My first trade is an expensive lesson

By | October 23, 2019

My first investment is through the stock purchase plan in my first job. IIRC, I can invest 10% of my salary to purchase company stock every 6 months, and the purchase price was 85% of the lower of the stock price at the beginning or the end of the purchase period. This sounds like a great deal so I participated in the stock purchase plan.

I was able to accumulate around 300 shares after several years and the stock kept rising. I thought it was about time to sell the stock and made my first profit.

So I took my paper stock certificates (yes they exist…that’s the days before internet and online trading) to the bank and opened a stock trading account so that I could sell my stock.

The banker told me that the price of the stock was $39.50 (which was a bit down from the intraday high when it reached above $40) and asked whether I wanted to sell at that price. For some unknown stupid reason, I thought the stock would keep going up and $40/share was a nice round number that could be reached easily. So I told her to set up a limit sell order at $40.

It turned out that $39.50 was the historic high for the stock. It never reached $40, and started the downward slide from there. Eventually I lost patience and confidence in the company, and sold the stock at $16.25 (which was a loss). Whoa…a silly mistake of trying to get $150 more turned out to be a loss of $6975!!!

Lessons learned:

  1. If you think the current stock price is good enough to buy or sell, use market order to buy/sell at the current market price. Don’t sweat over the minor price difference as it usually is not significant (unless it is a day of market crash or big market swing). The extra $150 ($0.50 per share) is only 1.25% difference in that trade!!
  2. If you believe that a mistake was made, and that the stock should be sold, don’t just sit on it. For example, I should sell the stock at $30 during the downward slide!!