Life,  Misc,  Stock Market

Here’s What I Did After Losing $40,000

Hay Guys! How you all going!

Summer has well and truly come to Sydney and I spent most of it outdoors with friends, how about you?! Hope you had a cracker of a weekend as well!

After the crazy week at work I’ve had, I needed this! Don’t you just love social interactions with good friends, good food and good times? What life should be all about.

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Love this city.

I got a bit of banter from a couple of friends about the last post as well – “hey funny guy, why don’t you actually post what you did instead of some Santa Claus fairytales?”

S…sorry if my darkest childhood memories got in the way of your entertainment.

So to appease those bulli… friends, here’s what happened after I had recovered sufficiently from having my finances bush-whacked:

Research, research, research.

The absolute key take-away from this experience is I could not just rely on “gut feels” and “because it feels right” when making investment decisions. Sure there’s an element of luck involved with investing but first and foremost without education and research, you’re relying on blind luck.

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Mr Nazgul sir, did you read TheFrugalSamurai’s post on education and research?

This meant I actually had to spend the time to learn what I am investing in. This concept is not rocket science mind you, but just like everything in life – if you don’t prepare and be educated, you won’t be making any informed decisions.

What I did in this aspect was to read and learn and absorb as much as possible from one of the greatest investors out there, the one who everyone wants to be and quote from – Kim Kard… sorry, wrong. Warren Buffet.

There are so many books written about the great man and his investment style it’s hard to choose which book to start from. It didn’t matter, I spent about 6 months dedicated to reading every article, book, memoir, excerpt I could find about Buffet and then applied it to practice.

The next 6 months I spent trawling through the ASX200 (Top 200 companies of Australia) using the principles learnt from my readings.

The results of which was (Schindler’s) lists upon lists of shortlists of companies.

Haha, sorry I lost my thought process watching that video. Hm… where was I – oh yeah! Lists of companies… yeah so I came up with a few names out of the 200 or so companies out there and watched them like a hawk. I was excited, I was back!

Then months past. Those stocks just sat there, scratching their nose and looking bored.

Nothing happened, no material price movement, no company announcements, no major events.

Fuck this, I can’t sit around all day – so I bought into one and IMMEDIATELY the price moved…

… DOWN.

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Haha, good one Woolworths.

It dropped over 50% in two days, as in the two days after I bought.

What a punch in the guts! Fuck this stock market game – GG, I’m out.

But you know what? I didn’t GG, I didn’t panic, I didn’t freeze, I didn’t ignore it – I researched what happened.

Reading through I rationalised the company took a severe blow to its bottom line – but not a mortal one.

So naturally I added to my position given the reduced price and began accumulating more.

Slowly the share price reflected what I guesstimated and now 5 years later it’s around triple my buy-in price.

It’s not the biggest position in my portfolio, but it’s my proudest. Mind you if I had only waited 2 days…

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Me, after waiting 2 days.

What, TheFrugalSamurai – are you a stock market guru now Homie, eh Ese? 

Why are you speaking like a Mexican gang banger? Anyway just because you apply a couple of principles of Warren Buffet doesn’t make you a guru, I mean, I didn’t even have the patience to catch the big break.

But from where I came before researching to where I ended up after, it felt a big leap.

Understanding the importance of research and preparation was the big highlight of what happened next after losing $40,000. Of course there were other important take-outs, what are they? Find out in the coming posts!

What do you think? Did you enjoy this post? Please help me out if you enjoyed this and click on the little “follow” button at the bottom right and be a follower! Thank you greatly!

 

4 Comments

  • Innocent Bystander

    What’s the #1 thing you look for when you research stocks? What’s your biggest takeaway from reading everything Warren Buffet?

    P.S. Full credit for showing patience and buying into what you believe in. However, hypothetically at what point would you walk away if your stock stayed bearish for an extended period?

    • The Frugal Samurai

      Hello sir – biggest takeaway I look for… um… would have to be margin of safety, i.e. buying in at a substantial discount to the market price, it REALLY tests your patience.

      Regarding the walk away price – it depends on the fundamentals and outlook. If it’s a decently run company with some decent ongoing competitive advantages, I’m inclined to hold it forever irrespective of the share price. I started out as a “trader” who didn’t know what I was doing to more of an “investor” who knew slightly more, there’s a big difference between the two.

      • Cal @ FI Me Outta Here

        Just curious. What was your rationale to hold until it was triple your buy in price? Most people would have probably count their blessings if they broke even after losing 50% / 40k!

        Even the most patient and well researched person would have probably cashed in long before then, under such circumstances. Took some cahonas!

        • The Frugal Samurai

          Hi Cal,

          Thanks for the message!

          Haha, no I don’t think it was cahonas or anything like that – I was fortunate to have just come off learning from the readings of Warren Buffet, yknow how his favourite holding period is “forever”.

          Even though the stock tanked as SOON as I bought in (sonauva… nvm nvm), Buffet’s teachings was still fresh in my mind. Also I did believe in the company and decided to back myself to hold and see.

          In addition, the amount that I put in although substantial wasn’t going to make or break my financial situation – luckily worked out in the end!

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