These 3 Mistakes Have Cost Me Tens of Thousands of Dollars

Writing this article made me sick to my stomach.

You see, I had to pull data on stocks that would have made my portfolio much larger than it is today -- had I not made the mistakes I'm about to share.

As painful as it is to revisit these mistakes, I hope that by my sharing them, you'll avoid making them yourself. Then I'll share one way to ensure that you'll never fall victim to these mistakes -- something I'm very excited about.

My first mistake
I bought Starbucks (Nasdaq: SBUX  ) in April 2008 at a split-adjusted $17.47 a share.

It was a maturing company with a widely recognized brand and a loyal following.

But Starbucks' slowing growth took a huge toll on its stock price -- sending it to less than half what was then its all-time high, and making it a clear bargain in my eyes.

On top of that, the company had only begun to master its international business. Sure, coffee is a tough sell in countries such as China and Japan. But I thought it could easily be the McDonald's (NYSE: MCD  ) of coffee no matter where they were.

By that, I mean they could cater to each country's popular social drink. Coffee in America, tea in Japan, mate in Brazil, etc., similar to how McDonald's has successfully riffed on local tastes (and why sales in the Asia/Pacific, Middle East, and Africa segment of its business have doubled over the past five years).

These scenarios are still what make Starbucks such a strong company today (and why McDonald's could also be a smart investment, even at three times the size).

But I got impatient.

As Starbucks's stock continued falling, I started thinking, "There are better places for me to put my money right now. A lot of companies look much cheaper." So I sold out at $8.78 -- not far from where it bottomed out.

Today, Starbucks trades for around $52, meaning it's up 492% from where I sold, 197% from my initial purchase price.

The lesson: Never forget your original thesis; "superbrands" don't disappear easily, even though their stocks may test your patience.

My second mistake
Next up is a sin of omission.

Baidu (Nasdaq: BIDU  ) was a no-brainer when I joined the Fool in June 2007. The Chinese answer to Google (Nasdaq: GOOG  ) , it's a search engine that makes money from advertising sales, with an expanding empire of add-on products and services.

As dominant as Google was -- and still is -- in the United States, Baidu was its clone in China. Just as Google is the No. 1 ranked website in the United States according to Alexa, Baidu is the No. 1 ranked website in China.

Seems like an obvious buy, right? Well, it wasn't to me.

You see, at the time, the stock was up nearly 150% over the past year. And its price-to-earnings ratio was well over 100. As a stubborn "value investor," I wrote off the stock completely.

I even neglected to buy when the stock took a tumble at the end of 2008, dropping below $11 a share. As with Starbucks, I was sure there were cheaper stocks.

The result? Baidu now trades for $140, meaning I missed out on what could have been a mind-boggling 1,172% gain.

Google's growth has been incredible -- its top line has grown at a compounded annual growth rate of 29% over the past five years, and Baidu's growth has been even more impressive -- at a five-year rate of 77%. Yet analysts still predict these companies will grow 18% and 47% annually, respectively.

The lesson: Don't anchor to a stock's past performance; game-changing, high-flying stocks will always have P/E ratios that seem ridiculous -- don't focus on that one metric.

My third mistake
Lastly, we come to Netflix (Nasdaq: NFLX  ) , where my stubborn idea of being a value investor again got in the way of monstrous profits.

I bought some shares around $30 in April 2008. I liked the company's growing brand, the size of its untapped market, and its smart preparation for streaming video, as well as the acumen of founder and CEO Reed Hastings.

Then I got cocky. I started toying with elaborate spreadsheets, running countless discounted cash flow analyses of Netflix and what its share price should be worth under various scenarios.

After running hundreds of scenarios, I settled on a conservative fair value of $45. Meaning if it started to approach that, I'd be willing to sell.

So when March 2009 rolled around, and Netflix started creeping toward my target price, I sold out at $43 a share.

Regrettably, Netflix went on to trade as high as $304.79 this past summer. Meaning this mistake forced me to miss out on as much as a 914% gain.

And even though the stock has dropped to just over $100 again, its most recent quarter showed encouraging numbers, with subscriber growth again accelerating.

The lesson: Don't fool yourself; it's hard to accurately predict what a much-loved, high-growth company is capable of -- or how the market will reward its success.

If you add it all up...
Here's where it gets really ugly.

If I had only invested $10,000 in each of these stocks and not made any of these mistakes, that $30,000 investment would be worth more than $187,000 today. Instead, because of these mistakes, that amount is worth just $29,300.

All because:

  1. I got bored and impatient with a stock.
  2. I anchored to a stock's recent success and high P/E ratio.
  3. I ran so many valuations of a stock that I lost sight of the big picture.

Hopefully, you won't make the same mistakes I did.

Adding salt to the wound...
I did all this against the advice of an investor I trust -- Motley Fool co-founder David Gardner, who had recommended all three stocks.

