I first bought Tesla (TSLA +2.71%) stock in mid-2011 when I was a high school science teacher in Florida. I had taken a ride in a friend's Tesla Roadster, and based on everything I had read, I thought the Model S could be a game changer. So I bought 100 shares for an average cost of about $23. Since then, the stock has completed a five-to-one split, so this makes my original cost basis about $4.60 for 500 shares.
As I'm writing this, Tesla trades for about $1,088 per share. If I had simply done nothing and held on, my $2,300 investment would be worth $544,000 today.
Instead, I made a mistake that newer investors often make.
Image source: Getty Images.
Why I sold Tesla at $12
Fast-forward to early 2013. I was recently engaged, planning a wedding, and needed to put down various deposits. Plus, my now-wife and I were in the process of buying a house, and although I was using a low-down-payment FHA loan, I still needed some money toward the down payment, and the wedding deposits had nearly exhausted my savings. So I decided it was a good time to look to my brokerage account for some help.
Of the three stocks I owned at the time (the other two were AT&T and First Solar) Tesla was the only one that had increased by any substantial amount. The Model S had recently been named the 2013 Car of the Year by Motor Trend, and the stock quickly started to rise soon after as the company started to deliver the vehicle. My 100 shares were trading for about $60 per share, or a split-adjusted price of $12. (Note: I wish I could tell you the exact price, but it was in a brokerage account that no longer exists.)
My original investment of $2,300 had increased to just over $6,000. In my mind, I thought, "I've more than doubled my money -- there's absolutely nothing wrong with selling and taking a profit." So I sold my shares -- and left $538,000 in profit on the table in the process.
Why I'm not bitter about it
I'd be lying if I told you I never regretted the sale. But as the years go on, I've taken a different view, and for a few good reasons.
First, it allowed my wife and I to buy our first house, and in an expensive real estate market (Key West, Florida). We don't own it anymore but made some great memories in that house, and ended up selling it a few years later for a nice profit.
Second and most importantly, the sale proceeds helped set me up for true happiness in life. Not only am I still happily married eight years later, but if you had asked me what I wanted my life to look like in 2022, it would be pretty close to how it actually looks now. I have two beautiful kids and a great home, and I know that selling Tesla to help fund my wedding and first home purchase helped make it happen.
Finally, it taught me one of the most valuable investing lessons I've ever learned, and one that I believe will end up making me even more money than I left on the table with my too-short Tesla investment.
There are many great reasons to sell a stock you own, but "because it went up" isn't one of them. If my original investment thesis still applies, I don't sell winners, and this has served me extremely well in the years since.
For example, I bought Square (SQ 3.25%) (now Block) shortly after its IPO and haven't sold a single share since, despite a roughly 1,500% gain. If I hadn't learned my expensive Tesla lesson, I almost certainly would have moved on after it doubled or tripled.
The same applies to a few other stocks I've owned for several years that have performed extremely well. And more importantly, now that I'm further along in my investing career, it will motivate me to hold onto winning positions that are significantly larger than my Tesla investment was.
The bottom line is that while I obviously wish I would have chosen to sell one of the other stocks in my portfolio at the time, my decision to unload my Tesla stock prematurely has made me a better investor and has truly helped make my life more fulfilling. It's the mission of The Motley Fool to make its readers "Smarter, Happier, and Richer," and my sale of Tesla certainly did that for me. In a way, it was one of the best investment decisions I ever made.
