It’s a shame, really. I should have stuck to my guns. I’m typically a very good, goal-oriented person, and yet I gave into the moment. In an anxious fit, I bought even though it wasn’t at my goal price. What I’ve learned since, is that two days later on August 29th, the COH stock went back down to $40! If I had only exercised a little more patience and strictly adhered to my father’s advice I would have wound up with more shares and reached my goal sell price sooner!

My original goal was using $4,000 to buy 100 shares at $40, earning 38% and selling at $55. Which morphed into lowering my investment amount to be equivalent of 20% of portfolio. This meant my new goal became using $3,000 to buy 75 shares at $40, earning 38% and selling at $55. This seemed very reasonable, as April of this year the stock reached $54. But what I ended up doing was using $3100 to buy 70 shares at $43. If I still want to earn 38% I have to wait for the stock to reach $59.

I also didn’t use the dollar cost averaging technique effectively. I bought my first order at $43.35 and my second at $43. Nice! I saved a total of $7. But by buying on separate occasions, I was charged two commission fees which equaled $14. I didn’t come out ahead. Had I bought at $43.35 and $40, I would have saved $60 which would have been worth it.

Also, if I had known not to invest more than 20% of your portfolio prior to my first purchase, I would have divvied up the shares differently. I think, perhaps, I would have bought 40 shares to begin with and then followed with 30. Even a straight 50/50 would have been wise.

If that SmartMoney article is right in predicating a 36% increase in a year, I could easily walk away with $1,200 in about a year’s time. Not a bad return for little effort. Although, since I bought higher it may take longer for me to reach my goal sell price. Which means, I could potentially lose out on greater gains had I bought lower, I could have sold faster and reinvested that money sooner.

What I’ve learned:

  1. Set goals and adhere to them
  2. Use dollar cost averaging intelligently
  3. Use limit orders to buy stock
  4. Don’t invest more than 20% in any one stock
Advertisements