I want to share my first experience investing in a stock. It was July of 1997, just a few months into my first job. I took my boss’s suggestion and opened an online brokerage account. I researched and tracked the price movements of a few stocks, and when the price felt “right”, I pushed the button and made my very first stock purchase - 200 shares at $17 a share, plus a small transaction fee. For the days that followed, I watched my account value move constantly - it dipped a bit, moved sideways, and then, shot up! A couple of weeks later, I sold all 200 shares and couldn’t believe I had nearly doubled my investment in such a short time. Over the years and decades that followed, I watched that same stock climb higher, and higher, and split time and again… and yet, I never bought more shares aside from what I held in mutual funds and ETFs.
Anyone who invests in the stock market knows that it involves a lot of moving parts that can impact your outcome – knowledge, timing, luck, and various psychological factors, often referred to as “behavioral finance”. While I can’t turn back the clock and prevent my younger self from making that foolish move of selling all my shares too soon, I can share some methodologies that may serve as useful guidelines for others.
Before we dive deeper, let’s get some basic concepts –
1. Stock. A security that represents the ownership of a fraction of the issuing corporation.They are subject to risks, including fluctuating prices and loss of principal.
2. Bond.A fixed-income investment where individuals lend money to a government or company at a certain interest rate for a certain amount of time. They are subject to market and interest rate risk if sold prior to maturity. Their values could change as interest rates and availabilities change.
3. Mutual Fund.Mutual funds are pooled investments managed by professional money managers. They involve risk, including possible loss of principal. They fluctuate with market conditions and may not achieve their investment objective.
4. ETF. An exchange-traded fund (ETF) is an investment vehicle that pools a group of securities into a fund. They trade like stocks, are subject to investment risk, and fluctuation in market value. ETFs carry additional risks such as not being diversified, possible trading halts, and index tracking errors.
And here are some investing tips that could be beneficial –
1. Do your research. It’s important to do your research before putting your hard-earned money into any investment. Be careful of scams that often claim to offer “massive returns” or “quick wealth”, as they often push you to make hasty decisions. Take time to reflect, seek advice from reliable sources, and maybe play a market simulation game first.
2. Diversify. While it’s possible to score big with a single stock, the risk of losing is equally high. That’s why one may consider Mutual Funds and ETFs in general: as they offer a broader diversification compared to individual stocks. Though there is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio, nor does diversification protect against market risk.
3. Investing for the long run. Statistics shows that it is the “time in the market”, not “timing the market” that tends to brings long term benefits to investors. A tip - keep a sufficient amount of emergency funds, in savings or CDs, so you wouldn’t have to tap into the long term investment funds, especial during market downturns.
4. Take advantage of tax-benefits. When investing for the long term, try to maximize your growth potential by utilizing tax-efficient retirement plans/accounts, as well as 529 (for education), HSA (for health spending). Start early to allow compounding growth to work in your favor.
Remember, do your homework before you start. And, Good Luck!
If you are curious (as I occasionally am) about how much that stock I purchased in 1997 is worth now? Those 200 shares today would be 22,400 shares after 4 stock splits. Multiply that by $235.45 (a/o 2.12.2025) equals $5,274,080! That is how much my $3,400 (plus that small fee) initial investment would be worth, IF I hadn’t sold it. By the way, that stock in my own personal "Life Lesson" was Apple. Now you see why it is my favorite story in investing.
If you have any questions about investing, or finance in general, we are here to help. My email is: li.tian@lpl.com
Happy Investing!
Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. Li Tian, Ph.D., CFP® and LPL Financial do not provide tax or legal advice or services. Please consult your tax or legal advisor regarding your specific situation. Past performance is not indicative of future results. CFP Board owns the mark CFP® and CERTIFIED FINANCIAL PLANNER®" in the US.
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