eBay-Like Investing

Being a hockey fan, I buy a lot of jerseys on eBay. They're cheaper and usually in great condition. I bought my first one in May 2010 for my 33rd birthday when Montréal Canadiens had an improbable playoff run to the Eastern Conference Final, getting a white (Away) jersey to complement my red (Away) jersey, which was already so old that home teams wore white back when I got it.

Since then, I have bought several more jerseys (more than necessary, admittedly). While a team jersey can usually be found (well) below $50, most of the player jerseys still sell for $75 and (way) up. I bought my first player jersey this summer when I found a reasonably priced Patrick Roy jersey for $55 (before shipping & handling). Patrick Roy is the reason I'm a hockey fan today, and even more so, the reason I am a fan of Les Canadiens.

A few weeks later, I happened across a bid on a jersey for Alex Galchenyuk who was the third overall draft pick in 2012. The auction started at $19.99 with a Buy-It-Now price of $99.99. The shipping was reasonable as well, and it worked out that if someone won without another bid, then they would pay $27 (fittingly, since Galchenyuk's jersey number is 27). I followed the auction for a day, and with only three days left and no bids, I bit just to see how it ended.

Unfortunately, Alex Galchenyuk's contract had yet to be renewed during the auction. Therefore, no one else was willing to bid on the item. The auction closed with only my bid, so I happily paid the $27. The day after the jersey arrived, Galchenyuk re-signed with the team. Therefore, I tweeted about how I had just gotten his jersey off eBay for $27 (USD) the night before, a.k.a. #HumbleBrag.

I got a quick response asking for the name of the seller because that person wanted to see what else the person had available. The reality is there was nothing else that great of a deal. Truthfully, my jersey wasn't even that great of a deal when I bid on it because there was still a solid chance that he could have gone into free agency, and that jersey would have been outdated before I even got it.

However, I had high hopes for Galchenyuk regardless which team he represented, and the fact that Montréal is my favourite team would be a reminder that he started with the Habs. Putting money on it before he re-signed resulted in a sharp profit of owning a current player jersey at a fraction of its retail price.

Same as investing.

By the time you hear about a stock by word-of-mouth, its run is generally over. Buying a stock because someone you know got it for a deep discount would be on par with paying retail on a jersey that someone you know got for cheap. However, if you still believe in the company's future the way I believe in that of this hockey player, then the profits could be realized in the long run.

I have been investing in individual stocks for a little over a year now so there is not much personal wisdom that I can share. But I have only bought as much as I was willing to lose, and I have not backed down from any individual stock yet. It is entirely possible that one or more will become completely devalued. In fact, my first stock purchase was for a company in Chapter 11 bankruptcy, so I can reasonably expect that stock to be worth nothing soon, but even still, the amount remaining in that investment is as much as I would be willing to bet on an improbable turnaround. (Nevermind that stock became part of a pump-and-dump in September, rising from $0.06 to $0.64, but still below doubling in value for me, which has been my target amount.)

Based on my experiences thusfar, however, I am even more steadfast in my belief in index investing.(Not that trading stocks isn't a bit of fun in its own way.)

The Full Motley -- 4Q, 2015

As the tide rolls in and rolls out, the markets rise and fall alike, at least during business hours save on a few national holidays.  After a choppy third quarter, the markets saw a strong rise throughout October.  Unfortunately, it's not October anymore and the Santa Claus Rally (which is more lore than rule) is several weeks away.  The markets have been recently retreating, and as much as ever, the possibility of any day rising or falling is anyone's guess.

While this tumultuous uncertainty may inspire many questions, more opinions and few answers, the most productive steps for your financial health may be considering every possibility and then weighing each against its corresponding probability to revisit your asset allocation and assess that the percentages are a true reflection of your long-term view of the market.  Then, rebalance accordingly.  

When things were at their most dire in early 2009, I remember considering the probability that the US dollar would become worthless and that the markets would zero out to nothing.  The former scenario was vastly unlikely and the latter hypothetical was borderline impossible, requiring virtually every business to file bankruptcy (which, even then, it would take a few years before the stock values would be zeroed out).  Compared to the chances that the market declines were irrational overreactions, it became easy to justify not just maintaining my investments in the market but increasing them at the time.

While markets are only down 10% at most, the long-term views should not be influenced on whether the market is going to retreat 15% or even 20% from its all-time high, but merely whether today's all-time high will continue to be the all-time in another decade or two.  The money invested in stocks, including equity mutual funds, will be working for you.  Those efforts are not always an instant reward, but historically, they have been.

Therefore, while others celebrated Singles Day online (mostly in China), I rebalanced my portfolio as quickly as I could, moving about 0.1% from four funds to split between two trailing equity funds, namely Vanguard Total Stock Market Index and Vanguard Explorer Fund.  And now I'm done for activity in my 401(k) for the rest of the year (in fact, until February 10, 2016, which marks the 7th anniversary of this blog).  While I will likely keep an eye out to see how things develop in between, I am committed to my asset allocation and there is no need or temptation to adjust the portfolio any further.  The most complicated part of investing is how simple it is.