The first time I ever invested it was on a penny stock. (A penny stock, for those that don’t know, is a stock that sells for under $1 per share. Usually, a lot of bad things have to happen for a company to get to that point.)
I had no real experience investing, but a ton of things led me to buy this stock at 25 cents per share and sell at about $3 per share. 12x my initial investment!
It’s the best return I’ve ever made on an investment, and it is the worst type of investment I’ve ever made.
When it happened, I thought I was a genius and found I had some natural gift to pick incredible “winners.” Almost like it was an untapped superpower and this would be my origin story.
The truth: I was just lucky my first time picking a stock.
At the time I had some spare cash since I was living with my parents (as I looked for an apartment), I had the irrational confidence of someone in their 20s, and it just so happened that in grad school I was doing a case study on the company in question.
The sobering moment came when I tried to do the same with other penny stocks. The next 5 penny stocks I bought lost almost all their value. I wouldn’t even try a 6th time.
It was clear that buying penny stocks was going to be a race to the bottom for my brokerage account. I had to embrace the humility that I wasn’t a brilliant investing savant. (At least not yet)
Since then, I’ve gained some wisdom and become more disciplined in which companies I choose to invest in.
When I started investing, I didn’t realize that buying penny stocks is often like trying to catch a falling knife. I could have been prideful and lost my shirt by thinking that my “genius” was the reason for my first investment gain.
Or I could have been discouraged by the losses that followed and given up.
But experience is a great teacher and I didn’t let the losses deter me from investing any further. It just informed me of what not to do going forward.
However, the real takeaway here is not to allow yourself to simply “play the result.” The first time I tried a [in hindsight] reckless strategy it yielded an incredible return. But luck is impossible to replicate.
A sound strategy and patience is a much better path to success.
It reminds me of the time I was playing HORSE (a basketball game where you challenge opponents to mimic your trick shots) in college.
I took a shot sitting down and backwards from the free throw line and made it on the first try! Even though the shot went in, we should be rational enough to realize that it’s a terrible way to shoot a free throw.
Instead, develop a repeatable process over time. Then trust the process.