A Tale of Two Portfolios
Before I started investing, I thought it smart to practice investing. I found a website that let you practice with virtual money and used real market data to see how you were doing. Now, this was 2017 going into 2018 and so it was a great year to be invested. I didn't know much about investing but I tried to think of companies that were strong blue-chip stocks and so invested in Walmart, Pepsi, Adobe, and Union Pacific. It took me a couple weeks to gather these four and get as many shares of each with my virtual 10,000 dollars.
Fast forward one year and my account had grown about 30% to 13,000 dollars. I was ecstatic with the growth of my fake portfolio. I still had it in my mind that every year wasn't going to be as good as this year, but I had so much excitement and anticipation to start my real stock portfolio.
Keeping the paper trading account, I deposited 50 dollars into my account and started trading. Over the next couple of months, I would put in a few hundred dollars and tried to recreate my success with the paper trading account. I tried to diversify but with such a small amount it became difficult. This led me to invest in much cheaper stocks. I invested in stocks like Ford, AT&T, and General Electric.
The rest of 2018 and into 2019 were much more difficult on stocks and I found myself in the negative until recently. I finally broke even and now have even gained 5% on my portfolio. It had been a while since I checked the paper trading account and so I decided to see how it had done and to my surprise, it was up 20% during the last year when I had struggled to make anything.
I was shocked and a little bit upset at the difference between the two portfolios. The last month or so I've considered what was different between the two and this is what I've come up with.
In the first portfolio, I thought about companies that I heard were doing pretty well and that seemed like they were going in the right direction. The stock price of each of these companies was close to 100 dollars or more. I didn't worry much about the dividend or how much growth the company would have, I was just focusing on good solid companies. The second portfolio, however, had companies that were in the 5 dollars to 35 dollar range. These were still very recognizable companies but they didn't have very much good news surrounding them.
Most companies don't aim for their stock price to be that low. In many cases, they had seen a few years of difficulty and the stock price had been dropping. I don't know if I would say they were bad investments. Some turned out better than others, but I wish that I had put my money with better companies. I've learned a difficult lesson from this. Evaluate the company and don't be afraid to invest in ones with a higher stock price. 100 dollars seems like a lot to use on one stock when your whole portfolio is only 300 dollars but if the companies are good then the investment is worth. I'm now revamping my portfolio to show the lessons I've learned and I'm even more excited to see what the next year has to bring.