Money: Lessons from my first stock purchase …

It was two years ago when I start invested in stock. At that time, my friend Agi already had a lot of experience in stock investment. Therefore, I asked him about which stock to go for and how it would go. At that time, the Archer Daniels Midland Company (ADM) was on the raise. The trend was going straight up. Unfortunately, it was the high point when I bought the stock – around 45USD/share. Latter this stock kept falling – to the lowest around 30s in January 2007. The stock price keeps bouncing up and down and I eventually sold it around 37 – losing more than 8 dollars per share for that 100 share purchase. Agi just told me today that the stock has gone back to 45USD/share level. Did I sell it too early or should I wait until the stock bounces back and sell it?

I think I made a good decision when I decided to sell the stock – no one can ever anticipate how a stock will go. In retrospect, there are several lessons that I learned from this investment.

The first mistake I made was buying a stock that I don’t know. In fact, I am still not quite sure about the product of ADM, its profit margin and how well is this company compared to its competitors, let alone taking a look into its balance sheet, income statement and cash flow statement. Knowing what you are buying is crucial. Nowadays I really don’t buy stocks of the companies I do not know – even if everyone talks about it and says it will triple (I will do sufficient research on the stock if that’s really the case!).

Secondly, the stock is not that bad since its gives out dividends. Capital increment is definitely something to pursue but sometimes getting dividends can be very lucrative. Although I did not get at a good price for the dividend I got paid, at least it is better than some other stocks that do not give dividends.

Finally, don’t just listen to others, have some judgment yourself. Investment can be a long and lifelong learning process to do. Learning from the mistakes, correct the mistake and don’t make the same mistakes again.