So I recently committed a cardinal sin. I shot myself in the foot and am now going to pay stupid tax. Anyone have a dunce cap I can wear?
A while back, I wrote my Investment Plan to help set a guideline for all my investment vehicle purchases, length of holdings and portfolio composition. I was, and still am, proud of how it turned out. You can take a look at it here. It has already served as a good cornerstone of my investment strategy and, up until recently, deterred me from making some stupid buys.
I fell into the trap of buying a stock because someone said it’d be a good buy. I was talking to a friend from work who has recently been on an earnings-play kick. Now, it’s important to note that playing the earnings is NOT part of my strategy but I got sucked into a “sure thing”.
We were talking about buying BioTelemetry Inc. as they were slated to release their earnings last night (Feb 19) and had beat their earnings that last 3 quarters, so of course… it had to be a sure thing.
To make matters worse, I figured I’d throw some of my Christmas bonus at the stock since “it was money I’d never planned on having in the first place”. After very limited research, I called up my broker first thing in the morning and told her I wanted to buy. She was hesitant but after my reassurance decided she’d try and buy below $11. I snagged the stock at $10.82, ecstatic since Zacks’ analysts were calling for a target price of $15 after the earnings were released.
To my dismay, BEAT did beat their revenue but didn’t make their EPS, thus the price has dropped just over 10% leaving me to pay stupid tax if I sell or try and ride this thing to break-even. What I’ll likely do is hang onto this and see what the next quarter brings since I do feel bullish about the stock and am optimistic about what the firm is doing with their products and services.
The point however, is that I loosened my self-control, got hooked into a “sure thing” and deviated from my strategy. Letting your emotions dictate what stocks you’re going to buy typically lends itself to heartache, as I don’t believe a single investor will ever beat the market over the long-term.
I’m somewhat disappointed in myself, take full responsibility for my actions and am going to use this as a learning experience. I’m still hopeful to make a return on this but now I’ve got to hang onto this stock for a longer period of time than I’d anticipated and broke a promise to myself NOT to deviate from my strategy.