And, if you hadn't heard, this is a man who boasts a documented annualized return of 19.4% over the past 17-and-a-half years.

If you're interested, David Gardner is putting the final touches on a new venture, where he and a team of top analysts will give real-money-portfolio advice on when exactly to buy and sell the stocks that David believes in most -- in a clear, concise, and actionable manner.

This new project of his is called Supernova, and you can find out more about it -- and secure yourself an invitation to join -- simply by sharing your email address in the box below.

Adam J. Wiederman owns no shares of the companies mentioned above. The Motley Fool owns shares of Google and Starbucks. Motley Fool newsletter services have recommended buying shares of Starbucks, Netflix, McDonald's, Baidu, and Google. Motley Fool newsletter services have recommended writing covered calls on Starbucks. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (59) | Recommend This Article (203)

Comments from our Foolish Readers

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  • Report this Comment On March 13, 2012, at 4:28 PM, Clint35 wrote:

    Good article Adam. If it helps you feel any better I also owned Netflix for a short time. I also sold way too soon. I sold at an even lower price than you did.

  • Report this Comment On March 13, 2012, at 5:16 PM, laree63 wrote:

    Hindsight: 20 20

    Same article could be written about dozens (hundreds) of trade decisions.

  • Report this Comment On March 13, 2012, at 5:32 PM, seattle1115 wrote:

    @laree63: "Same article could be written about dozens (hundreds) of trade decisions."

    Isn't that exactly the point? These unprofitable decisions happen all the time, to everyone. The trick is to examine the error, learn from it, avoid repeating it, and (maybe) help others avoid it, too.

  • Report this Comment On March 13, 2012, at 5:37 PM, HUcaps wrote:

    You've made a case for selling only a portion of one's holdings. It's a tragedy to research the management and potential of a company and then lose out on gains on the horizon. In fact, you could have bought more SBUX and been better off when you bailed. You're the victim of your own knowledge in alternative opportunities!

    Of course, in Sept 2011 Netflix ate itself, confirming that some companies will just turn on you.

  • Report this Comment On March 13, 2012, at 5:46 PM, Mobbie wrote:

    Hi Adam.

    Great article.

    Didn't you consider re-entering the stock after you had sold, and gain from its continued increase?

    Why/why not?

  • Report this Comment On March 13, 2012, at 5:49 PM, dnelsch wrote:

    Been there, done that as well, no fun! When you get done kicking yourself, it is time to move on and try to not make the same mistakes again.

  • Report this Comment On March 13, 2012, at 6:16 PM, TMFBreakerRob wrote:

    Good article. There is another "omission" mistake that many investors make:

    Feeling it's too late to invest in winners or being reluctant to add to a winner you already own.

    While it is certainly true that some companies may soon "top out", there are others such as BIDU (that you mention) where jumping in late....was *not* too late and adding along the way was a great decision.

    Fear can be a great inhibitor of investing success. Focus on what you know and let the brain (instead of the emotions) lead.

  • Report this Comment On March 13, 2012, at 6:51 PM, haysdb wrote:

    How many of those companies with a PE over 100 turn out like Baidu? How many examples could one find where buying these stocks turned out to be a horrible idea?

    With Netflix, how many investors are able to stomach the ride from $300 to $70 back up to $130 and now back down to $105? And with all the boneheaded mistakes they've made, how do you keep the faith? I certainly wouldn't blame anyone for selling Netflix somewhere along the line.

    As for the hundreds of scenarios, I'm reminded of a book I read recently, The Little Book of Behavioral Investing, where the author finds that more information rarely results in better decisions.

  • Report this Comment On March 13, 2012, at 8:04 PM, TMFDonauschwaben wrote:

    @Clint35 -- Glad you enjoyed the article, and can commiserate with me on NFLX mistakes!

    @HUcaps -- I think you get my point, yes -- definitely was the victim of my own "knowledge." But there's some irony in that statement.

    @Mobbie -- To be honest, yes, I did reconsider entering some of these stocks. But there's still somewhat of an aspect of pride that prevented me. Or something like pride. I dunno, maybe it's just me trying to compartmentalize the mistake in the first place.

    @dnelsch -- I agree. I hope that by finally confronting something that's been in the back of my mind for awhile, I can move on and never make similar mistakes again. Alas, we're all human, so it probably will happen in some way or another.

    @TMFBreakerRob -- Right on the money, brother. Thanks for chiming in. There's probably 100 mistakes I could've focused on, maybe I'll use your idea in another article. :-)

    @haysdb -- You know, obviously not all companies turn out like Baidu. Otherwise we'd all be millionaires. But I definitely think it probably happens more than we realize... a lot of "expensive" companies end up looking cheap in hindsight. Remember GOOG's IPO, for example? Everyone and their grandma thought it was overpriced, and look at where it's sitting today. And with NFLX, it's definitely hard to ride a stumble like that... You just gotta keep on truckin. Haha. That's really all you can do. We'll always make mistakes -- we're human. Just gotta notice it, admit it, pick yourself up, and resolve not to make 'em ever again.

