Selling at a Loss-The Buy Low Sell High Rule Was Broken
Back in April of 2014, I wrote a post called Buying Stock to Pay off Debt-Mistakes I’ve Made or I’m a Genius it was during this time that I made a serious of mistakes with investing:
- Thinking I was Warren Buffett
- Timing the Market
- Thinking that a company not making money is probably fine
- Chasing good money after bad
- Thinking you know what is going to happen in the stock market
I came to a conclusion at the end of the article that I was not going to sell, here’s exactly what I had to say:
“Then I made a decision, I wasn’t going to sell my stock, especially at a loss. I was able to save enough money besides the money I foolishly put in the stock market to pay off my debt and made a payment to pay off the whole thing.”
I was able to pay off my private student loan which my parents co-signed for without using the money from the stock market in which I made so many investment mistakes, 5 to be exact if you are keeping track at home. Over the course of the last year or so I have made it my life mission to pay off my student loans. I decided that for
10, 11, 12 month goal I would destroy my debt, like a Viking, using everything that I could earn to reach my goal. One of the many things that I used during this time was my individual stock investments, this included my emergency fund in Nike and just this week the stock I bought in the above mentioned Buying Stock to Pay off Debt article. It would be easy to focus on the win I had with Nike stock, I have the pictures and numbers all ready. In this case I think it’s better to talk about my mistakes and what I learned along the way, so I sold at a loss and broke the ultimate investing rule of buy low and sell high.
Let me first start out by saying, I didn’t start out with a plan to buy high and sell low, that would be foolish, no that would be stupid. I bought the stock because I thought it was priced low and the brand and image of the company was going to take off. They seemed to be following Nike’s approach of signing athletes and marketing them as a brand, someone who uses the product, if you have heard of Nike then you know that Michael Jordan was one of the catalysts for growing Nike to where it is today along with a number of superstar athletes. I knew I was taking a gamble with Musclepharm, not a penny stock like Young Adult Money invested in, but it might as well have been as the stock is traded OTC and not listed on the New York Stock Exchange or Nasdaq for example. The stock had highs and lows, times I should have sold and reaped my rewards and even a time where I tried selling right before earnings were announced because I knew it was time to get out or should I say felt like it was time to get out.
This was not a great a deal of money, but it was money I planned to use for my student loan payment. I am inches away from paying off my student loans and this money is going to be used to help pay them off, if not it was another month or maybe more of making that same $199.85 and taking every last cent and applying it to the debt. I can see the finish line and there was no way I was going to allow myself to fail, even if it meant taking a loss. I did the math, I knew that I needed this money. I made a decision if the time came and I needed the money for my last payment in June then I would sell even at a loss. I don’t share a ton of numbers, but here is what I sold the stock for and the paper gains before that.
I lost money from my initial investment of about $1400, plus the cost of each trade with Scottrade, the platform I used for my OTC purchase and sale. So add in another 3 buys at $7.00 and 1 sale at $7.00, none of which is calculated into the loss of $323.75 and 22.92%, put that into play and I’m pretty sure the numbers get more sad.
Did I learn a lesson in all of this? Absolutely, I think I learned about 10 different lessons. I learned a lot about myself and what matters most to me, that I am not the next Warren Buffett, I like to gamble and this became one of my outlets, if backed into a corner I will choose reaching a goal and paying off debt over losing money on a stock, this can be written off as a loss and I told myself that it’s a small win despite the big loss. I feel like I could go on forever about what I have learned.
I sold my individual stocks to pay off student loan debt. It was not a lot of money, but I think this has taken a little bit of the gamble out of me. When I asked if I was a genius or made a mistake, it’s very hard to argue against the numbers. Mistakes happen and you learn from them, so that’s exactly what I will do.
Have you ever made an investment mistake? Did you pay off debt with investment gains or losses?
*I’m supposed to put a disclaimer in here about stocks, if you can’t tell by the article I sold MSLP, I guess that makes me short MSLP and I have no position or plans to purchase in the next 24 hours, probably longer, possibly ever, even if this makes me look like a fool in a year or two.