If you’ve spent any time looking into stocks and which ones to invest in, you’ve probably seen articles that talk about how much money you would have if you had invested in XYZ stock 30 years ago. I hate these articles because it assumes you would have known 30 years ago what the stock would do and never sell it. It’s the same as watching a sports game and then after seeing which team wins telling your friends how much money you would have won if you had bet on the winning team. Let’s take a more realistic approach to this same concept and follow the journey of 3 investors over the last few years.
Let’s meet the 3 investors we will be following. Kelly, George, and Patty have been friends for a while and have talked about investing but could never agree on the correct way to invest. Patty always listened to investors such as Warren Buffet who say investing should be boring and you should just stick money away and forget about it. George had watched the Wolf of Wall Street one too many times and dreamed of using stock investing to strike it rich. Kelly believed that you should invest in companies you believe in but didn’t think you should buy and hold a stock forever, but only for as long as it benefited you. One day in December of 2021 they each agreed to invest $10,000 to see whose strategy would make more money. They decided they would purchase on 12/31/2021 and buy or sell based on their own investment strategy.
Conservative Patty
Patty invested $10,000 into an S&P 500 index called VOO. She felt like based on everything she read that would be a good ETF (exchange traded fund) that would grow consistently over time. She bought in when the price was $436 a share for a total of 22.9 shares. Patty is a little worried because at the time she purchased the ETF was trading at all-time highs. She knows this stock pays out dividends as well, so she plans to just let it sit and reinvest those dividends every quarter. She also agrees to herself that she is only going to look at her portfolio every 3 months when the dividends are paid to see how well the stock is performing.
During the first month of 2022, Patty’s investment was down by almost 10%. She promised herself she wouldn’t look at it, but she couldn’t help it. Only a month into investing and she was down almost $1,000. She felt like this shouldn’t happen since she picked a more conservative investment, and she is seriously doubting her choice. She remembers what investment advice she has received before and reminds herself that in 20 years she will be happy she picked this one.
On 3/29/2022 Patty logs into her account to see how she is looking now that she is receiving her first dividend payment. She is a little upset to see she only got $31 which earned her .07 of a share of VOO. This increased her total number of shares from 22.9 to 22.97. “Ok, so it’s not that much but over time it should add up,” she tells herself. Patty looked at how much her shares were worth, and they were up to $9,509. She was still down from her initial investment of $10,000 but it seems like it’s heading back up from being down almost $1,000, so she is feeling a little bit better about her decision.
True to her word, Patty does not check her account for another 3 months. She logs in to see a similar dividend payment to the last one (this time it was $32, and it earned her .09 shares). This brought her total shares up to 23.06. When she looked at her account value though she almost threw up. It had dropped down to $8,047. Patty did not know how this happened. As she investigated it, she saw that VOO has continued to drop over the last 6 months, but also most other stocks were down as well. She considered selling now and taking her $8k out of the market for fear that it would continue to go down, but she thought to herself it should go back up and I’ll make my money back.
On 9/28/2022 Patty logs back into her account to see her next dividend payment. This one is a little bit more than last time ($33 which earned her another .1 share bringing her total shares to 23.16). Patty looks at her account value and sees it’s even lower than last time. Her current value is $7,874. She is furious. She’s had her money invested for 9 months and she’s lost almost 25% of her money. She thinks of other investments she could have done that wouldn’t have lost her money such as CDs or even just putting it into a savings account at her local bank. She wouldn’t have earned much on the money, but she’d have her $10k which is a lot more than she was looking at now. The only thing that stopped Patty from selling her shares was remembering when Covid hit, and stocks tanked how quickly they rebounded, and she didn’t want to risk making her money back. She felt like she had no choice but to stay invested to try and earn back the thousands of dollars she had lost so far.
On 12/20/2022 VOO paid out a little bigger dividend when Patty logged into her account. The dividend she received was $1.67 this time so she got a total of $38. This brought her total shares up to 23.35 with an account value of $8,476. Finally, her account balance goes up instead of down. Maybe there is still hope for Patty to get her money back.
VOO continues to pay Patty dividends consistently every 3 months around $1.50 a share. She earns roughly $35 every time and it goes straight into more VOO. Patty logged back into her account a year later (12/20/2023) to check her account. She sees that she has a total of 23.6 shares and her account value is currently at $10,148! She is excited that she has earned back her money but also frustrated that she has had her funds tied up for 2 years and she has about $150 to show for it.
Fast forward to today. Patty logs into her account to see she has a total of 23.67 shares of VOO and at the current trading price of $490 a share, her account value is sitting at $11,598. This gives her an increase of 15.98%. The crazy part is that for the first 2 years of her investment, she was in the negative and it wasn’t until the last 6 months that she earned any money. It wasn’t like she thought it would be where her investment grew every couple of months, but Patty felt like she learned a lot.
