Someone asked me recently “how did you first learn about the stock market?” I first noted that I am not particularly astute when it comes to stocks (I’m an index fund guy), but the basic operation of public corporations and the stock market is something that I first learned about when I was a kid.
My Dad would talk about the stock market and had his broker buy 2 shares of General Motors stock at my recommendation. I liked cars and was excited about the new Chevy Camaro and Pontiac Firebird they had coming out. He thought it would be fun to buy the shares and track them. It was 1982 and the shares went for about $38 a piece.
When the shares were registered I was on the shareholders mailing list and I got a glossy annual report in the mail each year. I can remember bringing it to school and analyzing it during my study hall time. I was interested in more than just the new cars. I studied the income statement, the balance sheet, and read about the CEO and Board of Directors.
We sold the shares a few years later and remember it was for much more than we had originally paid. It looks GM doubled by the time I was in college, reaching $78 in 1985. That’s an amazing 27% annual return over 3 years. It was a good thing we weren’t long term investors, because that’s about as high as the stock ever went. (They went bankrupt in 2010)
Similarly, a few years ago, I helped my son buy a stock of his choosing: Qualcomm. It was right before they got in trouble with Chinese and EU regulators for anti-trust. We it bought for $78, but they quickly sunk to as low as $45. They looked like they might get out of their funk earlier this year (getting to $90), but now a US Federal Court has ruled they are a monopoly. The stock has now dropped to $67.
We’ve had the QCOM stock for about 5 years so far. If anything, he has learned about why not to invest in single companies and put too many eggs in one corporate basket. A couple years ago, he opened his own brokerage account and put his investment money into a simple, low-cost, index fund. Probably about all he needs to know!
How did you first invest in stocks?
MrFireStation 
My experiences were more like your son’s. In my early twenties, when we finally had some “extra” spending money I decided to try my hand at stock investing on a small scale. I had always heard about investing in the stock market, but never had any direct interaction with stocks or investing in anything other than my 401k up to that time in my life. So I took $1k cash and bought Ramada Inn and GE stock based on a tip from my brother-in-law who was the only person I knew who bought stocks directly. (Big life lesson #1…never listen to a friend’s stock tip on investing!) Three years later the GE stock had tanked, the Ramada Inn stock did fairly well, and I sold both and (fortunately) only lost a small amount overall (mostly the fees!) I put the remaining cash in my new baby daughter’s college fund and never looked back. Great lesson, that only cost me a small amount to learn. I did try again a few years later on a small pharmaceutical company stock. I worked in the industry and learned about a new potential cancer drug release, and bought a substantial number of shares of the company, only to lose half my investment in less than a year when it failed stage three testing. So much for the brilliant stock investing career! That was in my early thirties, and also was my last individual stock purchase. Over the following years, I learned about index funds and also became an index investor. Best decision ever (in addition to real estate investing).
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On your pharma investment losses – those are tough. When you work in an industry, you think you have a better perspective on the industry than the average investor, but you should really lay off, all the same. My former MegaCorp is having some sudden challenges (stock down -34% from its peak) and I’m tempted to buy some. Seems too low. That said, I don’t exactly have a portfolio of other individual stock buys to manage the risk.
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It can be tough with individual stocks…You are exactly right. It’s easy to convince yourself you have a unique perspective on the stock(s) that you “think you know”, but even those deeply involved in the inner workings of a company can rarely correctly predict it’s stock behavior. There are just too many potential factors to weigh properly. It’s pure speculation IMO. I’m strictly an index funds and real estate guy these days. The real estate is a divesture and early retirement cash flow and a great tax haven option. The index investments are long term retirement backups, potential legacy and philanthropy options. I resist all urges to buy individual stocks now. I just have to remind myself, that I’m really not that smart…its really not that tough in my case! 😜 😆
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I watched the movie Wall Street when I was a kid and thought being a stock broker would be the coolest job. Became an accountant instead and started investing on my own eventually.
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“Greed is good …” 😉
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