Key to investing -- Forget About it
I spoke recently with Tom Taulli, co-founder of CurrentOfferings.com (a web site with information on private placements and other corporate stock offerings) for a story I wrote called, "The Get Rich Slow Scheme."
Tom and I discussed how investors have to take risks if they are going to make serious money in the stock market. But they don't need to take big-dollar trading risks. Rather they should make small, calculated bets and hope that about one out of 10 pay off. That's how venture capitalists make their money.
I included that tip in the story. But Tom also shared an anecdote that ended up on the cutting room floor -- perfect fodder for this blog.
Taulli observed that some of the people he knows who have made the most money on a single investment were folks who had forgotten they bought the stock in the first place.
For example, Tom recently ran into an acquaintance who made an early investment in an Internet start-up years ago. The company had struggled in the dot-com bust and the owner of the shares stopped bothering to check the stock, which got down to as low as 22 cents a share in late 2000. In fact he forgot all about it.
Tom bumped into him recently and mentioned their shared investment. The guy said he assumed the company had gone belly up. Not at all, Tom corrected him. The company, now known as j2 Global Communications (JCOM), was doing great (it currently trades at around $35 a share). Tom estimates that his friend's $5,000 original investment had grown to $100,000 without him even realizing it.
Sure, the guy got lucky. But stories like that make a good case for buying and holding -- especially when you're taking a flyer on a risky start-up.