It was a classic rookie mistake. I fell right into it, blindly. It was 1990. I had just started to get my feet wet as an investor and was bored with simply buying growth-stock mutual funds.
I wanted a little more excitement -- and agitation -- in my life.
I funded my meager account at Charles Schwab (NASDAQ:SCHW) and set my sights on finding my first big winner. After hearing some news on Wang Labs and seeing the stock languish in the single digits, I thought it seemed to be a match made in heaven.
I snapped up a few hundred shares and waited. It was a match, all right. I struck it and was playing with fire. See, I knew little about mainframe computing. I was only vaguely familiar with the company. In retrospect, I was only guessing. Wang eventually filed for bankruptcy in the summer of 1992. If there's a silver lining to this story, it's that I wasn't there at the end - my trigger-happy ways and I were out of the stock just days after it started heading south on me.
I deserved the capital loss. My research was nonexistent. My valuation techniques were hollow. In short, I was gambling with my own money, and that's rarely a good thing.
Paying your due diligence
I had a knack for math as a kid. In kindergarten, my teacher would reward the students who got the top scores in her weekly math quizzes with small prizes. After I won the first few computational contests, Mrs. Barney's solution was to simply give me a harder quiz than the rest of the class.
It was enough to trip me up, but I grew up cocky. I eventually paid the price. A few years later, my math grades dipped because I didn't show my math. I arrived at the right answer; I just didn't get there through conventional means. I thought it wasn't fair at the time, but I'm all for "show your math" these days.
For instance, what if I had bought shares of Chuckie Schwab instead of Wang when I started investing? What if I had held on? I would have been sitting on roughly a 60-bagger, but I probably wouldn't have deserved it. I would have been lucky. Let's not diss Lady Luck. She rocks. However, the speculator who relies on rubbing that rabbit's foot before every random trade isn't going to last in the market too long. Great investors earn that distinction.
Jumping the gun
I should have done what my more stock-savvy friend had suggested at the time. I should have done a little trading on paper first. It would have helped me avoid some losers. It would have helped me hold on to my winners a little longer. I was undisciplined, and it cut both ways. A few months later, I bought into Amgen (NASDAQ:AMGN), and I ditched it weeks into my investment when it started drifting lower. I may very well be that rare investor who actually lost money being long on the premier biotechnology stock of my generation.
I was impatient. I know that. I also didn't have a lot of resources to facilitate mock trades to test my mettle. It's funny -- plenty of outfits will let you simulate the speculation on commodity futures or gamble on online poker until you get your feet wet, yet the more proven Wall Street enrichment machine often encourages you to dive in headfirst instead.
That's changing these days. There are now several ways for fence-sitting market watchers to try investing on for size. The latest market-trading simulation is our very own Motley Fool CAPS service.
The brand-new interactive experience allows you to go head-to-head against thousands of investors. More importantly, it lets you go head-to-head against the most important investor on the planet: you.
You can evolve as an investor -- improving or retrenching after every simulated trade -- without risking a dime. You can also lean on the collective knowledge of the community.
Fake trades, real learning
Let's take a company like Ctrip.com (NASDAQ:CTRP), for instance. You may already be familiar with the leading China travel specialist. The stock is an active Hidden Gems newsletter recommendation. You may already have your own opinion on the prospects of Ctrip, toiling away in the world's most populous nation, where the economy has been growing at a 10% clip over the past three years. If you don't, CAPS can help color in that perspective. More than 800 players have already weighed in on the stock, with 165 of your fellow individual investors chiming in with the reasons why they feel the stock will outperform or underperform the market.
I wish I could have had just one person shake her head the moment I was buying into Wang Labs way back in the day. I can only imagine how much easier it would have been had I had hundreds -- or thousands -- nodding their heads in approval or shaking them in disgust.
This doesn't mean that you should go with the herd. In fact, the best thing about CAPS is that you can mingle in both the bull and the bear camps until you solidify your own opinion. You can explore a company like Google (NASDAQ:GOOG), which has 584 opinions. At the moment, exactly half of them are bullish, while half of them believe that Google shares are headed for a fall.
Even obscure equities like Chico's FAS (NYSE:CHS), Stock Advisor pick InterDigital Communications (NASDAQ:IDCC), and infant health specialist Natus Medical (NASDAQ:BABY) have more than a hundred opinions apiece.
It's a brave new world out there for investors. You now have the online tools to practice your mad stock-picking skills for free. It's fun. It's educational. It's edutainment, and it may one day be the seed that lets you sprout into the smart -- and disciplined -- investor it took me way too many heartbreaks and ill-advised knee-jerk trades to become.
Don't let Wang Labs happen to you.
Charles Schwab is a Motley Fool Stock Advisor pick.
Motley Fool CAPS is a free new community-driven experience, where individual investors pool their knowledge to seek out stock ideas. Are you up for the challenge? You have nothing to lose, so go ahead and give it a shot.
Longtime Fool contributor Rick Munarriz believes in taking chances to earn superior returns. He does not own shares in any of the companies in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy .
