What I’ve learned Investing in Stocks
I started investing in stocks in 2014. The first purchase I made was the stock that is now called Canopy Growth. At the time of its initial public offering it was Tweed Inc.
The IPO was around $4.60 per share, luckily I did not buy right at the IPO. I did this unknowingly, but over the last few years, I have learned to wait a few weeks after the IPO to buy. With these stocks there is always a drop.
The most important thing I have learned, do not buy a stock based on its share price. I know this sounds wrong, you want to buy a $1 stock and have to go $100 right. When buying stocks you have to look at the Market Cap. Two stocks that are both priced at $1 per share can be valued completely different depending on how many shares they have outstanding.
The $1 stock with a market cap of 500 million is cheaper than a $1 stock with a market cap of 1 Billion. The billion dollar company has to have more growth in order to double.
Investing in Stocks
As you can see in the chart below, I made many purchases of Canopy Growth over a period of time, about 6 months or a year.
My first purchase was at 3.87 and last at 1.64. The stock price dropped more than 57% from my first buy.
I’ve learned to not “Panic Sell” which is when you are so scared of losing money you end up selling it when the price drops, guaranteeing the loss.
Only invest what you can afford to lose, I started out investing $1000 and slowly bought more shares over time, dollar cost averaging. $1000 was an amount I felt comfortable leaving in the stock even if it went to a big fat 0.
I’ve also learned not to buy during run ups. As investor psychology chart shows below, the highest risk purchase is when you buy a stock at the top of the market. After the November 2016 spike in prices I tried to avoid buying stocks. Although I did buy 1 or 2 while they were priced too high.
The gains seen in this industry can lead to false confidence, leading us to buy while prices are going up. This could wipe out all your gains. I’m trying to avoid that but until things fully play out, I don’t really know if I’m being over-confident.
The panic sell happens when you just can’t handle the stock dropping any more. You sell the shares and they recover shortly after. One thing that has helped me is when I see all the stocks dropping I know its a sector wide correction. When the overall market is dropping I’m less worried about my stock crash.
Investing in stocks will put you through this chart and then some. The stocks are highly volatile. You need to be able to stomach the drops and also handle the thrill when they go up. An easy way to beat this chart is to not monitor stocks daily.
I’ve made a few more purchases over that last 3 years. In the above chart I had a grand total of over $6,000 invested into Canopy Growth. I stopped buying when I ended up realizing how much I had invested.
Now I have much more invested, over time I got used having a large amount of money invested. With over $22,000 now invested in Canopy Growth which is now worth $44,000.
I started buying again after seeing the price decline from around $12 per share. Expecting it to rebound.
I bought at $8.95 and the stock continued to drop, bought more at $7.79 and finally about $7,000 worth at $7.74. With my last purchase I invested as much capital in one trade as I originally invested.
I’m continuing to hold my stocks long-term, with the thinking that we are getting in on the ground floor of a new industry. I’m going to continue watching the stocks, adding more positions and selling off others if I feel the company isn’t going anywhere. Right now I am focusing on buying companies with international expansion plans. This will help them have the most growth potential.
Below is all my purchases of Canopy Growth this is only one stock in my portfolio. Will be sharing more in upcoming posts.