“I got out of AMC today, took a nice little hit on that one…”
…said my next door neighbor on a phone call as I walked by his patio to check my mailbox. That was a couple days ago. Poor fella… I imagine he’s not alone.
I started writing this blog post on 1/14/21 about my first week in the stock market. Here’s that intro:
“After seeing the Bitcoin and Tesla crazes in December, I was ready to start figuring out this nebulous world of stocks. My friend referred me to Robinhood-a free app for stock trading-that got me going with an initial investment of $100 at the new year. They gave both of us a free stock valued at about $3.20 just for the referral.”
I love this part—
My friend referred me to Robinhood - a free app for stock trading
I wrote like my readers never heard of it. I laugh because at this point, I would be shocked if you don’t know about Robinhood. Little did I know that a tsunami was creeping up around the corner…
I remember seeing GameStop (GME) and AMC in those $3 ranges around this time of writing. I had seriously considered AMC because they had gotten a big bank loan in January to avoid bankruptcy. I thought it was a bad sign, though, and too risky with the pandemic. Not to mention that they closed down the iconic AMC 30 in Houston a few months ago where I snuck into Scary Movie as a kid and literally laughed my guts out! Was probably bitter about that one…
I was at work when the GME saga broke. My coworker follows reddit and told me about the jump. When I saw it hit $40, I thought that was the peak. Of course I’m kickin’ myself for that one.
I’m kickin’ over a lot of missed opportunities. Although I don’t know much about stock trading, I seem to have a solid research strategy. Or, maybe just the right apps installed.
I downloaded Yahoo! Finance to help me track the key details of companies. Also, a great perk is that it notifies me when big news or market changes occur. Take Novavax (NVAX) for example. I got notified around 3:05 pm CT (just after the markets closed) that their covid vaccine tests were about 85% effective. I checked their stock price immediately and it was only around $120. Within 10 minutes, it shot up $40, and by the opening bell next day, it had nearly doubled. And it only kept climbing after that. I use this as an example of a key learning lesson in my first month of trading: trust my gut.
Along with that, the other lesson I’ve learned is to always hold, and know when to sell your gains. Apple was my first experience of the hold game. Naturally, as a first time trader, that was one of my first stocks. I had $20 in it, about 1/6th of a share. I held it for 3 weeks in January at a loss. The loss was marginal compared to the upside potential, which is a reminder I have to keep drilling into my head when it comes to these large cap US companies. Simply hold. Unless the business fundamentals change, play the long game; the odds are in my favor. Just a couple of days after selling my Apple at a loss, the price jumped well above what I paid and has not dipped back below since. This has happened to me on a handful of large cap stocks, including Align Technology (ALGN) and Raytheon (RTX) where I got out early by breaking even, only to see an uptick the next day.
This speaks to the emotional and psychological game at play on the market. My heart can’t take the insane swings! This was evident by the end of my first month of trading. I had consistent weekly gains of about 2% until the last week when GME took over everything. By the end of January at market close, my portfolio was down 0.90%, or a loss of $15.00. The pendulum swung had swung both ways so far, so quickly. And that’s stocks.
It was rough, and I was nervous all weekend. Luckily, my friend that got me into Robinhood gave me reassurance to hold the line and see what happens Monday. Sure enough, the free market naturally recalibrated itself, and by the opening bell I was back at break even.
That brings me to this week, which has been a slam dunk! It’s been a run across the board all week though, so it’s no surprise. In January, the most I peaked was 1.65%, or $24 gains. Within the first week of Feb, I am up 4.6% for a gain of about $70. Ultimately, I’m not sure if the gains are worth the hours I’ve put in to research, but still, I think it’s better than my money just sitting in a savings account doing nothing.
Thoughts about Robinhood:
I’m totally addicted, and it’s by design. The app is extremely clean and no frills. Upon logging in, I instantly see how my portfolio is performing in real-time. I can quickly swipe between time periods to see how it has performed daily vs weekly vs monthly and so on.
I can make lists that help me track stocks I’m interested in, but I can only view one at a time. As my lists grow, it gets harder to scroll and track them. This is my first grievance against the design. In this sense, it is not a true trader’s brokerage service in my opinion. It’s a great “dip your toes in the water” app, but the depth stops at the shallow end of the pool. I made the mistake of diving in deep (in terms of money transferred into the account), and now I’m stuck in a less-than-ideal platform that limits my ability to grow as a trader. I’m shopping for an out.
Honestly, I’m not as upset about their controversial decision to ban trading on the marquee short squeezes of the week that made headlines. On one hand, it’s totally wrong from an ethical standpoint; their choice was the antithesis of the “free market” premise that drives this idea of Americanism, and it was counter-intuitive to their brand name. On the other hand, regulation was inevitable. As usual, the Fed was too slow to act, so the market regulated itself. Being without precedent, I’m not surprised to see immediate restrictions. Still, locking the “retail traders” into their positions was a mistake.
My real gripe with Robinhood is surface level. It’s simply too simple, or oversimplified for my goals as a trader. I wish I had known that sooner. When compared to other products out there such as Webull or TD Ameritrade (two platforms I’m considering at the moment), the tools on Robinhood don’t deliver. While it’s an efficient and elegant mobile-app, it is not conducive to desktop trading. It lacks the most commonly adopted features found in other platforms, so I understand why the pro’s look elsewhere.
Final words:
My mom put it best when I mentioned my new investing habit to her:
Sounds like you’ve got too much money, and too much free time on your hands.
Leave it to mi madre to speak the truth plainly. I’ve been quite fortunate with my employment during the pandemic, working only 29 hours/wk. Having climbed my way out of my debts (student loans withstanding), I am able to dedicate portions of my income toward investment trading. It was the process of trying to sell my car last November that got me into the finance mindset. That led me to learning more about how my 401k works. I had many productive conversations with the folks at my credit union and Fidelity. I made the calculations and decided to play my hand at the market once my major financial burdens were all squared up. So far, it’s been a wild and rewarding ride, aside from the occasional heart attacks that sent tremors through my pocketbook! (not real ones, my heart is fine y’all)
As for Robinhood, it’s been a great toy to play with, but this kid has outgrown it. I feel confident from all of my research and hard-knocks so far that I can play with the big dog tools to my advantage. It’s time to move up, just like my portfolio.
The only advice I can offer is that if you are considering brokerages, look beyond the easily accessible Robinhood app. There are too many options out there to settle for what’s at your front doorstep. Shop around, and commit to a brokerage that you’d want to stick with for the long game.
Let’s go to the moon!
Disclaimer: this is not financial advice and all statements are my opinion only.