StrategyTrading1

My first stock trade didn’t go well. I ‘m sure you have had similar experiences. Here’s what happened.

The year was 1960. I was in my teens. I had never purchased a stock before, but along came this incredible company (or so I thought) that was going to revolutionize the way we watched TV. The company was called Subscription TV and the symbol was STV. I read about it in the paper.

The whole idea of STV was that this company was going to transmit certain live events, particularly sports and concerts, for a fee, directly to one’s home TV with some sort of electronic interface - a converter box. Wow! Now that was a GREAT idea.

In retrospect, this was the idea behind HBO and Pay Per View.

So, I went to a local stock brokerage company and opened an account with money I should have saved for college. I purchased $100 worth of stock, and of course paid some sort of commission, that was certainly a large percentage of the transaction.

Along came the election of 1960. There was great excitement over the battle between John Kennedy and Richard Nixon. There was also a proposition on the ballet to stop STV. This was California and anything can be put on the ballot with enough signatures. And the rallying cry against STV was that it would kill free TV, and that scared a lot of folks.

For most people, TV was something new, and mostly in black and white. Fortunately, it was free, and the thought of having to pay for TV was not acceptable.

Of course, STV wasn’t going to kill free TV, but who cares about the truth - this was politics. Backing this initiative were the theatre owners, who were naturally concerned that people would stop going to the movies and stay at home watching all the good stuff on TV.

So, on theatre screens across California there splashed a commercial to Save Free TV.

And, of course, the proposition passed, and STV filed law suits, and the stock plunged, and I lost almost all of my money.

Hindsight is always clear sight. As the election neared the stock began to sink. I didn’t have an exit plan. I should have sold STV on the way down. If the proposition failed, STV would have been on the cutting edge of the future and I would have been riding the crest of the wave, or so I dreamed.

Years later STV won their law suits, but by then it was too late. The last I heard they had all of their equipment stored in a warehouse in Santa Monica. I can’t recall another proposition that put a private company out of business.

I didn’t buy another stock for 20 years, but I never forgot the lesson learned - a company can have the greatest product in the world, and circumstances can send that company and its stock into a large pit, and along with the stock, your money can disappear.

Some lessons learned:
1) don’t put all your money into one stock - diversify
2) have an exit plan, a stop, an options hedge
3) don’t fall in love with any stock or any company story
4) don’t “chase” a stock unless you have a very tight stop
5) calculate your total commission or fee costs as a percentage of the trade

Many years later I bought another stock that seemed like a great idea, and that trade worked. It was my best stock trade ever, and I’ll write about that at another time.