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:

  1. Thinking I was Warren Buffett
  2. Timing the Market
  3. Thinking that a company not making money is probably fine
  4. Chasing good money after bad
  5. 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.

Sell High, NOT Sell Low

Sell High, NOT Sell Low

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.

mpsale2 mpsale3

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.

16 Responses to “Selling at a Loss-The Buy Low Sell High Rule Was Broken

  • One step closer to killing your student loan debt and a lesson on investing. I’ll take it.
    Brian @DebtDiscipline recently posted…Summer Jobs: Part DeuxMy Profile

  • I use to trade stocks all the time in college and for a few years after. Some times I did well, other times (who am I kidding – most of the time) I did bad. I’m still holding onto some of them but over time, depending on the tax implications, I’ll sell them to put them in my Vanguard after-tax account. But I’ll probably always keep a small portfolio during my accumulation phase of FI for growth/speculative stocks. I don’t blame you for selling at all in your case, I think you made a great decision.
    Fervent Finance recently posted…Asset Allocation – Part OneMy Profile

    • EvenStevenMoney
      3 years ago

      I agree with investments having an affect on what phase you are it in your life, especially your FI Blueprint. Yeah it was a gamble and I lost, but I am so much closer to that bigger win.

  • While you can certainly say this was a “mistake” the fact that you used it to pay off the student loan or get their quicker is a win to me. While $300 isn’t chump change it is certainly ok to finish the goal. I actually am doing that now with one of these student loans. I am so close I can taste it. I am getting reimbursed for my trip to China and I am seriously considering taking that money and putting it toward the student loan instead of toward my credit card. The card will be paid off next month, but just knocking out this last portion of one of my loans has been an obsession of mine. So it may cost me money, but that is ok to achieve this goal. Or at least that is how I am rationalizing it.

    • EvenStevenMoney
      3 years ago

      Interesting take on paying back the student loan, you scared me with credit card, but if it’s getting paid off without any interest, I say pay off that student loan, winning will feel so good. Also yeah it didn’t feel good losing $300 or not selling when it was a $1000 gain, but can’t change that today only can try tomorrow.

  • When I bought my condo I had to divest some stocks to make the down payment. Unfortunately, because of my timing, I took a small loss on the investments. I wouldn’t call it a mistake, per se, because it was really just basic market fluctuations that caused the loss. I guess the mistake was putting money in the market with a relatively short time horizon in mind.
    Ali @ Anything You Want recently posted…Accessing Money AbroadMy Profile

    • EvenStevenMoney
      3 years ago

      Yeah I can agree with that and I probably should add that as #6 or #7 to my investing mistakes. I think selling to gain something or defeat debt is less of a mistake, but I guess we would have to ask ourselves if we would do the same thing again if we were asked in a year or 5 years.

  • I used to use Scottrade too but I wasn’t buying large enough amounts to make the $7 to buy and sell worth it. I’ve since moved on to TradeKing that had a recent promotion of a $200 deposit into your account once you deposit $3,000 and make three trades.

    • EvenStevenMoney
      3 years ago

      Trade fees do eat up your wins or exploit your losses, I actually use TradeKing and had issue with buying an OTC stock, so I used my old Scottrade account. $200 sounds like a good promo though, thanks for mentioning that for everyone.

  • I haven’t put money into stocks with a short time frame in mind, but I’ve been burned with some poorly timed purchases. Transocean was doing great, lots of orders, deepwater drill-ships were the next big thing in the O&G industry, so I got some of their stock with my “allowance” fund. About 9 months later, their rig blew up and sank (just like their stock price) in one of the costliest Gulf of Mexico offshore disasters. Recently, I tried investing with Seadrill, only to find out 6 months later they lied about 4th Qtr earnings to short their dividend and are now being sued. Great choices…

    My lesson learned: Maybe I should quit investing in offshore drilling companies, lol
    Mr. SSC recently posted…May 2015 UpdateMy Profile

    • EvenStevenMoney
      3 years ago

      Haha sounds like you could write your own investment mistake article or at the very least offshore drilling companies to do and not to do!

  • Despite highlighting this as a mistake, I think congratulations are in order! It takes a lot of guts to admit mistakes like this rather than just bury them and forget about them, and it’s just as hard actually making the decision to sell, feeling the little pain of loss, and then moving on. Every investor experiences losses, it’s how you react to the losses and deal with them that matters.

    And even better, you’re now using the money to go towards your bigger goal of paying down debt, and have gained some valuable wisdom along the way. Great result!



    • EvenStevenMoney
      3 years ago

      I need you to write this again in about 1000 words telling me how great I’m doing! In the big picture you are right, paying off debt and gaining long term wisdom, I guess it’s a sneaky win in my book;) Thanks for the positive words.

  • We have all made mistakes. I first started investing about 10 years ago when I was still in college.

    I made a lot of mistakes that luckily didn’t cost me any money, because I happen to get into a hot market where everything just went up…go figure!!!

    But then I continued to take risk I didn’t understand at the time and then used margin…the short story is that lesson cost my about $14,000.

    Since then that lesson has made me multiples of that loss. The important thing is to learn from our mistakes.

    Gen Y Finance Guy recently posted…Freedom Fighter Interview #3 – White Collar FreedomMy Profile

    • EvenStevenMoney
      3 years ago

      Agreed learning from mistakes is very important because the definition of insanity is repeating the same thing over and over and expecting different results.

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