buy and sell trade fees) to at least break even. This is compared to the current price for the individual stock bottom line. When dividends started coming in, I realized I needed to take this into account so I added a couple columns which also show the bottom line with the dividends. Looking at them as a group first, the stocks have generated $11 in dividends (which, interestingly, is precisely 1% of the $1,100 I’ve deposited in the past year). I’m also technically $51.29 in the black for all the stocks as a group. One might ask how the stocks could be in the black but yet I have a bottom line loss…? I this this is a discrepancy caused by the fact that part of the account value is just available cash not being used for anything and the fact that the dividends are factored in as cash invested in the whole account. Or something like that…

The big winners as far as in the context of the account? Apple comes in at $76.14 in the black. Followed by Tesla, Verizon, and Dominoes Pizza. Dominoes Pizza?! No, I’m not just trying to make money off of fat Americans. I read they re-structured and paid back a bunch of debt and were expanding internationally and likely to become quite profitable. Go, Dominoes! (Although I can’t remember the last time I actually had their pizza…)

The big losers at the moment? Susquehanna is one. Although I’m not really worried as I’ve been very happy with them as a bank, and they seem to be a careful and responsible financial institution that didn’t look for a handout. Eventually they will start paying more substantial dividends again. Or so I tell myself. Other current losers are Citibank, Steinway (*sadface*) and Intel. The only one I’m particularly annoyed about is Activision/Blizzard… I bought shares before Cataclysm and figured they’d get this huge influx of dough for that and that it *had* to have an impact on the stock price. I’m hoping it will just take a little longer to hit… And I somehow got to throw something geeky like World of Warcraft into this, so that makes for some amusement.

If I could go back and tell myself anything it would be the general suggestion to not buy less than 4 to 6 shares of anything. Of course, the 1 share of Apple that is keeping things generally in the black and is the first thing I bought is an immediate exception to that guideline. But in general, it usually makes sense. The math part of it is simply that any amount invested needs to increase by at least $14 (The $7 to buy and eventually the $7 to sell) either through an increase in value or generating dividends (and that is just to at least break even). The more shares you divide that cost out to, then the less that stock has to increase in value. Seems like common sense really, but I didn’t quite factor that in at first. An example of this is my experience with Citibank. In my first round of buying I ended up with enough cash leftover to just buy a few shares of Citibank at $4.54 each. Of course, this meant that they had to get up to $9.21 to break even. After it went down for a bit and seemed to stay there, I later bought 15 more shares at $4.17 each. Although this doesn’t seem to make sense, it means that it now only has to get up to $5.40 a share even though I’ve now made the cost of trading it go from $14 to $21. I believe technical financial type people would refer to this as Dollar Cost Averaging. Eventually I don’t believe Citibank will have been a mistake as it was up at $50 before the downturn, and will hopefully also start paying dividends again at some point. Even if not, I’m currently in a place where I’ve only lost $16 (and the most I’d ever lose is $76). If it goes up another 90 cents I’ll break even. If it gets back up to $50…? I will have made $800… Isn’t that what this stock market game is all about?

So I’ve definitely learned a few things over the past year. Fortunately, since I’m a poor artist type, the mistakes I’ve made haven’t really had a huge cost to them. The gains, likewise, aren’t ever going to be particularly dramatic. I’m sure all the really rich bastards would look at this with, “Oh, look at him… isn’t he cute with his little portfolio with a value of what I make every time I blink.”

But, really it’s just nice to be able to do some active things with my money in an effort to make more. Hopefully it’ll help me out later!

2 comments on “My First Year as a Wall Street Investment Mogul
  1. Meestor Dave says:

    Scott, I have to give you an education in how to read all that, but you are at least “getting there”.

    Just remember one more thing: the money you make or lose has a tax consequence, too. It’s somewhat complicated by long vs short term, etc., but you have to figure that in to your true bottom line.

    Good post. I enjoyed it.

    • scottfarquhar says:

      I hadn’t thought about the tax considerations. Don’t tell me I have to make another section on my spreadsheet?!?! 🙂

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