I haven’t done this in years. I bought a bit of hope. I bought a bit of stock. It was even MVIS. I hope that’s a good idea. Last week’s Early Harvest of selling some GERN met this week’s business receipts, leaving me with a bit of extra cash (though not enough to assuage the mortgage or the credit card balances.) One of the powers of money is that it can make more money. Rather than have the excess sit, waiting for the next bill, I decided to send it back to work, for at least a short while, by buying some stock. It goes against my normal strategy, but it’s worth a try. Good things can happen.
Most financial plans include an emergency fund. It is the backup in case of bad luck. Accidents happen, and one way to be prepared is to have that rainy-day fund sitting there, just in case. We discuss those funds as if they’ll never get touched. Witness here what happens when so much of the rest is gone that the emergency fund becomes the main fund. It happens. That’s why they exist. My plan had various pockets of emergency funds. My primary funds weren’t up to “enough”, but they were headed that way – until the Triple Whammy I’ve described elsewhere. Those primary funds have almost completely vanished over the last two years. What remains isn’t enough to pay the mortgage. For a while I tapped my IRA for the mortgage payments, but the primary stock (No More Dendreon) finally ran out, and so did my payments. Welcome to the world of approaching foreclosure.
My consulting business is up. Yay! (Need someone to help you make a decision or develop a plan?) But the revenues have to double before I can pay all of my bills solely from that work. The growth is good, and at this rate can hit that target in 2015. In the meantime though, there was a cash flow dip that had to be filled with the early harvest of some GERN stock from my IRA. Regardless of the way I keep my house, I am a tidy guy in many ways. I sold off a nice round number of shares which gave me a bit more money than the gap required.
The money was transferred to my regular brokerage account so I could more readily pay my bills; and as I went to it I paused. What would I do with an extra few hundred dollars? I haven’t had that dilemma in years. It was the proverbial money burning a hole in my pocket, though the money and the pocket were ditigal.
“Do not move unless it is to your advantage.” – lesson from karate and The Art of War.
I sat. I pondered. Then I remembered. Two years of financial turmoil, of wondering how I was going to encounter the monthly bill paying challenge, had trained me to concentrate on preservation of capital. It is easy to fall into habits and never step back out of the ruts they create. What did I do when my portfolio was healthier? I’d put the money to use.
Two hundred dollars aren’t much. I watch people walk by wearing that much on each foot. That’s a couple of fill-ups for my truck. (Its got a 26 gallon tank.) But, remembering back to my investing beginnings, two hundred dollars is about what I used to start many of my original holdings. It doesn’t take much to make it worth the effort. I already have enough for most of my other bills: insurance, utilities, food, gas, and even enough to pay down a bit of the credit card debt that I incurred as I anticipated a portfolio recovery. The difference is, when I started those positions I did so to create my emergency fund from which I have been drawing. Now, I am in the midst of that draw. Instead of investing with a decades mindset, I am investing with a months mindset.
The shorter the investment horizon, the more chance is involved. Any given day, MSFT may go up or down; but buying MSFT in 1986 and selling ten or fifteen years later got beyond noisy fluctuations in the market. Buy small companies and sell them when they are large takes a long time, isn’t a sure thing, but requires little work and can have great rewards. Check Figure L, page 233 in my book Dream. Invest. Live. for my personal performance. Long Term Buy and Hold can work well. And did, until my book came out and the market crashed. (No, my book did not make the market crash.) At the other end of the investing spectrum are the day traders who aren’t investing in companies. Day traders buy stocks and rely on the fact that on any given day some stocks will go up 20%, 30%, or more. Buy low. Sell high. and get out of the market at the end of each day.
Between the two extremes exists a continuum. LTBH can experience over 2,000% gains, but it takes years of patience. Day-traders can experience 20% gains within a day, but it takes frenetic work and good luck. Investing over the course of weeks or months decreases the influence of luck and increases the consequences of company performance.
I bought MVIS because I believe they are in a critical phase of their transition. We shareholders do not know the precise timing, the customers, or the products that are to be announced; but, from what we’ve been able to discern there should be significant news within the next few months or quarters. Maybe we’ll even get news within the next few weeks. Products to be sold for Christmas have to be announced soon. Just like with my business, one or two major customers can suddenly create a significant cash cushion.
Within the next month Samsung and Sony are expected to announce new devices before Apple’s announcement of a new device on September 10. Therefore, within the next 20 days those three major OEMs are announcing products which could include pico-projectors like those invented by MicroVision. I didn’t buy a hundred shares of MVIS from certainty, but from a reasonably informed guess with an acceptable risk.
If the stock goes up, the investment was worth it as long as it at least paid for the taxes and the commission. If the stock goes down, those $200 will be reduced but probably not eliminated. If the stock goes nowhere, then I’ve at least opened a door that was otherwise locked.
As I described in the previous post, financial losses are most likely temporary losses of an abstraction, not a true loss (though that doesn’t appease my mortgage company). Of all the things we risk, many fear finances far more than real losses. One freedom I enjoy is the realization that if I buy a stock I can also sell it. The commitment lasts as long as I decide. The market may control the price but I control whether I decide to participate. As of today, I’ve decided to start participating again; maybe not the way I prefer, but at least in a way that reminds me that I am in control. I’m buying back in. (Okay, MVIS, do good things for all of us.)