I embarked on my investing journey in August 2007 with a few hundred dollars and grand aspirations. I firmly believed that the stock market was a more potent tool for attaining financial independence compared to stashing money in a savings account. Despite my belief in a robust emergency fund, I opened a brokerage account and initiated my first investment with $250, all of which went into purchasing Netflix (NASDAQ: NFLX) shares. This decision marked the inauguration of my investing education.
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Setting the Scene
My leap into stock ownership coincided with turbulent times for investors. Shortly after my initial investment, the Great Recession commenced, heralding one of the most severe market downturns in history. Despite many of my stock picks suffering during this period, Netflix emerged as one of the top performers, benefitting from a surge in subscribers seeking solace amidst economic turmoil.
Interestingly, amidst a challenging market environment, my Netflix holdings saw an impressive 144% appreciation.
A Pricy Lesson
Amidst advice advocating for capital protection, I succumbed to the popular notion of diversification in a bid to safeguard my assets. Netflix had matured to constitute almost 20% of my overall portfolio, despite my diversified holdings. Conventional wisdom suggested trimming such concentrated positions to secure profits. Heeding this advice, I sold 10 Netflix shares at $41.65 each in late March 2009, bagging profits of approximately $245, which seemed like a smart financial move at the time.
The subsequent events unfolded predictably. Netflix shares surged to around $636 by the market’s close on Friday, marking a significant missed opportunity. A 7-for-1 stock split in mid-2015 meant that the 10 shares sold would have translated to 70 shares, valued at more than $44,000 today, a stark contrast to the $245 I pocketed in 2009.
Extracting Wisdom From Missteps
Though this blunder cost me dearly, the experience imparted a crucial lesson – avoiding premature profit-taking and adopting a long-term holding strategy, barring significant shifts in the investment thesis. I refrain from selling solely based on substantial gains or valuation metrics.
Implementing this lesson has turned many of my investments into success stories. Noteworthy gains from long-term holdings include:
- Netflix (remaining shares) up 25,942%.
- Mercadolibre up 6,859%.
- Chipotle up 6,379%.
- Tesla up 4,246%.
- Intuitive Surgical up 3,597%.
- Apple up 2,940%.
While selling Netflix prematurely constituted my most expensive investing lesson, the ensuing learning curve facilitated substantial gains from maintaining long-term positions in subsequent investments.
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The author, with investments in Apple, Chipotle Mexican Grill, Intuitive Surgical, MercadoLibre, Netflix, and Tesla, acknowledges positions held. The Motley Fool also acknowledges positions in and recommends Apple, Chipotle Mexican Grill, Intuitive Surgical, MercadoLibre, Netflix, and Tesla, maintaining a disclosure policy.