Bad Investment Decision – How I lost last weeks earnings of 1000$ in a day

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I lost over a 1,000$ in last week. Luckily all that money came from the earnings from previous week. I actually made 1,200$ off of approximately 5,000$ in a weeks time. For reference, read my previous blog post that talks about my experience in the investing world as I set my foot into this world of making quick money by smart investing:

My First Week Of Investing – 1040$ Profit – 20% Margin

Now let me describe how I managed to lose all that I had earned. So Citibank and Tear had made my week when I just started investing. What I had done was research and more research. I was looking for two kinds of stocks:

1. Undervalued with kind of safe bet to grow soon

2. Undervalued with huge potential but involving great risk of going down

In the first category, I found Citibank. By doing my research I had realized that Citibank was obviously extremely undervalued but was up for my bull rally soon. There was some uncertainty regarding Fed’s decision to sell off their shares but nonetheless there was strong speculations about the stock going up.

Now the second category belonged to the stocks that were undervalued and had big potential. I chose Tear for that category because they have a ground breaking technology and they had recently broken their 52 weeks moving average on the high side. Since its a new company, it involved huge risk factor at the same time.

I became greedy – Invested when the rally was in its full swing

Both of these stocks yielded me close to 1,200$. Next what I did next was to develop greed and confidence in the research that I had not done. I assumed that rally was going to continue so I got back into both these stocks and then they tanked. Well everyone knows that after a stock rallies really high, it goes down and settles somewhere in the middle. Thats exactly what happened! and I lost bunch of money.

I invested in ALL risky stocks – VERY BAD

I also found some other undervalued stocks such as BGOI, CABL, FNM, MGH, WG, YUII and do you see any pattern in those? ALL of them are risky investments! So here I am all burned up! but the important fact is that I learned from my mistakes. I did some research and found the support point for Tear and got in when it bottomed and guess what it started rising again, lot more slowly than before. But it did make up for my losses. I am still sitting in around 200$ loss in Tear but I think that will even out soon.

So the bottom line is that do NOT put all your eggs in the risky investment basket. Even them out, put in some into the risky companies and also secure some in the low-return safe harbors!