recurrent greed

A little more than two years ago I made one of my twice-a-decade stock purchases. During the early days of the financial crisis I bought what I thought was a severely underpriced General Electric (GE) at 19 per share. I allowed myself to fall into groupthink; working at a huge Wall Street client (which was almost about to collapse itself). All of the frequent traders I worked with were clamoring about ‘bargains’ and ‘steals.’ I let myself get seduced by the idea of blue chips on sale and snatched up a fairly substantial chunk of GE stock.

Soon I had unrealized losses soaring up to more than 50% of my original investment. GE bottomed out at a little more than $7 per share. As the market tumbled, I berated myself for being so foolish and set an alert to notify me if it ever rose about $19. I swore I’d get out of that position and get back into funds (or frankly, simple cash accumulation).

Time passed. The crisis thrashed around for a bit, then quieted down. Health care ‘reform’ replaced financial reform on the headlines and the market began a slow steady climb back up to 2008 levels. I forgot – as I like to do – about my portfolio and turned my attention to more important things like Season 2 of Mad Men.

Then suddenly, earlier this week, my phone pinged with a text: GE is above your notification limit of 19. More than two years later, I was reminded of how arrogantly I had crowed about my bargain purchase. I remembered how, with consulting work drying up and my portfolio bottoming out, I had bitterly regretted that purchase and told myself I would get out if I could ever just break even.

And I stared at the message. I could almost imagine the little angel on one shoulder (‘now you can get back to sensible investing’) and the little devil on the other (‘keep it just a little longer… this time it will be different’). I wondered if I should hold on to it just a bit longer… and deleted the text, and returned my attention to my work. I hoped this time things would be different.

Out of this mindset, of course, investors become speculators and Wall Street snickers. I know I’m supposed to be in it for the long term, and I know my investing strategy is now firmly centered around broad-based low-fee index mutual funds.  But I still remember the “go-go” days and hope that I’ll get one more lucky strike.

7 comments

  • Oh, boy! Can I relate to this! Actually, I'm a little luckier than you in that I bought Ford when it was down to $2.00, and now it's hovering around $13.00. I know I should sell, I know I should sell, I know I should sell…..but maybe it will go UP even MORE! Greed and fear, as they say, are the only two emotions on Wall Street, and, as you say, I keep hoping that this time, I'll get lucky and hit the jackpot so that I can retire on the profits from my brilliant stock pick. Pitiful, isn't it?

    • I bought Ford too. But, I bought it for $7.05 and watched it go all of the way down to $2.00. I should have bought more Ford, but I bought GM instead. That turned out really bad. But, I held onto my Ford shares and did really well with them.

  • writerscoin

    You should've doubled down!

    • Oh, I tried that strategy before – hence my nice big holding of Citigroup (the only other stock I hold) with two big purchases made at 60 and at 20. That worked out well. 🙂

  • Sounds very familiar. I paid $20 for GE before they slashed their dividend and I've decided to sell once it hits $20 again.

  • barbfriedberg

    Hi Bripblap,
    As a portfolio manager and investor of many many years- losses are all part of investing-but unless you have a TREMENDOUS AMOUNT OF TIME and are extremely lucky, buying just a few index funds (total USA fund, Broad based international, & total bond fund) and putting more money in regularlly is the way to get the best returns with the least amount of risk!! 70% of actively managed stock funds UNDERPERFORM the indexes!!! Gook luck

  • Thanks for sharing this post. I'd be interested to know what application you use to track stocks.