  • Report this Comment On March 13, 2012, at 9:11 PM, jm7700229 wrote:

    I don't agree these were mistakes. You have to work with what you know, not with hindsight. I used my Roth contribution to buy C a few years ago at $3. I remember telling my wife "hey, it's a flyer. If it goes belly up, I lose $6 k, but if it lives it could be worth 10 times as much. I was right -- today it's worth in fact 11 times as much. But I sold at a nice gain when I got uncomfortable with their prospects. Sure, I wish I had known what it would do, but I didn't.

  • Report this Comment On March 13, 2012, at 9:37 PM, EBerg13 wrote:

    I just sold Netflix, based on the fact that it is also being sued for investment fraud ... and because I only buy what I like, for general shoddy care of their DVDs. This may sound strange but if I dislike something about a product, I just don;'t buy the stock. And at 175 P/E I said enough!

  • Report this Comment On March 13, 2012, at 9:46 PM, george1927 wrote:

    Well, as one of David's recommendations, I bought Netflix for $270. Now it's $106, but I'm hanging on to see if it will recover. Is that a mistake? Turns out it was a mistake to buy at that price. But will it come back to that high level? We will see. We never know our mistakes until it's too late.

  • Report this Comment On March 13, 2012, at 10:09 PM, patternjuggler wrote:

    Come on. This is a hind sight is 22/20 game you're playing.

  • Report this Comment On March 13, 2012, at 10:26 PM, militauro wrote:

    There is nothing wrong in betting against a super-brand fading away. Blockbuster, Blackberry (RIM), Nokia and Yahoo at one point would have been considered super-brands, and betting against them was the right call. In my opinion, you place your bets and you deal with the consequences. We can't all win in the stock market and only judgment calls will set you apart from everyone else.

    I own Netflix myself, and if it had failed to gain traction again after the Qwikster debacle, I would live w/ that call. I hope you've learned your lesson and all, I just hope you don't think the contrary is correct by default.

  • Report this Comment On March 13, 2012, at 10:33 PM, Tarek307 wrote:

    Bought AAPL in october @ $375 held on, watched it rise to $425 couple of times & didn't sell..then when earnings came, i said ok Sell on the up then buy again to make some $$ this time..sold @ $451 then watching it go up & up & up every day- can you say depression...lol

  • Report this Comment On March 13, 2012, at 10:38 PM, woodNfish wrote:

    "On March 13, 2012, at 9:46 PM, george1927 wrote:

    Well, as one of David's recommendations, I bought Netflix for $270. Now it's $106, but I'm hanging on to see if it will recover. Is that a mistake? Turns out it was a mistake to buy at that price. But will it come back to that high level? We will see. We never know our mistakes until it's too late."

    You violated the rule of cash preservation. You should have been trailing stops. Motley Fool does not tell you this, they just tell you to stick it out. If you blindly follow all their advice you will lose your butt when markets go south. Staying in a stock that has lost half its value is a bad idea. That kind of loss is hard to recover from.

  • Report this Comment On March 13, 2012, at 11:30 PM, Kennethsdad wrote:

    I have benefited significantly from the Fool. Thank you. I also sold AAPL at a loss when the screaming Fool email said sell this stock now (about $235 as I recall).

  • Report this Comment On March 13, 2012, at 11:41 PM, northhills24 wrote:

    How about those of us who hold too long and miss the gain as the market declines? having bought in 2008 and 2009 - "i was of the buy and hold"- could have sold in 2011- +gains of 50% should have taken profits.. And bought back when they all bottomed. Now thats a list I don't want to add up. !

  • Report this Comment On March 14, 2012, at 12:48 AM, zombiedust wrote:

    Truth hurts - honest article. If I could only go back in time. But why beat yourself up when at the time how could you have known? It is so easy to look back but so hard to look ahead. I have personally kicked myself in the teeth many times. How could I not see that? Duh. The answer is your gut instinct. You can look at all the data you want but in the end just go with your gut. I should listen to myself more.

  • Report this Comment On March 14, 2012, at 3:15 AM, Tarek307 wrote:

    So true about "pride" or "something" preventing you from getting back into a stock after selling it. When i sold apple in January at $451, i've been watching it rise, but for some reason i've refused to buy lol!

    So instead i bought PWRD & HEMP.PK (this one is a penny stock)

  • Report this Comment On March 14, 2012, at 6:19 AM, kalimon789123 wrote:

    Wow, I can't believe how good this guy is at investing in the past, having, now, seen the future, he should be a gazillionaire as soon as we get the time machine running.

  • Report this Comment On March 14, 2012, at 7:34 AM, BFatConservative wrote:

    As a fellow value investor, this article made me squeamish. I have made the same value decisions of omission that you mentioned in # 2. I'm going to echo what other have said in that I truly believe that yes you will miss a few high fliers when you take a somewhat purist approach to value investing; however, I think I could write four articles about how the value investing mantra has saved me from buying the anvils of yesteryear.

