Most of my early investments are more instructive than my later ones. That could simply be because my later ones haven't had as much time to come back and bite me, but I just assume it's because I've actually learned something from my early mistakes. In any case, I hope some of you can take a lesson away from my missteps, because, boy, do they hurt to reflect upon.
How it caught my eye
The first time I ever touched equities I was in high school. I bought shares in the now-ubiquitous search-engine monster Google
And it was time to pile into Google stock. I invested every penny I had in Google, buying in at $220 per share.
Now, I happened to buy in at a time when it was fairly easy to be a Google shareholder, and most of the "volatility" the stock experienced merely showed itself through abnormally high returns, which is still my favorite type of volatility. In short, all was well, and the stock got as high as $313 in July, less than four months after I'd bought in.
Alas, the blissful ride was about to come to an abrupt end, thanks to Yours Truly.
What went wrong
Suddenly, the stock started behaving very differently. It began to -- gasp -- go down! It struck me as very un-Google-y, and I quickly became extremely concerned.
I'd had just about enough of this downward volatility stuff. I liquidated most of my position at $287, keeping a few shares just in case it resumed doing what it was supposed to do. The stock wasn't quick to pick up on my wishes, and within three weeks I sold the rest of my shares at $277 a pop. Six years later, I would buy back in at an average price of $553 -- or about twice as much as I sold them for. Did I mention I sold all my shares again less than a year later at prices about $100 lower than today's? Well, I did that, too.
The takeaway
My Google debacle was a painful prequel to an even more hurtful experience of the same kind with tech rival Apple
I learned a few things from my first experience with the stock market. The first was about diversification: Never put all your eggs in one basket. I ended up making money on the Google trade, but I very easily could have seen my life savings disappear. My lack of diversification was part of the reason I freaked and sold everything. The daily swings were massive: I couldn't stand to see my total worth up 10% one day and down 10% the next. You won't often see those kinds of fluctuations with a diversified portfolio.
The second lesson is a classic Foolish idiom: Buy companies you love, and if you believe in their long-term staying power, then hold on for dear life. Don't mind the day-to-day volatility; if you still believe in the business, don't sell out. Certainly don't sell on dips, anyhow.
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