This isn’t a media consumption or creation thing, exactly, but I thought I’d relate this story about what a crappy investor I am.
As background, I NEVER buy individual stocks. I was surfing around the world of investment websites, however, and I noticed that Fannie Mae (FNM) was trading at well under a dollar a share. On the theory that the company would either be nationalized (in which case the shareholders would lose everything, total wipeout) or eventually return to some kind of a normal trading price (over $5/share, at any rate), I thought it would be a good bet to plunk down some noncritical amount of cash on the sucker. This has nothing to do with the underlying soundness of the company, mind you. I’m not even sure that I understand what FNM is (some kind of public/private hybrid?) — I know it will look bad for the government if it nationalizes it, so they will probably avoid that at all costs.
On June 8, 2009, I bought 250 shares of FNM. It was at $.68/share on that particular day. Why did I choose that day? Beats the hell out of me. It dropped like a rock for a while – it was down to $.30 at some point in the 52-week period. Since I’ve owned it, it’s been down in the 50 cent range. Disaster! Today, it’s up to $1.70/share. My calculations show me that I have an enormous paper profit — well over 100% in under 2 months. (The volatility of a bear market!)
But this is why it’s gambling, and why I’ll always be the guy stuck at the nickel slot machines. I think I’m probably right about this pick, and that it may go up some staggering amount (percentage-wise) in the next months or years. I don’t have the money (or the stomach, if you look at it that way) to really place a serious bet on the matter, however. But also, the amount that I was willing to bet was so small that even an enormous profit, in terms of percentages, is not worth taking. So I’ll just let it ride.
See, a good investor would walk away with the earnings and be happy at his good fortune (whatever the nominal amounts). Now, however, I’ve gotten greedy AND lazy, and won’t do it.
People who make money in the stock market are either 1) emotionless robots, 2) wild optimists who just happen to get lucky, 3) crooks, or 4) some mixture of the above.