Many Hats of Me: Investing in the Stock Market - Year 3

Thursday, January 24, 2013

Investing in the Stock Market - Year 3

My Investing Year Started off with a Bang

When I went to check my Roth portfolio at the end of January to see how my new purchases were doing, I noticed that my Estee Lauder stock had halved in price! The last I looked it had risen to a heady $112, an incredible doubling of my original purchase price. My heart dropped, and I wondered what happened. Staring at the screen for nearly five minutes, I realized that the quantity of the stock had  doubled, meaning that the stock had split! My mood swung from utter devastation to joyous yelling and dancing.




When I had calmed down a bit, I returned to my screen and reviewed the rest. Kimberly Clark was up 10$/share, Coca-Cola was up $7/share, Royal Bank was up $5/share, and both VFC and GE were holding steady. My losers were Ford, which lost $2/share, and Pepsi, which lost $3/share. I had a lot of respect for Ford, being the only company not to have needed handouts from the government. And Pepsi? Still bad leadership? The Pepsi company owns many brands that we all recognize: Frito Lay, Tropicana, Life-Quaker, Gatorade, SoBe, Mountain Dew, Naked, Sun Chips, Aunt Jemima, and more! I decided to hang onto both stocks, hoping that they would turn around.

I still had money left over from last year's selling of Alamo, so I finally purchased Allergan (not ALG but AGN!) at $89/share.

When to Buy Stocks

Each time I buy, it is a reaction to news that the stock market is having a bad day due to global issues, that include riots, war, Greece threatening to default, Spain threatening to default, fiscal cliffs, etc. I usually hear something on the radio, and then I quickly check the news on CNN, and then review my fantasy portfolio on Yahoo Finance. If I see red, then it's probably a good time to buy. Sometimes, I just really want a stock, no matter what the markets are doing. I put in an order, usually two dollars below what the last asking price was, set a limit trade so that when the price falls to that number, it will purchase automatically.



(fiscal cliff)

When to Sell Stocks

Letting go of a stock that is doing well or doing poorly is the hardest thing to do. If you sell a stock below the price you purchased it, the money you lost is no longer on paper, but it's for real. If you sell your stock that is above the price your have purchased it, you will trigger income tax. Luckily, in a Roth account, all gains are TAX-FREE. I love it.

In September, I decided to sell half my Estee Lauder and VFC stock. It was really painful to do, but I wanted to lock in my gains. Estee Lauder doubled in price since purchasing, and VFC had risen 40%. 

My Yearly Mistakes


I had been watching Chipotle stock rise in 2011, but I didn't buy because its P/E ratio was high, indicating that it was overvalued, and at $400+, was darn expensive to buy. However, I caved and bought some end of January. Soon after I purchased, the company was charged with hiring illegal immigrant workers.  I wish I had heeded this warning sign and sold immediately. Their illegal activity probably meant that they were not doing as well as they reported and had to cut corners. Later on in the year, the fired workers sued Chipotle. The stock today is $293/share, a loss of 24% for me.

Readers, please note that my investment strategy is working for me (mostly) and it may not work for you. 



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