  • Report this Comment On March 14, 2012, at 8:08 AM, Bulldog83 wrote:

    I have followed David for couple of years while doing my own evaluations. When I buy David's recommendations and hold them, I make money. Like AAPl and Intuitive surgical. I owned Netflic for some time, got squeamish when the announcement came for the increases in prices and sold. I was glad I used my evaluations. Some times Tom leads me into buys I sell pretty quickly. So a long time ago I decided to follow David's leads, evaluate them on my own and generally I make his buys. This year so far has been a very great time to be in the market for me and I am only off about 10% from retiring .

  • Report this Comment On March 14, 2012, at 8:09 AM, Bulldog83 wrote:

    I would like to say wise investors are wise truly when the respect the work of David check them out and then buy in.

  • Report this Comment On March 14, 2012, at 11:16 AM, mikecart1 wrote:

    Ok. Now make an article of these companies. I could have bought into the idea that FNM and FRE would soar back to where they went. Unfortunately, I did buy both. I bought lots of them. I watched my investment go to pennies right before both stocks turned into pink stocks.

    I could have bought into the idea that old GM was going to survive like F. I did. I bought lots of GM. I kept buying and buying because America rules!! Yeah baby! GM is here to stay!!! I watched my investment go to zero as the stock one day was instantly pink sheeted and later new GM was born but I still had no money left.

    I could have bought into the idea of several bank stocks. How could some of them ever go to $0? Well I bought them all. I actually bought every bank stock that was going to near zero with anticipation that they would make me millions. Except they all went to zero. I got greedy and I lost.

    I bought Circuit City because "Welcome to Circuit City, Where Service Is State of the Art". I said they were awesome and I am going get rich. Instead, in addition to having my big screen TV not being covered by the warranty, I also lost all the value in my shares.

    Bottom line. You can easily go broke on these stocks mentioned above.

    These articles are no good for nobody. :)

  • Report this Comment On March 14, 2012, at 9:12 PM, Darwood11 wrote:

    Good article.

    "I ran so many valuations of a stock that I lost sight of the big picture."

    Yeah, it doesn't matter how fast the gerbil runs in the cage, he or she still goes nowhere!

    I have found myself doing this and there is an old saying "Are you in thought or in action" which is another way of saying "Am I in my head?"

    I have found it's a good idea not to over analyze. If I am really in such a fit, it's a good idea to decide to either buy more, or sell. Whatever, that is a great time to make a decision and move on and put my energy somewhere else.

  • Report this Comment On March 15, 2012, at 11:48 AM, Iggywine wrote:

    Adam:

    See your three and raise you one: I purchased 100 shares of Dell waay back when; it split to 150 shares, had a bit of an accounting snafu, and I sold. Those 150 shares would be 9,600 today with subsequent splits.... (On the other hand, I purchased SBUX at $4, and still have 100 shares, so can't cry too much!!) And I still haven't purchased Baidu OR Google......

  • Report this Comment On March 16, 2012, at 11:32 AM, uaku wrote:

    Stupid article. You doubled your money on Starbucks. You made more than 50% in Netflex and you did not give purchase and sale price or Bidu.

    Turning 30k to 187k sounds great but can you tell me how did you manage to turn 30k to 29.3k where you made profit in all three companies.

    If you did not have 10k to put on each company then your article is wishful thinking.

    Had my aunt had balls she would have been my uncle?

    Can write an article - in 2001 I watched forest gump and he lt dan invested in some kind of fruit company and we don't have to worry about money no more. laughed and checked the apple stock at $7 and did not buy. if I had bought 1000 share I would have been a millionaire after the stock split, like Mr. Gump. I had 7k to invest at that time as well. now can I fool.com publish this article as well. Big mistakes I drank beer after watching the movie did not take Mr. Gump's advise

  • Report this Comment On March 16, 2012, at 11:35 AM, matthtang wrote:

    Everything is easy to say in retrospect. You dumped a lot of stocks when the market bottomed out just like the majority of the fish out there. The fish are now buying all three of the stocks that you "should have held onto". I do admit, I like two of your three picks for future earnings growth, but the valuations aren't justified at the current prices.

    The real key to investing is monitoring your decisions. There are plenty of times when I should have bought, but didn't and the price declined. (good luck since i got in at a cheaper price) There are also times when I sold and the price increased. (bad luck because i "could have made more money") The real key is understanding that markets are fickle in the short-medium term and making rational decisions. In the end, the results speak for themselves.

    When the bottom was falling out in march 2009, I was one of the few guys watching the ticker, researching and buying. I'm now shifting allocation. I'm still bullish on equities but selectively bullish. You should be too. Its too bad that you probably won't take my advice though.

