Q: I subscribed to 5i in order to learn about investing, and I have learned a tremendous amount, although not always quickly or painlessly. Here are 3 of the many lessons:
Lesson 1: Stocks sometimes (often?) go down right after you buy them, but that is not a reason to sell. About a year ago I asked Peter about two companies I was considering, DHX Media and C-Com Satellite. I had read all Q/As about both companies and was leaning toward C-Com. However, Peter picked DHX, so I bought shares. But DHX immediately began to decline and C-Com began to rise. Luckily I did nothing. Now DHX is up about 80% and C-Com is down significantly from that date.
Lesson 2: Analyst and money-manager recommendations are not free of conflict. Sometimes (often?) recommendations are designed to generate trading activity so brokers can make money on commissions or to improve returns in a money manager's fund. I bought Avigilon at $14. and it rose to $19. but then one analyst downgraded it and the stock dropped to below $15., but in time, in spite of that analyst downgrade AVO rose to $34. Then the CFO resigned and now it is down around $22., but not because of poor earnings. Recently, I saw a money manager on BNN who is short the stock in his fund, and he suggested that because of increased competition and lower margins AVO is probably only worth about $12. dollars per share. (Now, being short, wouldn't he be happy if he could get the market to sell AVO down to that price.) I am learning that a stock's current share price is not always based on its current earnings or the long term potential of the company, so in order to make my investment decisions, I will rely on the conflict free expert opinion I pay 5i to give me. (How could it have taken me over a year to learn that simple lesson?)
Lesson 3: Re-balancing may either decrease or increase your returns, but it will always definitely decrease your risk. I bought Amaya at $5.20 and it was by far my biggest position. I watched it rise to $9.50 and thought about re-balancing, but decided to wait until after quarterly results came out, hoping to make even more. (Greedy) When the quarterly results came out the market did not like them and the share price declined, very close to my original purchase price. So when the stock rose again, on a rumour, I felt I had learned my lesson and took the opportunity to re-balance my portfolio and sold half my position at $11. Now the stock is around $22., but the weird thing is that I don't regret selling half my position at $11., even though I would have made WAY more money if I had not sold half. Instead, I feel lucky that I had the opportunity to make 100% back then, on a rumour no less. And now I'm thinking of re-balancing again, because my portfolio weighting is again way too high, almost back to where it was in the beginning.
I will probably (definitely?) need to keep re-learning these 3 lessons over and over again, but I feel very lucky that 5i is helping me learn about investing--and making me quite a bit of money while doing so!
Lesson 1: Stocks sometimes (often?) go down right after you buy them, but that is not a reason to sell. About a year ago I asked Peter about two companies I was considering, DHX Media and C-Com Satellite. I had read all Q/As about both companies and was leaning toward C-Com. However, Peter picked DHX, so I bought shares. But DHX immediately began to decline and C-Com began to rise. Luckily I did nothing. Now DHX is up about 80% and C-Com is down significantly from that date.
Lesson 2: Analyst and money-manager recommendations are not free of conflict. Sometimes (often?) recommendations are designed to generate trading activity so brokers can make money on commissions or to improve returns in a money manager's fund. I bought Avigilon at $14. and it rose to $19. but then one analyst downgraded it and the stock dropped to below $15., but in time, in spite of that analyst downgrade AVO rose to $34. Then the CFO resigned and now it is down around $22., but not because of poor earnings. Recently, I saw a money manager on BNN who is short the stock in his fund, and he suggested that because of increased competition and lower margins AVO is probably only worth about $12. dollars per share. (Now, being short, wouldn't he be happy if he could get the market to sell AVO down to that price.) I am learning that a stock's current share price is not always based on its current earnings or the long term potential of the company, so in order to make my investment decisions, I will rely on the conflict free expert opinion I pay 5i to give me. (How could it have taken me over a year to learn that simple lesson?)
Lesson 3: Re-balancing may either decrease or increase your returns, but it will always definitely decrease your risk. I bought Amaya at $5.20 and it was by far my biggest position. I watched it rise to $9.50 and thought about re-balancing, but decided to wait until after quarterly results came out, hoping to make even more. (Greedy) When the quarterly results came out the market did not like them and the share price declined, very close to my original purchase price. So when the stock rose again, on a rumour, I felt I had learned my lesson and took the opportunity to re-balance my portfolio and sold half my position at $11. Now the stock is around $22., but the weird thing is that I don't regret selling half my position at $11., even though I would have made WAY more money if I had not sold half. Instead, I feel lucky that I had the opportunity to make 100% back then, on a rumour no less. And now I'm thinking of re-balancing again, because my portfolio weighting is again way too high, almost back to where it was in the beginning.
I will probably (definitely?) need to keep re-learning these 3 lessons over and over again, but I feel very lucky that 5i is helping me learn about investing--and making me quite a bit of money while doing so!
