I made a big mistake last week. One of the biggest financial mistakes I have ever made.
Last year I killed the last of my debt. At 38 I am debt-free for the first time in my adult life.
It feels great!
But it is all new to me.
For the first time I have money being funneled into savings on a regular basis.
I also feel a sense of urgency.
I am 38 and essentially starting over. I have almost nothing saved for retirement. Nothing saved for my kids' college. No car fund. Nothing.
So in my haste to "catch up" I made a costly error.
I had been reading up on trading "distressed" stocks and had been following the moves of some successful traders.
I thought "this doesn't look too hard, I can do this".
I downloaded the Robinhood app and funded it with $10,000 with hopes I would double that amount in no time.
The Robinhood app is slick, almost too slick. It is easy to access, easy to use, and trades are free. This can be wonderful or wonderfully dangerous.
At first I was putting my money into ETFs that tracked the broad stock market.
But I was growing impatient. Checking the app several times a day to see only slight movements made me antsy.
In retrospect, I was just bored and checking the balance was fun.
A few months ago I had made a few thousand bucks trading bitcoin. Pure luck, but it was the worst thing that could have happened. I began to think trading was easy and that big, quick gains were the norm.
So I made the jump on my Robinhood account, I sold the ETFs and started to buy distressed stocks. Some were trading under $1, others were just a few bucks a share.
I gained, I lost, I broke even. Overall it was still pretty uneventful. Then I decided I had the perfect stock pick and put more than half my money into a trade that I was sure would double in short order.
Except it went down, way down, and fast. It lost 30% in the first day. Then I started to panic when it lost another 20% the next day. I thought "I am going to lose all of my money".
So I made the real mistake, I sold it! I locked in my losses. I panicked and bailed. I was out several thousand dollars in just over 24 hours.
Worse yet, I watched as the stock rallied back, recovering much of the previous losses.
I really screwed that whole thing up in every way imaginable.
I realized that style of trading is not for me, I don't have the impulse control to follow that through. I am far better off in a buy and hold strategy where I hardly check my balance and all of my investments are automated.
I made a mistake and it cost me. I took a chance on something without giving it adequate thought and with no real goal in mind. I paid the price.