  • Report this Comment On March 16, 2012, at 11:41 AM, whyaduck1128 wrote:

    Today's bit of investing "wisdom", something we've all experienced. Whoop dee doo. Followed by the almost inevitable promo piece for yet another "this is really our best, we swear" service.

    That's about 5 minutes of my time I'll never get back. Thanks.

  • Report this Comment On March 16, 2012, at 12:05 PM, purplepatty wrote:

    In 1993 I bought Microsoft for $115; they had never had a split at that time. I held on through 5 splits after which the stock began to fall in mid-2004. I held on because I believed in Bill Gates and I was concerned with tax consequences of selling. I finally sold at $42 with a loss of $325K. My only consolation was that the gain had been only on paper, hence the loss was ONLY on paper. Boo hoo! Never consider the tax consequences; be glad you have the gain and the money to pay the taxes.

  • Report this Comment On March 16, 2012, at 12:05 PM, norman727 wrote:

    always protect yourself & use sell stop orders -- either fixed or trailing. adjust fixed price orders about 3-5% below the moving avg line @ least once per week. let the winners run but never let the stock price take a significant dip.

  • Report this Comment On March 16, 2012, at 12:09 PM, mackerel6 wrote:

    Interesting article but he concentrates on the coulda, woulda, shoulda school of investing.

    Forty plus years ago, I could have bought Columbia Pictures for 1 1/2. Two or three years later, when Coca-Cola acquired the company, it did so at 68 a share. I kicked myself at the time, but in retrospect, if I'd owned it at $5, I'd have sold it and figured I had tripled my money. Later on I REALLY would have kicked myself!

  • Report this Comment On March 16, 2012, at 12:14 PM, showtime100 wrote:

    I once went to a horse race and Skeeter out in the parking lot said to bet Baidu a 30:1 horse and sure enough Baidu won the race and if I had bet ten grand on Baidu I'd have a boatload of money but I should've known that because there once was another claimer named Google who was a longshot and won a race so next time there's a longshot that's gonna win I'm gonna bet ten grand on it and if "ifs" and "buts" were candy and nuts every day would be Christmas.

  • Report this Comment On March 16, 2012, at 12:16 PM, jrj90620 wrote:

    I don't think you are alone.Seems like 99% of stock buyers are traders,not investors.They think they are buying a certificate,not a share of a company.That short term thinking,trying to make quick profits,ends up making quick losses for most people.Try thinking like you are a silent partner in companies you own.Think like Warren Buffet thinks.It may not be as exciting but is less stressful and more profitable for most.

  • Report this Comment On March 16, 2012, at 12:29 PM, sikiliza wrote:

    Like someone once said, it isn't a profit until you sell and you cannot win the lottery without buying a ticket. The fact that you missed out on upward trajectories cost you nothing. What would have cost you would have been buying netflix at $300 in 2011 and watch it plummet to the $70s.

  • Report this Comment On March 16, 2012, at 1:11 PM, maddyabby wrote:

    if u make a gain with every transaction u r a true winner.if u sell 1/2 if the stock doubles u cant lose.so whats the problem? paper gains or losses r meaningless.

  • Report this Comment On March 16, 2012, at 1:19 PM, baxter429 wrote:

    In the "Can You Top This?" department, I bought Apple stock in 1991. It was a stock I was going to keep for the long run but one of my financial newsletters (not MF) said to sell, so I did for $52! Today it is $584. Like Adam, I should have trusted my gut instead.

  • Report this Comment On March 16, 2012, at 1:20 PM, grunt7 wrote:

    Don' feel bad I had apple at $7.00 and ssked my brokerabout it. He said, "Apple is done". Right!!!

  • Report this Comment On March 16, 2012, at 1:37 PM, afoolsumtimes wrote:

    nice article. i equate these lessons in every investment area of my live... time, energy and money!

  • Report this Comment On March 16, 2012, at 1:42 PM, erkaye wrote:

    For me the main takeaway from this piece is the importance of finding a way to separate emotion from investing. Part of that is training myself to buy when the entire market looks bleak, and to sell when it feels really good. Like one of the other posters in this thread, I started buying in late 2008 into 2009. It was one of the most difficult things I've ever done, but in the end many of my buys are up over 100% with rising dividends. It doesn't get any better than that for us value investors.

    One tactic I pursue is to sell covered calls when the market feels buoyant, and and sell puts on stocks I am thinking of buying when things seem unreasonably bleak.

    Of course this limits both the downside and the upside; it also tends to even out the emotional highs and lows of investing. If emotional extremes appeal to you, one casino is as good as another, but I wouldn't say it's a good approach to investing.

    BTW, what feels really bad right now is European stocks. Several months ago I put about 20% of my trading portfolio into high dividend stocks Daimler (germany), ABB (switzerland--since sold), Seadrill (norway), TOT (france) and some others. The average pick is up about 20% the yield is over 5%. I'm not sure this is still a good time to get in, but there will be another opportunity somewhere in the world in some sector, to buy great companies at a discount.