Time the Market Kelly
(Tesla went through a 3-for-1 stock split in 2022, for the purposes of this scenario we will assume current post-stock split prices)
Kelly does some research and sees that Telsa (TSLA) looks like a good company to invest in. Their stock has dropped a little bit from its all-time high of $400 a share so it looks like it’s on sale, so she buys in at $352 a share on 12/31/2021. With her $10,000 investment that gives her a total of 28.4 shares. She wants to watch what the stock does so she can learn when she should buy and sell to maximize her profits. She knows Tesla is considered a more volatile stock so if she can figure it out, she is confident that she will make money. “Buy low and sell high, right?”
Kelly holds onto TSLA for an entire year without making any trades. She watches it every day. In her first month of ownership, shares drop over 25%. She has faith that the company will rebound since she believes in its mission, so she holds strong. She notices how certain news will make the stock jump up and sometimes the price will drop out of nowhere. She sees articles about a stock split coming up in Aug. of 2022 and she thinks to herself that has got to make the price go up. While initially, the stock dropped immediately following the split, it ended up going up about 10$ a share. Kelly believes she is starting to see some patterns here.
On 1/6/2023 Tesla hit an all-time low. Shares traded as low as $101. Kelly’s portfolio which had started with $10,000 now showed a value of $2,868. Kelly couldn’t believe that in 1 year she had lost so much money. She consulted friends and family to ask them what she should do. At this point, she felt like she had lost so much that there was no point in selling. She decided to hang on and hope beyond hope that Tesla stock would jump back up.
By 2/17/2023 Tesla stock had almost doubled from where it was just over a month previously. Kelly now saw her account balance sitting at $5,680 and she thought to herself I need to sell. The stock has jumped 100% in a month so there is no way it can go any higher. She wanted to lock in whatever money she could, so she put in an order to sell and sold her 28.4 shares at $200 each.
Less than a month later Kelly sees that TSLA shares have indeed dropped in value like she thought they would. On 3/13/2023 she decided to buy back in with everything she had from selling before. She buys back in at $165 a share with the remaining $5,680 giving her a total of 34.4 shares. This is more shares than she started with, so she is feeling good. The stock slowly increases over the next couple of weeks to over $200 a share. Kelly hangs on because she thinks it is going to jump up a lot higher. Unfortunately, it doesn’t get much higher than $200 a share before it starts to drop down. From 4/21/2023 to 4/26/2023 the stock prices go from $165 a share to $153. The price pops up to $160 on 4/26/2023 so Kelly decides to sell. This leaves her with $5,504 in her account.
Kelly kicks herself because it seems like as soon as she sold her stock TSLA decided to shoot up. Day over day the stock showed price increases. Kelly is afraid she is going to miss out on this jump in price, so she tells herself if it jumps over $200, she is going to buy back in. On 5/30/2023 the price hits $200 so Kelly places a buy order. She spends her $5,504 and purchases 27.5 shares. Just like she thought, TSLA continued to jump higher and higher. On 6/13/2023 the price jumped up to $250 a share. Kelly decides to sell and lock in her profits. Her account now has $6,875 in it and Kelly feels pretty good that she was able to make a nice profit on that last trade.
On 7/3 Kelly feels like she may have sold a little too early. TSLA keeps going even higher. She knows the market is closed on July 4th so she wants to buy back in quickly so she can make even more money. TSLA shows no sign of slowing down so she feels like she needs to get back in! She uses all her funds to buy back in when TSLA is trading at $275 a share. This gives her 25 shares. When the market opens back up on 7/5/2023 the price has increased to $283 a share so Kelly feels good about her decision. By 7/18 the price is almost at $300 a share. Kelly’s portfolio has a value of $7,475. She decides that if it gets above $300 a share she will go ahead and sell to lock in profits.
Unfortunately, TSLA does not get above $300 a share and starts to drop. Kelly continues to watch it drop for about 2 weeks hoping it will reverse any day now and she can go back to making money. On 8/8/2023 the price drops below $250 so Kelly decides it’s not going back up so she better sell to avoid losing anything more. She now has $6,250 in her account. TSLA shares continued to drop and hit $215 later that month. Kelly feels good about selling her shares since she would have lost a lot more had she held.
Shares start to head up over the next 30 days. Kelly watches as share prices jump to $275 on 9/14/2023. She feels like this is too expensive but thinks if she can wait for the price to drop down a little bit more then she’ll buy back in. On 9/27/2023 Kelly thinks it’s her time. Shares have dropped to $240 a share so she uses the last of her funds to buy them up. With her $6,250 she picks up about 26 shares. For the next few months, the price fluctuates a little bit but not enough to make Kelly want to sell. At one point the stock dipped below $200 but it quickly rebounded. A few times Kelly considered selling if it got back up to $240 but it never quite did so she continued to hold on. Eventually, the stock price dropped to $190 on 1/25/2024 so Kelly decided to sell so she didn’t lose any more money. Her total portfolio value sat at $4,940 and she decided then and there that stock trading was not something she ever wanted to do again so she vowed never to buy stock again.
