Buying a stock on a hot tip is exciting, but it can be very expensive excitement don’t make the same kind of mistake I did…
Turning Back the Clock
In 2000 I sadly followed a hot tip and bought 15 shares of Sycamore Systems for about $1000. Pure speculation and not very wise on my part I was caught up in the irrational exuberance of the Internet bubble. It was pretty exciting, especially when the stock more than doubled!
What goes up…
The internet bubble popped sending stock prices through the floor. As it plunged I could have at least my original investment back… but I hung on, and on, and on… Hindsight is 20/20, so I know I should have sold, but who knew at the time that it really was the end of the bubble? Today, it’s a stock I’m likely to never sell. Don’t misunderstand, it isn’t that that it’s a wonderful investment. It’s that it is worth so little now (~$42.30) that it is worth more as a reminder to NEVER again buy a stock on a hot tip!
A Saner Alternative
What if instead I had bought $1000 of the S&P 500? Today it wold still be worth $760. Yes, that seems like a pretty big loss but when you include nine years of dividends I would actually be pretty close to break even… That’s even after buying at a truly terrible time to buy stocks!
Don’t Try This at Home
Being older and wiser, I’m not planning on repeating this folly. I’ve realized that I don’t need to get 100% yearly returns to reach my goals. Slow and steady is far more likely to get me there- even if it is boring! Please take my advise- forget the hot stock tips, buy low cost index funds and reap the rewards of owning a piece of capitalism. The alternative is that you have your own $1000 reminder.