    I'm looking to buy BIDU on sale. I guarantee the markets won't be pretty when it is, but it will sill be a good buy. And if it never goes on sale, there are other opportunities out there.

  • Report this Comment On March 16, 2012, at 2:10 PM, bharatkapadia wrote:

    There are two sides to my story, both a result of being a "buy and hold" investor:

    (1) I had a $100,000 profit in Sun Microsystems that got completely wiped out and then Oracle bought Sun at a loss for me.

    (2) I bought 200 shares of Apple (AAPL) and when I had $40,000 in profits, was thinking of selling it. But being an old "buy and hold" guy, kept it. It is now worth $116,800.

    So, the bottom line is: You win some and you lose some. The VERY SAME strategy blew away my winnings in example 1 and the VERY SAME strategy gave me another $70,000 plus in profits. Go figure.

  • Report this Comment On March 16, 2012, at 3:05 PM, BruceHBi wrote:

    Not only does the article assuage the angst of my own mistakes, but all the other stories give me comfort as well. Not being afraid to make decisions (and living with the ones you make) is how you move forward in investing.

  • Report this Comment On March 16, 2012, at 3:57 PM, diverdon56 wrote:

    My biggest investing mistake was singing up for Motley Fool Special Opps, and making several of their trades. I lost over $44,000 in General Maritime alone. I would have thought that a news letter analyst would have checked weather a company was about to declare bankruptcy before recommending it.

  • Report this Comment On March 16, 2012, at 8:37 PM, Zitadel wrote:

    Your article highlights the toughest thing about investing--it's not what or when to buy---but when to sell. I'm beginning to agree with Warren Buffet that if one does their homework before they buy, then the ideal holding period is forever. All of us tend to do far too much trading.

  • Report this Comment On March 16, 2012, at 9:28 PM, kahunacfa wrote:

    As a seasoned Venture Capital Portfolio Manager -- April 1977 to the Present, KCFA NEVER gets inpatient. Investment holding periods are decades, not months, quarters or years.

    Examples: Nanometrics(NANO) bought a private equity stake 1977 from the founder, CEO, Vincent Coates on a visit to the company with an investment Banker from Smith Barney -- when there Firm really was just Smith Barney, thank-you very much. Every year I went on a Research trip sponsered by Peter Labe', JD sometimes the Smith Barney Software Analyst, Jean Orr would also come along as well. There were usually about a dozen Institutions inveted on the trip each year. We were actually a small institution, Employers Mutual Insurance Company of Wausau. That firm was started in Wausau by the Wisconsin "Timber Barrons" so that their operations and workers could be insurred on the dangerous harvesting job. One of those in that group formed Wyerheuser, another Wausau Papaer Company, Mosenee Paper, Menasha Corporations, ever heard of Kimberly-Clark -- a company driven from Wisconsin by the high individual marginal tax rates of 11.4%, top rate effective at about $9,5K per year. KMB is now located in Dallas, Texas -- no Income Tax. <There may be a lesson here for President Obama and the Congress of the United States. People and capital in the Modern World are Mobile. Tax & Spend -- Good bye!

    In August 1976 earned a MS Finance & Economics, interviewed in a tough job market, probably tougher than 2012. Every investment position in the country demanded 3-5 years of experience. I applied to those. My experience? August 1974-September 1976 as a paid student intern at a local Madison, Wisconsin Insurance Company on East Washington Avenue. To take that position, I actually had to take a pay-cut from my Systems Analyst/Project Manager position at the University of Wisconsin Center System on State Street -- just steps from campus.

    In the Spring Summer and Fall of 1976 I searched for future perminent employment. The Offers eventually came: 1. First National Bank of Colorado Springs, First national Bank of Miami, Central Trust in Cincinatti, Employers Mutual Insurance of Wausau. All ot the offeres were in the same range $17K to $22K per year. I accepted the best position, immediate analytical responsibility for 1/3 of the S&P: Beverage, Food, Electronics, Computer Hardware and Computer Software as well as the Healthcare industries. Computers, Electronics, software and were already specialities - I had to learn the rest.

    My wife, Number 1 son, born December 1971 in Honolulu, Hawaii and I lived in Eagle Heights, Graduate Student Housing. A small, but adequite two bedroon apartment was $95 per month all utilities except telephone included. Here is the Applied Securities Analysis Program web-site: http://www.UWASAP.org. The web-site describes the program and has views if the UW - Madison Campus.

    The Founder Prof. Steven L. Hawk was my undergraduate BBA and MS Academic Advisor, and Mentor from 1972 - 1976. I returned the favor in 1979 by urging him to turn his active consulting activities into an Investment Management firm that became Northern Capital Management, http://www.NorCap.com.

    My biggest investment mistakes through the years? First, not starting-out Rich, like many of my peers. Could not attend my first choice Universities: Stanford, Rice, or Cornell. Way,way too expensive, would have had to use student loans. My only student loan from 1962 - 1976 was a $300 short-term <Emergency Loan for six-months, paid-in-full at the end of that six-months.> .

