Tuesday, September 1, 2009

Shoulda, Coulda, Woulda

For the past couple of years I've been jonesing to try my hand in the stock market. I had about $2000 at the beginning of the last school year to spend. I had been following several stocks very intently - Ford, Marvel, Vanguard Total Market Index Fund, Vanguard Emerging Markets Index Fund, and Visa.

I had been looking for about the previous year, and with the beating the stock market was taking I was thinking it would have been a good time to try it out. Someone once said that the only sale that people ever run from is when it's at the stock market.

I didn't want to be one of those people. I wanted to try and take advantage, especially since everything was so low. I was most intent on buying around election time, but I was thinking of jumping in around November. I was trying to "time" the market, which a lot of people don't suggest doing, but I thought that was as good an opportunity as any to try and do so.

Here are the prices at their lows in November 19, 2008:
  • Ford - $1.26
  • Vanguard Total Market - $37.17
  • Marvel - $23.70
  • Vanguard Emerging Market - $18.60
  • Visa - $46.38
This is what they are now, September 1, 2009:
  • Ford - $7.24 - 474.6% increase
  • Vanguard Total Market - $50.51 - 35.8% increase
  • Marvel - $47.70 - 101.3% increase
  • Vanguard Emerging Market - $34.47 - 85.3% increase
  • Visa - $70.18 - 51.3% increase
That brings my would be total unweighted gain to about 150%. A good return on investment is about 10-15%. Pretty damn good, right? But the thing was, because my available capital to invest was so scant, I wasn't really interested in the more expensive stocks, though I was pretty sure they would do well.

I thought Visa would be a great pick because it had only gone public in the first quarter of 2008. When Mastercard had their IPO, they were going for about $46, but then blew up to over $200 in just a couple of years. Because Visa is so similar, I felt confident they would perform similarly. They opened at about $60, but then dropped to $46 because of poor timing. But even at $50, I would have only been able to buy a few shares which wouldn't really mean much if I gained anything, unless it was something absurd like 10,000%.

The Vanguard Total Market felt like the safest bet because it tracks the whole market, and it also has very minimal expenses to start with, but the same problem - I can't by many shares. The Emerging Markets felt good, but you never know with foreign markets, so I wasn't so keen on going with that one.

Here are two semi-long explanations about why I wanted Ford and Marvel:
  • The two stocks that I felt good about were Ford and Marvel. I had been tracking Ford for the previous two years. I saw their shares plummet from around $6 only months earlier to less than $2. I was almost sure that Ford couldn't drop any lower. I remember even having a chat with Dave about buying shares of Ford. I felt good about Ford because they seemed to be in better shape than GM and Chrysler. They were getting some assistance, but were not being taken over to the extent that the other guys were.
  • Marvel was a sentimental favorite, but felt like a sound investment too. I read an article a few years ago about Marvel being one of the hot stocks. It went from $3-4 to about $25 in a couple of years. I didn't think Marvel would dip below $20 ever, so my baseline price for when I thought it would be a good time to buy would be low 20s. Also, Marvel had just come off having Iron Man as their summer blockbuster. What was significant about that was Iron Man was the first Marvel movie that belonged exclusively to Marvel. They had to sell the rights to Spiderman and X-men because they were operating with so much debt. Iron Man, however, destroyed in the box office and they had already committed to two more sequels. In addition to that, they have a slew of other franchise comic book movies coming out over the next several years, so that felt like a really good thing. Plus I just thought it would be cool to own a piece of a company that I had loved so much as a kid. So what happened yesterday? Disney acquired Marvel, instantly doubling the price of the stock.
One thing that I had done to put myself in a position to start buying stock was signup for the Charles Schwab high yield checking account that is linked to a brokerage account. You can transfer money online from your checking to your brokerage account online, without any fees. And with each trade, you pay a $12 fee, which isn't the best, but made it super easy to do.

One night I was ready to buy 500 shares of Ford, and 37 shares of Marvel, costing about $1500. I only had to click on the confirm button to do it. And then I backed out. Why? The stock market still scares me. It felt like gambling, and it would have been most of my savings. I was afraid of not having much available cash in case of an emergency. But compounding all of that, Obama had just recently committed to letting the Bush capital gains tax cuts expire, effectively doubling the rates. So if I were to have gotten an awesome 20% return on $1000, that would be $200 without taxes. With a capital gain tax of almost 40%, that leaves about $160 profit, which didn't feel like enough money to justify the risk.


Who knew that if I had invested like I was thinking at the time, my 500 shares of Ford for $630 would now be worth $3620, and my 37 shares of Marvel at $23.70 at $860 would now be $1760, totaling $5384, for a 258% return? I was a "click to confirm" away from taking the plunge.

Dammit. Damn you sense of responsibility. And damn you Obama for raising taxes and scaring me away from investing in the economy. One day, stock market, you and I will meet, and I'll be on better ground to handle you.

1 comment:

Dave said...

you really blew it. i was gonna throw money at that too like we agreed. so the way i see it... you owe me $3,000 payable pronto.