Stocks vs Real Estate

Today I hit an interesting milestone.

A couple of years ago I started investing in single stocks. I have been fairly successful, but success can't be measured in two years in stocks.

One of my stocks had dropped before I ever put any money in to it. Then it dropped more, so I bought more. Then there was a major PR blunder, and the stock tanked. So I bought more. Then they announced that since they were going to be expanding, to expect profits to plunge, if not go negative. And guess what happened to the stock. It plunged. And I bought more.

That was a mistake.

Not for the reasons most might think. I had forgotten one thing I had learned about investing in stocks. If it is dropping, there is a way to tell about when the drop had ends.

Now this isn't perfect, because it really only tells when the current trend has ended, not what the new trend is.

Combined with research, and it can help increase gains. I don't try to time the market, as this is more responding to what happens in the market. I also am in investor, not a trader, so I don't like to jump in and out of the market.

This was a stock that was going from an American market, to a worldwide market. They were (and are) the biggest, and most successful company in a field, yet I kept hearing about how this company, or that company was going to start competing, and put them out of business.

Well as I said, I kept buying, and it hit bottom.

They proceeded to repeatedly exceed annalists estimates, and the stock started to recover. The PR flack was over, and people returned, realizing there wasn't any decent competition.

This stock rebound, and suddenly it grew to a large portion of my portfolio. I disliked the balance, so I sold. Then as I decided to get in to real estate, it climbed, so I sold more. Recently I sold at a new high, then again today. (October 21, 1993.)

Interestingly I have now sold more then I put in to this stock, and it is still 20% of my portfolio. Net, this means I don't have any money in this stock.

I have another stock that has doubled in price, but I am waiting for this stock to double again before selling.

The reason for this is because the stock is now only worth 70% of book value. If this was the 90's it would be at risk from corporate raiders. I expect this one to double again, then I am going to sell out of half of that one, and have a second no cost stock in my portfolio.

Why am I talking about stocks on a real estate website? A couple of reasons.

Many people in real estate despise the stock market. I have heard people call the stock market gambling, or attempt to put it down. To me they just don't understand it. It is a different animal, and done right you can make a lot of money from stocks.

But that being said, I still believe that real estate investing is superior, and if a person knows what they are doing in real estate, they don't need to invest in stocks.

Unfortunately there is a ton of bad information out there. The supposed experts are often biased people trying to push a stock. Sometimes they are just talking heads who don't have a clue, but act like they do, too often forgetting their bad picks in the past. People listen to them, never even knowing how their picks did in the past.

There was one person who got in trouble with the SEC because he was buying stocks, going in to chat rooms, talking up the stock, and selling when the price rose. They took advice from some anonymous person in a chat room, never knowing this was a teen still in high school.

Like anything, you need to do your homework before investing in stocks. The stock that I had that plunged, I knew the fundamentals. People dumped the stock because of bad PR. People for get PR in a year. They also dumped because of low income, but again the only reason their income was down was because they spent it all growing bigger, and more profitable.

To me this was a duh moment.

I'm not telling you the stocks I mentioned above because I don't want people thinking I am trying to push these stocks, but also because I don't want people to pick these stocks just because I mentioned them.

Do your homework.

I am sticking with stocks, and while I will sell stocks to fund my ventures into real estate, eventually some of my profits will go back into stocks, with the intent of not selling those stocks.

Then the dividends will fund more real estate.