I embarked on my investing journey back in August 2007 with a small capital and vast ambitions. The allure of the stock market as a means to financial independence was captivating, in stark contrast to the paltry returns from a traditional savings account – although I certainly advocate for a robust emergency fund.
After setting up a brokerage account and making my initial investment, I was set to make my first stock purchase. With just $250 in my account, I meticulously sifted through recommendations from The Motley Fool and eventually settled on my debut investment – Netflix (NASDAQ: NFLX). Opting for fractional shares, I allocated the full $250 towards Netflix stock, acquiring 14.385 shares after a $4 commission.
Thus commenced my investing education with that initial purchase.
Image source: Getty Images.
Setting the Scene
My initiation into stock ownership coincided with a tempestuous period for investors. Shortly thereafter, the onset of the Great Recession, one of the most severe market downturns, unfurled. Following a peak just two months post my debut investment, the S&P 500 commenced a 17-month plunge, shedding over 56% of its value before reaching bottom in March 2009.
Amidst this maelstrom, several of my holdings endured significant setbacks. Yet, Netflix shone as one of the star performers, fueled by a growing audience seeking solace in its expansive entertainment offerings amid economic turbulence.
Despite weathering one of the direst market climates, my Netflix investment surged impressively by 144%.
A Pricy Lesson
During this juncture, prevailing wisdom underscored the importance of safeguarding capital. Netflix, representing nearly 20% of my portfolio, stood out among 24 other holdings. The consensus urged diversification to forestall the dominance of any single investment and advocated for profit-taking. Swayed by this narrative, I opted to sell 10 Netflix shares, valued at $41.65 each by late March 2009, pocketing proceeds of around $245 – a move I deemed astute and lucrative.
You can likely anticipate the outcome.
As of the latest market close, Netflix shares were priced at approximately $636. Noteworthy is Netflix’s 7-for-1 stock split in 2015, meaning the 10 shares I offloaded would have burgeoned to 70 shares. At the prevailing price, those 70 shares would now be valued at over $44,000, a striking contrast to the $245 I reaped in 2009.
Extracting Wisdom from Error
Though this rookie blunder came at a steep cost of $44,000, it imparted a priceless investment lesson: resisting impulse profit-taking and embracing a long-term investment approach. I allow my successful investments to flourish, barring significant shifts in the underlying rationale.
While occasional divestments occur, I refrain from selling solely on the basis of substantial gains and never make valuation the sole decider.
Embracing this principle of prolonged ownership has yielded numerous prosperous investments. Current gains, as of the latest market close, include:
- Netflix (retained shares) up 25,942%.
- Mercadolibre up 6,859%.
- Chipotle up 6,379%.
- Tesla up 4,246%.
- Intuitive Surgical up 3,597%.
- Apple up 2,940%.
While the premature sale of my Netflix shares represents my costliest investing gaffe, the ensuing lessons paved the way for reaping the rewards of holding subsequent investments for the long haul.
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Danny Vena has holdings in Apple, Chipotle Mexican Grill, Intuitive Surgical, MercadoLibre, Netflix, and Tesla. The Motley Fool has positions in and recommends Apple, Chipotle Mexican Grill, Intuitive Surgical, MercadoLibre, Netflix, and Tesla. The Motley Fool maintains a disclosure policy.
