As a mother with young twins, watching them grow from infants to children, I’ve observed how closely some investments resemble the behaviour of children. Some children are so easy to take care of while others need constant attention and monitoring. I’ve been investing since I was 20 years old, jumping from stocks, mutual funds, guaranteed investment certificates, and landing into real estate. The greatest similarities I have found are between kids and stocks.
In 2007, I bought Lululemon at initial public offering and I sold it six months later at a nice profit. Out of curiosity, I’ve been following the stock ever since and Chip Wilson, the founder, adds a lot of drama and controversy to lululemon, his insensitive remarks is every shareholder’s worst nightmare. For example:
Wow. Following this remark, the stock plummeted from $50 dollars to $32 dollars!
Over the past 15 years, I’ve owned many stocks, including Lululemon, Macromedia, Sketchers, iRobot, Apple, Microsoft, and Google to name a few. I’ve also witnessed three major market crashes sending shivers to any one trading frequently. Based on experience investing in stocks and taking caring of my twins, here’s my simple perspective, as a mother, Why stocks are like CRAZY Kids:
1) They keep you on your toes! You have to watch them closely and monitor them all the time. Fifteen years ago, I bought the shares in IRobot (NASDAQ:), and that’s exactly how this stock is behaving. One day, it’s a sweet heart stock, growing well, and another day, it decides to go on starvation mode and plummet in price.
2) Sometimes they say things that make you cringe like ‘mommy, why is that man fat?’, causing some people to judge you with a negative rating. The founder of Lululemon, Chip Wilson, said something similar, and the impact was huge: the analysts downgraded the stock and sent the stock plummeting.
3) Kids are always up to something, acquiring new friends, creating new spin-offs, and causing shakeups. Apple is a stock that does just that, acquiring the company ‘Beats’, creating new product lines like the iPad and causing shakeups when Steve Jobs died. With both kids and stocks it is important to track these events and assess how it will affect their growth.
4) Kids grow at varying rates, all of which are out of your control the moment they enter the real world, some hardly grow, some sprout like beans, similar to an initial public offering. When I purchased GoPro, I wasn’t sure how the stock was going to grow, but it grew at hyper rates and plummeted at scary rates, too.
What’s my perspective on mitigating the above risks? Warren Buffet summarizes it well:
‘Try to buy stocks in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.’
Check back in future blogs to read more about investing!
Many Happy Returns,
Tracy Ma