About a week ago, I finished buying 50 shares of Tesla
Motors, a plan I’ve had for some time. I
believe in Elon Musk’s vision, and I think the company will do very well. My goal was to get them for $200 each, for a
total of $10,000. There’s no science to
this choice. I’ve often read “If you had
invested $10,000 in stock Y in year X, it would be worth this many millions
today,” so I went with $10,000 as the amount, and wanted a round number, so I
went with 50. Tesla has been very
volatile over the past couple of years, mostly because it’s hard to value the
company, as they haven’t had any earnings.
Less than a week after I bought the shares, the stock was up
to 216, which made me a profit of over $800, and when I told someone at work
about this, they congratulated me and said I should take the profits and treat
myself. This goes against everything I
stand for, for the following reasons:
1)
You haven’t made or lost
any money until you sell the stock, so right now it’s all on paper
2)
I have a long time horizon. I bought those shares to hold for the next 15
years, and I will hang on to them even if they drop below my original purchase
price.
3)
The stock is at 226 right
now, so I would have missed out on $500 extra of profit if I had sold when they
told me to, and
4)
Most importantly, I do not
day trade
Day trading is when you buy and sell shares of a stock in
the same day to make a quick profit. For
most people, it’s a terrible way to make money.
It’s difficult, if not impossible, to time the market, and constantly
buying and selling is a recipe for disaster, due to fees. Trading is a zero-sum game. For someone to win, another person has to
lose, and chances are, the person on the other side of your trade knows more
about it than you do, and is buying or selling for a good reason.
I know several people who used to day trade. They all tell me it was a bad idea, and if
they had held on to the stocks they traded, they would be a lot richer than
they are now.
