Failure to follow my basic rules
I'm no day trader. I have a career to focus on. So the purchases I make are planned to be long term investments (12-18 months minimum) typically. I currently hold 7 positions and started creating them in January of 2010. At this point, I already missed out on the huge gains from the generational lows, but I finally felt comfortable with my own finances that I could put money to risk. As of today, I hold positions in 7 stocks - C, BWEN, DE, HON, ONNN, PEP, and ECA. Taking this as a moment to reflect on the past 22 months, there's a lot to learn about myself and investing.
My portfolio didn't add C or DE until 2011, so let's focus on my portfolio from the perception of the initial 5 (HON, ONNN, PEP, ECA, and BWEN). I believe in a diversified portfolio. I also liked the idea of having a little speculation - I'm still relatively young, plus I love the idea of trying to get a big turn around (doesn't everyone wish they bought AAPL back when it was at $5 - or even when it was in the 90s just a few short years ago?). Looking at my starting portfolio, I can see that it's likely I made at least 1, if not 2 mistakes.
Mistake number 1 - too much speculation. The idea is to speculate some of your portfolio, not a lot of it. Both BWEN and ONNN can be considered speculative plays. I consider 2 factors for speculation - 1) Is the market cap low (less than 1B)? and 2) Is the stock under $10. Both of these stocks were in the Single digits at time of purchase and based on cost-basis, and BWEN is < 1B market cap too. If the two of these stocks combined were only 20% of my portfolio, I'd have been in better shape, however, it was closer to 40%. That's failing to follow my own discipline and can be a costly mistake.
Mistake number 2 - Not diversified enough. This may or may not fully be a mistake. There's a number of ways to look at this and I'll describe some of my thought processes here. I haven't decided if I truly did something wrong here, or whether I just could've made better picks. When I originally looked at my portfolio, I had 2 thoughts that made me believe I was diversified. The first thought was that ONNN wasn't a speculation, it's just a tech company. Thought number two was that BWEN wasn't an energy play, it was a speculation play, and therefore I could get away with having 2 stocks in the same sector. When you're trying to maintain a portfolio of 5 - 7 stocks, I'm starting to think that having more than 1 play in the same sector is WAY too much risk to allow for speculation in a sector you already own. This market has been a little odd in the last year in particular. Oil has been relatively strong until the last few months, while nat gas and renewable energy have just been dogs. ECA is a nat gas play, BWEN is renewable energy, so clearly, I made some bad picks from the energy sector considering the unrealized losses I've currently undertaken. Had I 2 plays in the oil side of energy, I'd probably feel much better about what I had done.
As you can see from my opening comments, despite these mistakes, I haven't corrected anything yet. I did actually sell a portion of ONNN at one point so my speculation isn't near as much of my portfolio as it once was, but I still have work to do with ECA and BWEN. I have my reasons for holding yet, though - be they smart or stupid. I'll save that for when I start talking about each stock individually and describing what I've done right or wrong with each.
My portfolio didn't add C or DE until 2011, so let's focus on my portfolio from the perception of the initial 5 (HON, ONNN, PEP, ECA, and BWEN). I believe in a diversified portfolio. I also liked the idea of having a little speculation - I'm still relatively young, plus I love the idea of trying to get a big turn around (doesn't everyone wish they bought AAPL back when it was at $5 - or even when it was in the 90s just a few short years ago?). Looking at my starting portfolio, I can see that it's likely I made at least 1, if not 2 mistakes.
Mistake number 1 - too much speculation. The idea is to speculate some of your portfolio, not a lot of it. Both BWEN and ONNN can be considered speculative plays. I consider 2 factors for speculation - 1) Is the market cap low (less than 1B)? and 2) Is the stock under $10. Both of these stocks were in the Single digits at time of purchase and based on cost-basis, and BWEN is < 1B market cap too. If the two of these stocks combined were only 20% of my portfolio, I'd have been in better shape, however, it was closer to 40%. That's failing to follow my own discipline and can be a costly mistake.
Mistake number 2 - Not diversified enough. This may or may not fully be a mistake. There's a number of ways to look at this and I'll describe some of my thought processes here. I haven't decided if I truly did something wrong here, or whether I just could've made better picks. When I originally looked at my portfolio, I had 2 thoughts that made me believe I was diversified. The first thought was that ONNN wasn't a speculation, it's just a tech company. Thought number two was that BWEN wasn't an energy play, it was a speculation play, and therefore I could get away with having 2 stocks in the same sector. When you're trying to maintain a portfolio of 5 - 7 stocks, I'm starting to think that having more than 1 play in the same sector is WAY too much risk to allow for speculation in a sector you already own. This market has been a little odd in the last year in particular. Oil has been relatively strong until the last few months, while nat gas and renewable energy have just been dogs. ECA is a nat gas play, BWEN is renewable energy, so clearly, I made some bad picks from the energy sector considering the unrealized losses I've currently undertaken. Had I 2 plays in the oil side of energy, I'd probably feel much better about what I had done.
As you can see from my opening comments, despite these mistakes, I haven't corrected anything yet. I did actually sell a portion of ONNN at one point so my speculation isn't near as much of my portfolio as it once was, but I still have work to do with ECA and BWEN. I have my reasons for holding yet, though - be they smart or stupid. I'll save that for when I start talking about each stock individually and describing what I've done right or wrong with each.
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