How I Lost $2,000 Banking On Baby Yoda
Warren Buffet once said "Risk comes from not knowing what you're doing." I learned this lesson firsthand through my first stock market experience.
Perpetual Stock Watching
So we start from the beginning with a little bit of context.
I am fresh out of University, newly graduated, navigating the world of career searches and financial burden. A few friends and I would be having our weekly stock market discussion, which by then had basically become scripted…
Me: Did you see (insert stock name)? Trading 40% under its YTD average right now.
Friend: We should definitely buy, I’ll move some funds around.
Two months later…
Me: (Insert stock name) is back up 20 points and climbing. Did you end up buying??
Friend: Nope… Shame dude, I would have made (insert figure) by now. Next time I guess.
These classic conversations were getting us nowhere. No real investments, just a whole lot of talk.
Watching so many of my favorite companies take off — Facebook, Netflix, Amazon, Tesla — and not making a dollar off of any of it. Playing the markets this way, or should I say watching the markets this way, made me feel like we were constantly losing, despite no real investments being made.
Hindsight is always 20/20. The reality of the situation was, I was not confident enough in myself or my knowledge of the stock market to actually invest. My greatest lesson thus far; the stock market only works because it takes a lot of discipline to actually buy low and sell high.
This truly was an important realization. No more sidelining, no more vicarious living through the big traders I followed.
Cue: Turning Point
Not long after New Year’s Day 2020, I stumbled across an article that inspired me to finally dive in and start my stock trading career. And the timing was impeccable…
Best Stock Under 5 Dollars
I had been on the lookout for a sub $5 stock that showed promise. My plan was to invest a large sum in one stock, admittedly a pretty big gamble as opposed to the alternate strategy of diversifying and investing smaller sums in multiple stocks.
I was aware of the risk, but even as a rookie investor I knew that risk was the name of the game. Large risk, large rewards. I was hungry for a big win.
I read the article the same day it was published, great timing for a buy before news spread and others did the same. The stock was valued at $3.07 on that day: January 14th, 2020.
And this is where the problems began…
At the time I had an active TFSA account with Wealthsimple, a Canadian online investment management service.
What I hadn’t looked into was the details of opening and funding a trading account with their Wealthsimple Trade platform.
I opened a trading account and went to transfer funds from my TFSA to my trading account (which I foolishly thought would be fairly instantaneous), and to my surprise I was informed that it would take 3–5 business days. And it was Wednesday.
The next Wednesday, I received an email from Wealthsimple. My funds were finally available to be traded. Thanks guys!!
I was stoked. Ready to make my first investment in the stock market.
Build-A-Bear was my ace in the hole. It felt like I had inside information, almost as though I had to be low key about my move.
I hadn’t checked on the stock price since I had requested to transfer money to my trading account.
I hopped on my trading app, typed in those three beautiful ticker symbol letters — BBW — and saw the new stock price, a week later, sitting at $5.08.
January 21st, one week after I had initially wanted to invest, and the stock had shot up $2.01, a 65% + gain.
I was pretty upset about the huge return I could have, would have, should have had. The usual suspects.
Tough pill to swallow for a rookie investor. I had been ahead of the curve but thanks to my lack of due diligence, I lost a week and as a result lost my position and potential gain.
In that moment I thought about scrapping the idea and moving on, looking for another fiver stock that I could spontaneously bank on. But instead, I listened to my gut feeling that this was only the beginning of a potentially massive jump for the stock.
My gut said that Build-A-Bear Workshops was GOING TO THE MOON. And I wanted to be on that rocket ship, reaping all of the future rewards. This $2.00 gain I missed out on was nothing in comparison to what I knew was coming next.
So I invested $2,500. This got me approximately 492 shares of the stock at its price at the time of $5.08/share. My investment, carried by this weird-looking baby alien teddy bear based on a Star Wars character, was going to make me thousands.
And that was that, I was officially a stock trader. Despite the disappointment of losing out on a week’s worth of potential gain ($1,636.14 to be exact), I was still in great spirits. I could see the stock pushing the 10$ mark in the next six months, which would net me an awesome return even with the late start.
More Stock Watching
This was January 21st, 2020. Over the course of the next month the stock fluctuated steadily, just under 5 dollars — and you can bet I was watching.
Working a commercial painting job at the time, I was on site daily, standing on my scissor lift, spraying white dry-fall on 8,000 square feet of ceiling.
What better pastime than having my stock app open every 30 minutes to check the latest market updates and stock news. BBW was sitting right around where I had bought it.
Had I missed the curve?
No way, Baby Yoda sales were going to boost their quarterly earnings report and the stock was going to take off. February was just a slow month.
But March of 2020 will forever go down as one of the most shocking, overwhelming and unpredictable months in the history of mankind.
Cue CO-VID 19 Pandemic
On March 11th 2020, the World Health Organization officially announced a global pandemic, as a result of large-scale spreading of the COVID-19 virus internationally.
This was a harrowing day for people all over the world. So many questions to be answered, so many unknowns, so many drastic changes to the routines that people rely on for structure and stability.
And as a result, the stock market took a devastating hit. The Dow Jones and the S&P 500 dropped over 12 percent in the month of March. Investors were going crazy, some people pulled their money out of their savings accounts and dumped their stocks while they had the chance.
The economy was seeing a massive disruption, a lot of companies took massive hits, and Build-A-Bear Workshops was among them.
BBW stock price dropped from around $4.00 at the start of March, to an all-time low of $1.02 on April 3rd 2020.
I remembering opening my Wealthsimple Trade Account that day and checking the status of my Build-A-Bear investment.
I sold out of pure emotion and anger, wanting to move my remaining funds elsewhere. This is a classic rookie mistake. NEVER TRADE ON EMOTION. I lost almost two grand. My return was quire literally negative $1,999.52. I walked away with $500.
What a trip. I felt stupid, embarrassed, ashamed. What kind of idiot invests in a teddy bear company. Ya my timing was a little bit unlucky, but still.
I was pretty depressed. The friends that knew about my investment were laughing at me, but their portfolios weren’t doing well either.
And that was the reality. When I took a step back and looked at the grand scheme of things, my two thousand dollar loss was chump change compared to some of the losses I was hearing about.
Stock trading is inevitably, in one way or another, a gamble. You never know what could happen tomorrow, next week, next year. It isn’t for the faint of heart, emotions need to be left at the door.
And that’s what I did — took my experience as a valuable lesson that has already made me a better investor. Stay calm, stay positive, do your research, and be patient.
Patience is Key
BBW is now sitting pretty at over $7.00. I would have been up over $1,000 by now... I've learned my lesson.