    Second and related to mistake number one, not having the capital to buy shares of all of my Venture Capital Investments from Amdahl, Genentech, Tandem Computers, Spectra-Physics <supermarket scanners, you may have seen them lately>, Sysco(SYY), Amgen(AMGN), Computer Associates(CA), insulin from Genentech, Human Growth Hormone <popular with Olympic Athletes, ... Nextel(NXTL), PetsMart(PETM), and about several score of others. Federal Express(FDX), as well as FIserv(FISV) should have been in there too.

    All of the companies mentioned are wonderful companies, solving real problems in innovative, creative, and cost effective ways.

    My greatest achievements: 1. finding my wife in Honolulu, August 1970, 2. our children, two natural, one adopted at age 11 in 1980, 3. the 1964 Olympic Trials, sabre <weapons and scoring was not electric then except for foil an epee' <at over 65 I still fence sabre when I can -- sometimes several times a week. For upcoming Fencing Tournments see -- http://www.USFencing.org. and I probably should add finding TMF - http://www.Fool.com in the Fall of 1995 when it was only available through an AOL account, a very poor, dial-up ISP.

    BTW, AOL after its spin-out of Time Weiner could be of long-term interest again. Prefer Sturm Ruger(RGR) @ < $5, my cost = $4, Smith & Wesson holding Corporation, they produce in the United States the Walther PPK, a James Bond favorite, Nanometrics(NANO), Applied Materials(AMAT), Cerner, and Garman - GPS systems and mapping, finally the recovering Xerox(XRX) and Hewlett-Packard(HPQ) now headed by a Board Member Meg Whitman the founder of E-Bay. She will do well at HP in my opinion.

    Bon soir,

    Happy St. Patrick's Day -- Have to go see the Green Chicago River. It runs just below my former office in the Sears Tower, then Xerox Center Building across First National Plaza on Monroe Street

    le 16 mars 2012

    14:28 HST

    Kailua-Kona.

  • Report this Comment On March 17, 2012, at 12:26 AM, iks92 wrote:

    I believe in Buy and Hold......Sometimes I’m right, sometimes I’m wrong......In 1995 I bought 100 shares of Apple @44.75 a share. Since then it split twice. Now I have 400 shares. At the same time I bought another stock. I spent 4418.00 total amount for 200 shares. Since then it split so many times, I now have over 2600 shares. Today it’s worth $56,000 and my Apple shares are worth $234,228. I have heard so many experts say Buy and Hold is dead......It works for me........It more than covered what I lost on wrong decisions.......And believe me, I am FAR from an expert on the stock Market. If I knew what would happen with these two stocks, I would have bought more. Every time I buy a stock, right away it goes down......These two stocks went down after I bought them, but I held on to them. Why is buy and hold is dead?

  • Report this Comment On March 17, 2012, at 12:31 AM, Suhaim wrote:

    Everyone has their own way of analyzing stocks, if your stock trading methodology is successful overall i.e beating return on indices there is no need to second guess it, if it is consistently under performing the indices then it must be changed, there is no lesson to be learned as you cannot possibly hold all stocks you consider to be bargains till they return 500-900%, if your trading method is to sell after a 50% gain and then either wait for a pullback or buy something else then it is much more suitable and realistic in the long term.

  • Report this Comment On March 17, 2012, at 4:54 AM, temen wrote:

    Lots of talk here about the head (logic) and the heart (emotions). But there is also the intuition, and this has always had its place in my decisions, particularly when it was grounded by some truths, facts, and wasn't tainted by the emotions.

  • Report this Comment On March 17, 2012, at 5:22 AM, Usishkin wrote:

    I am loading SBUX right now, not waiting fro dips, don't care about all-time-highs. buy buy buy

    I don't and NEVER will touch any Chinese stocks. It's a question of of when (as opposed to 'if') the CEO sells the company to his-brother-in-law for 3 Yuan.

    A couple of years ago I bought small slices of 10 different highly recommended Chinese stocks (BIG analysts, highest rating). Within 3 months 3 were under investigation and I was down 50%.

    and no... I am not joining any court dates in a Chinese court. I cut my losses, and let the lawyers make money elsewhere.

    No bidu, renren, cnoop, alibaba, chop, I don't even go to Chinese restaurants these days (what's in the beef?)