Over 2 years Kelly took her $10k and saw a decrease of 50.6%. While she had some wins with her trading strategy, overall she had more losses and lost a good portion of her investment. Kelly feels like she made the right decision to sell since TSLA currently trades around $170 but if she could go back, she would have rather kept her money instead of investing it.
To the Moon George
(GameStop went through a 4-for-1 stock split in 2022, for the purposes of this scenario we will assume current post-stock split prices)
George has been hitting Reddit and hearing about what could only be described as the single most significant thing investors have done to try to topple the system. He has read about “meme” stocks and how many people are getting rich from investing in GameStop (GME). He has seen how crazy high the stock has gotten recently so he decides he wants to get into it. He throws his $10k into it and decides he is going to watch it go to the moon. He gets 270.2 shares on 12/31/2021 and vows to hold onto them.
Over the next couple of months, shares of GME have dropped but George looks at this as an opportunity to double down. On 3/14/2022, shares drop to $20 each. George takes another $10,000 and decides to buy even more GameStop. His purchase gets him 500 shares which puts his total number of shares to 770.2. He’s got $20k invested at this point and his portfolio is only worth $15,404 but he’s not worried. He knows Reddit will help him make so much money.
On 3/28 GameStop jumps in value. George logs into his account and sees that his account, which was only at $15k a couple of weeks ago, now shows a staggering $36,199! He has made an over 80% return on investment and is pumped! He calls his friends and tells them all to invest in GameStop. He says it’s about to take off even more and they could change their lives. His friends urge him to sell since that’s a ton of money but George refuses. Why should he sell? This stock is going to the moon!
Shares drop in value a little bit over the next few months but nothing that concerns George. He is just waiting for these shares to skyrocket like everyone on the internet is saying they will. He thinks he knows when this is going to happen too since the stock is set to split 3:1 soon. A couple days before the split George decides to take another $10,000 and buy even more GameStop. On 7/21/2022, just a day or two before the split, George uses the $10k to buy another 263.1 shares at $38 apiece. This puts his total number of shares to 1,033.3 and a portfolio value of $39,265. He has $30k invested at this point but he knows after the split this stock is going to pop.
George waits patiently and finally logs into his account on 8/8/2022. Shares are trading at $48 each and his account value shows $49,598. He calls his friends to tell him the good news. They urge him to sell again but he says you told me to sell before and look how much more money I’ve made! He says he’ll sell once the price hits $100 a share. Until then he is going to hold!
For the next 4 months shares of GameStop slowly decrease in value. Ever hopeful that they will pop back up, George continues to hold onto them without selling. On 1/6/2023 he logs into his account to see shares trading at $15 a share. He can’t believe what was valued at almost $50k just a few short months ago was now worth $15,499. Every day he logs in hoping to see his account jump back up to what it was and every day he is disappointed to see it even lower than the day before.
6 months go by, and GameStop starts to see some hope for a jump. There is talk that they made a good amount of money when shares were high, and they are planning on operating with a profit for the first time in a while. On 6/7/2023 shares are trading at $26 apiece. George’s account is up to $26,865 and he starts to get those feelings he had before when his account grew 80% in a couple of weeks. George is sure this is bound to happen again and is excited for the upcoming weeks.
Unfortunately for George, the price slowly drops down from here. The stock price gets lower than he has seen it since he invested but then it will pop up for a little bit. However, the highs have gotten lower, and the lows have gotten even lower, and George continues to watch his account grow smaller and smaller. He has also invested most of his savings into GameStop and is starting to feel the pressure of not having that nest egg. On 4/17/2024 George could no longer afford to hold on to GameStop so after almost 2 and a half years he gave up and sold his shares. On this day the stock trades around $10 a share so George takes home $10,333 and is disappointed that he didn’t sell when he had the chance. The total loss is -65.55% but George bet way more than he should have and is now $20k in the hole.
Fast forward a few weeks and George sees some things on the internet about GameStop. Within 2 days shares hit an all-time high of $64 a share. Regret fills George as he realizes if he had held on for just a little while longer, he would have had $66,131 on 5/14/2024. While shares have since dropped, George’s account would be worth $28,932 if he had held onto those shares until today.
Conclusion
While these scenarios are a work of fiction, what happened to the stocks during these times was not. It’s impossible to know what the stock market will do in the short term as well as to know what it will do long term. Even with conservative investing, you could still lose money. I share this so you can see the emotions that go along with investing. I have personally found myself feeling the same way Patty, George, and Kelly felt during these 2.5 years of investing. Fear and greed drive a lot of decisions when it comes to investing and they can be powerful emotions. Remember these stories the next time you are considering jumping on the bandwagon of the next “hot tip”. Remember that even if you are up today the market can turn on you very quickly. Also just because you are down today doesn’t mean you can’t make it back. Remember it’s not about timing the market it’s about time in the market. We are not recommending specific stocks today, but instead, we are recommending you be cautious and be aware of timing the market and meme stocks.
Let’s take a look at the final investments for all of our investors today, and see where they sit with their portfolios and strategies.
If you’re interested in more education about stocks, check out our Stocks & Market content here.