    Netflix... mmm... If I just smell Apple walking into a neighborhood (apple TV) I forget my previous loyalties very fast

  • Report this Comment On March 17, 2012, at 12:40 PM, jmdandy wrote:

    I am impressed with data. However, my best stock picks were made on intuition, and the biggest mistakes were made on the basis of data. In 1981 I was given a sales pitch on a start-up company, Direct Broadcast Satellite Corp. The principle people were all actively engaged in the government's unmanned space program. The government had just opened bidding for five licenses to construct and operate commercial broadcast satellites. The bidders included RCA and other industrial giants plus five little guys who had actually sent devices into space and hit the moon. The amount of money required for this effort was enormous and, to me, seemed unobtainable. However, they got the first license. I decided to invest. I knew they could do it, I didn't think they could get the money, but I considered this a riverboat gambler proposition. I then forgot about it. In 1999 I received a letter stating that Echostar Communications (DISH) had merged with DBS and my shares had tripled as well as my investment. Over the next year DISH split many times but the share price continued to soar. I ultimately sold, but not at the peak. Had I sold at the peak my initial investment of 25k would have been worth 1.5m. I made out very well, in any case.

    The second winner was very similar, but involved a pacemaker company with less than 1% of market share. I researched the company and found that at the time it was the only pacemaker company which had never had a recall of it's product. I decided to invest - same strategy. This, also, was treated with benign neglect but with similar results when they converted from pacemakers to searching for a non-invasive glucose sensor. Years later, the company announced that they had a workable prototype. The share price soared and I sold, but not at the peak. I tend to follow the Bernard Baruch philosophy, "I never bought at the bottom and I never sold at the top."

    On the other hand, following the recovery from the market crash of 2008 I spotted two companies which looked very good, but I didn't invest because they had not reached the data points required by the financial newspaper I followed at the time. So I didn't buy. The companies were Apple and Intelligent Surgical. What a mistake.

    Moral of story (if there is one) - go with your gut, but if your gut is supported by data you have a perfect world, hopefully.

    JMDandy 1952

  • Report this Comment On March 17, 2012, at 6:44 PM, maddyabby wrote:

    buying good co's with moats that pay dividends & using their drip plan is a great way to aim for retirement if you have the years.it worked really great for me & also saved me lots of fees.the anal-ists can mess you up.think for yourself.

  • Report this Comment On March 18, 2012, at 9:43 PM, sd101 wrote:

    Let's understand - Buy and Hold - should not be a Mantra- Warren B also does sell btw-contrary to popular opinion. and takes profits periodically, He does not simply Buy and Mold.

    What is the lifespan of a stock? Investors have limited resources to "Invest" and those investments may make or break them. Check out History, and see what the top leading stocks of any decade are- eventually, ALL are likely to transition into companies that reach a momentum peak.n They transition into slower growth, dividend paying vgf Some companies remake themselves, and their, and some simply go away.

    For long term investors, Read "The Bogleheads Guide to Investing" to start a core portfolio. Build on that core portfolio . And maybe then -seek to 'beat the market' with the various

    offerings of the Motley Fool.

    For every successful evolutionary stock pick- (AAPL) there are likely 10x or 100x more potential picks that simply didn't work out- All had potential at one moment in time-

    To sit through a 50% pullback and to do nothing in a stock position is simply irresponsible and LAZY. Get off your butt and protect your investments by periodic stops/ protecting some profits.

    Good Luck-SD

    The Motley Fool

    For

  • Report this Comment On March 19, 2012, at 11:06 AM, PEStudent wrote:

    When you sell a stock whose P/E is over 100 and then the price jumps up, you generally aren't making a mistake, you're just missing a lucky, unusual anomaly.

    I'd rather trust in value than luck.

  • Report this Comment On March 19, 2012, at 4:55 PM, hbofbyu wrote:

    Adam, My advice is to "not" learn from these experiences because all they do is drive your prejudice into making your next mistake. The market is not logical and does not care about the way it behaved in the past.

    Don't let your experience with Netflix cause you to abandon your next buy/sell premise and become a victim of recency bias.

  • Report this Comment On March 19, 2012, at 5:03 PM, CajunRon50 wrote:

    Actually I'm a little taken aback by Allen's article. These are lost opportunities, not costly mistakes.

    How about riding Allied Irish Bank (an MF recommendation) down to a 90% loss...or Select Comfort (another MF recommendation) to an 80% loss or Formfactor ( another MF recommendation) for another 80% loss. MF continued touting them on the way down and I continued buying more all the way down) none of them ever recovered. THOSE are mistakes where I LOSS alot of money! Worst of all, I can't figure out what insight I could have gleaned, what additional evaluation I could have made etc to have avoided these monumental losses...MF recommendations and evaluations made since to me....all the way to the bottom.

  • Report this Comment On March 20, 2012, at 6:22 AM, riwaterman wrote:

    this was a good article and great advice.

    but, why, why motley fool does everyone of these articles have to be an ad for some specialty newsletter? it gets very boring very fast.

    the fool has become a spammer. As a very long time supporter and subscriber I am wondering about my subscriptions and the continued barrage of junk mail and solicitations in articles - makes me wonder about the article and the truth in it.

    sorry.

  • Report this Comment On March 20, 2012, at 9:11 AM, ravenesque wrote:
  • Report this Comment On March 20, 2012, at 10:36 AM, sofpan wrote:

    * Nobody ever lost money taking a profit.

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